In MTA Canada Royalty Corp v. Compania Minera Pangea, S.A. de C.V., the Court`s finding that a Canadian merger had the same legal value as a Delaware merger led to a rejection of the applicant`s claim for prejudice. Under Canada`s income tax law, the purpose of the merger is specifically to define the tax treatments of different forms of corporate law mergers. There are two types of mergers under the Income Tax Act. First, “qualifying groups” are those that meet the provisions of Section 87 of the Income Tax Act. Once the terms of paragraph 87 are met, the Income Tax Act provides for various tax attributes and comprehensive tax deferral treatments for shareholders and the merged company. All other mergers known as “legal mergers” or “non-qualifying mergers” do not fall within the scope of Section 87 of the Income Tax Act. As the Supreme Court of Canada noted in its Envision Credit Union/R policy decision, the tax consequences of unqualified mergers are not clearly defined in the Income Tax Act and their requirements are therefore defined by other provisions of the Income Tax Act (unlike Section 87), other relevant legislation (such as the Ontario Business Corporations Act).
and the common law. To speed up the process, continuation items can be submitted at the same time as amalgam items. Section 87, paragraph 4 of the Income Tax Act provides for shareholders holding shares in predecessor companies as financial assets, with an automatic transfer of the adjusted cost base of those shares to the new merged shares received. Under paragraph 87, paragraph 4, point a), a shareholder of a predecessor company is considered to be ceding old shares for products corresponding to the adjusted cost base of the shares of the previous company just prior to the merger and is considered, in accordance with paragraph 87, paragraph 4, point b), as an acquisition of new shares (in the new company) at a price equal to that corresponding to the proceeds (of the old shares). Article 87, paragraph 4, applies to shareholders whose shares are held as assets; 2. Shareholders receive only stakes in the merged company in exchange for their shares in the company that preceded it; and (3) no benefits are granted to persons related as a result of the merger. The rollover rules in subsection 87 (4) do not apply to non-qualifying concentration operations. Therefore, a rollover in accordance with Section 87 (4) only applies if the conditions of subsection 87 (1) are met. A recent decision of the Delaware Supreme Court (Tribunal) is a useful reminder that there are significant differences between a Canadian merger and a Delaware merger that can affect the interpretation of contracts and the structuring of deals. In a business merger, Canadian taxable groups considering a merger are each referred to as “predecessor corporations.”