CANADA'S TAX & BUSINESS LAWYERS
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What is an Amalgamation?
An amalgamation is a combination of two or more corporations into one. The amalgamated entity will hold all of the property of the predecessor corporations; it will incur all of the liabilities of the predecessor corporations; and all of the shareholders who owned shares of the predecessor corporations immediately before the merger will receive shares of the capital stock of the new corporation.
Why Amalgamation
is Advisable
An amalgamation of two or more entities may be necessitated (or may be desirable) as part of a broader corporate reorganization.
An amalgamation of two or more corporate entities may be advisable for a variety of reasons.
It can reduce accounting and professional fees which would otherwise be incurred by two or more separate corporate entities; it can create efficiencies within a corporate group from a business or tax perspective; and, subject to complex rules in the Income Tax Act, a predecessor corporation’s losses can be used in a new corporation or carried back to another predecessor corporation.
When amalgamating entities, there are generally no immediate tax consequences. This is assuming tax legislation is properly adhered to. If an amalgamation is not structured properly or legislated provisions are not given due concern, then taxpayers may run into issues such as taxable benefits to a related party/parties in the transaction.
Furthermore, corporate law must be observed and adhered to when completing an amalgamation. Prior to merging, predecessor corporations must go through the proper process of approving the amalgamation by a special resolution of shareholders. This is after the Board of Directors of the predecessor corporations submit the amalgamation agreement at a meeting of shareholders.
Why Amalgamation
is Advisable
An amalgamation of two or more entities may be necessitated (or may be desirable) as part of a broader corporate reorganization.
An amalgamation of two or more corporate entities may be advisable for a variety of reasons.
It can reduce accounting and professional fees which would otherwise be incurred by two or more separate corporate entities; it can create efficiencies within a corporate group from a business or tax perspective; and, subject to complex rules in the Income Tax Act, a predecessor corporation’s losses can be used in a new corporation or carried back to another predecessor corporation.
When amalgamating entities, there are generally no immediate tax consequences. This is assuming tax legislation is properly adhered to. If an amalgamation is not structured properly or legislated provisions are not given due concern, then taxpayers may run into issues such as taxable benefits to a related party/parties in the transaction.
Furthermore, corporate law must be observed and adhered to when completing an amalgamation. Prior to merging, predecessor corporations must go through the proper process of approving the amalgamation by a special resolution of shareholders. This is after the Board of Directors of the predecessor corporations submit the amalgamation agreement at a meeting of shareholders.