CRA ruled on a butterfly spin-off by a listed Canadian corporation (DC) of its indirect interest in a foreign project to a “SpinCo” to be held by its shareholders, with most of the steps to occur pursuant to a plan of arrangement. A few points that may be of interest:
The application of s. 7(1.4) to the exchange of employee incentive securities on the reorganization required a determination of the relative FMV of the shares of DC pre-butterfly exchange to that of its shares and of SpinCo immediately after the butterfly exchange. To this end, the FMV of pre-butterfly DC common shares was to be based on their VWAP on the exchange for the five business days immediately prior to the Effective Date of the Arrangement, and the FMV of the DC Common Shares and the SpinCo Common Shares immediately after the butterfly exchange was to be determined by their VWAP on the exchange for the five business days beginning on the Effective Date. No rulings on FMV were given.