A corporation incorporated under the CBCA (Opco) was continued as a co-operative under the Co-operative Corporations Act (Ontario), so that certificates of discontinuance and continuance were issued under each statute. On the continuance, each common share of Opco was “converted” pursuant to the articles of continuance into a share of the share capital of the co-operative, having the same paid-up capital.
CRA ruled that the continuance did not result in a disposition by Opco of its assets, that there was no deemed dividend under s. 84(1) having regard to the safe harbor in s. 84(1)(c) (i.e., there was no overall increase in PUC), that the s. 86(1) rollover applied to the conversion of the shares on the continuance and that no deemed dividend arose under s. 84(3) having regard to the rule in s. 84(5) (deeming the amount paid for the Opco common shares to be the PUC of the co-operative shares).