Amalgamation

Short-form vs long-form amalgamation

Two procedural variants:

• Long-form amalgamation (s. 181-184 CBCA): all amalgamating corporations approve an amalgamation agreement by special resolution (2/3 of votes). Used when corporations are not under common ownership.
• Short-form amalgamation (s. 184 CBCA): simplified procedure for corporations under common ownership. Two sub-variants: 'vertical' (parent + wholly-owned subsidiary) and 'horizontal' (wholly-owned sister corporations). Skips shareholder approval at the subsidiary level.

Tax-deferred amalgamation under s. 87

Section 87 of the Income Tax Act provides for tax-deferred amalgamation where two or more Canadian corporations amalgamate into a Canadian corporation. The shareholders' share basis carries over to shares of the amalgamated corporation; assets retain their tax basis. Conditions: amalgamating corporations must be 'taxable Canadian corporations,' shareholders must receive only shares (no boot beyond limited de minimis), and the amalgamation must be a 'qualifying amalgamation' under s. 87(1).

• Tax-deferred treatment under s. 87 is the most common scenario in Canadian M&A integration
• Pre-amalgamation tax planning can optimize tax-attribute carryforwards (non-capital losses, capital losses, ITCs, RDTOH balances)
• Some attributes (e.g., refundable taxes, certain ITCs) are restricted post-amalgamation

Three-cornered amalgamation in M&A

A common M&A integration technique: the acquirer creates a wholly-owned acquisition subsidiary (NewSubco), which then amalgamates with the target. Shareholders of the target receive shares of the acquirer in exchange for shares of the amalgamated entity. The result: the target is integrated into the acquirer's group, with rollovers and tax efficiency under s. 87. Three-cornered amalgamations are often combined with a plan of arrangement for public-company M&A.