Corporate amalgamation

What is an amalgamation?

In Canadian corporate law, an amalgamation is not a purchase and not a transfer of assets. The amalgamating corporations combine and continue as one corporation, which holds everything the predecessors owned and owes everything they owed: contracts, debts, lawsuits, permits and employees carry on without being assigned one by one. The amalgamated corporation receives a certificate of amalgamation and, depending on the jurisdiction, a new corporation number.

Groups amalgamate for many reasons: to simplify a structure after an acquisition, to merge a holding company into its operating company, to combine sister companies that do similar work, or to reduce the number of annual returns, tax returns and financial statements to prepare. Whether an amalgamation achieves its goal depends on the tax and legal analysis done beforehand.

Short-form vs long-form amalgamation

A short-form amalgamation is possible only when the ownership is already unified: one corporation owns all the shares of the others, or one parent owns all the shares of each subsidiary. In a vertical short-form amalgamation, the subsidiary's shares are cancelled without being converted; in a horizontal one, the shares of all but one subsidiary are generally cancelled. Every other situation, including corporations owned by the same individual rather than by a corporation, generally goes through the long-form process. The exact conditions are set by each statute and should be confirmed for your case.

In Quebec, the Business Corporations Act uses its own terms: a simplified amalgamation (fusion simplifiée) corresponds to the short form, and an ordinary amalgamation (fusion ordinaire) to the long form. The logic is the same: unified ownership allows approval by the boards alone, while any other combination goes to the shareholders.

Amalgamating corporations from different jurisdictions

Only corporations governed by the same statute can amalgamate directly. A federal corporation and an Ontario corporation, for example, cannot combine as they stand: one of them first moves to the other's jurisdiction by continuance, then the two amalgamate. Continuance into a jurisdiction has its own fee and steps:

• Continuance into the federal jurisdiction: $200 onlinesource.
• Continuance into Ontario: $330source.
• Continuance into Quebec: $263 (priority: $394.50)source.
• Continuance into British Columbia: $350 basic fee (+ $30 name approval)source.
• Continuance into Alberta: $265.23 government feesource.

The jurisdiction the corporation leaves must also allow the continuance out, which can require a shareholder resolution and the authorization of the original registry.

Documents and approvals

• Directors' resolutions of each amalgamating corporation approving the amalgamation (short form) or the amalgamation agreement (long form).
• Amalgamation agreement (long form): name, registered office, directors, share capital of the amalgamated corporation, how existing shares are converted or cancelled, and any by-law provisions.
• Shareholder approval (long form): a special resolution of the shareholders of each corporation, with a separate class vote where the statute requires it.
• Articles of amalgamation in the registry's form.
• Director's or officer's statement confirming that each corporation, and the amalgamated corporation, will be able to pay its liabilities, and that no creditor will be prejudiced or that creditors have been notified, as the statute requires.
• Name: the amalgamated corporation keeps one of the existing names, takes a new name (with a name search where the jurisdiction requires one) or becomes a numbered companynumbered companyCorporation named after its registry number (e.g. 12345678 Canada Inc.). Skips the name search.See definition →.
• Notices of the registered office and of the directors of the amalgamated corporation.

Government fees for an amalgamation (sourced)

Amalgamation fees for Saskatchewan, Manitoba, New Brunswick, Nova Scotia, Prince Edward Island, Newfoundland and Labrador, Yukon, the Northwest Territories and Nunavut are being verified and are not displayed here yet. A name search, where a new name is chosen, and any continuance come on top of the amalgamation fee.

Amalgamation or another route?

An amalgamation is one of several ways to bring businesses together, and it is not always the right one. A parent can sometimes wind up a subsidiary and take over its assets instead; one corporation can buy the other's assets, which leaves the seller's liabilities behind; or one corporation can simply buy the other's shares and keep it as a subsidiary. Each route treats liabilities, contracts, employees and taxes differently.

Tax questions to review with your accountant

The Income Tax Act has specific rules for amalgamations, and Quebec has corresponding rules. Under certain conditions, an amalgamation can take place without immediate tax for the corporations and their shareholders, but the conditions and consequences need to be checked case by case. Incorpo does not give tax advice; these are the questions founders commonly bring to their accountant:

• Does our amalgamation meet the conditions for the tax-deferred treatment, at both the corporate and the shareholder level?
• When does each predecessor's taxation year end, and what does that mean for the returns to file and for instalments?
• What happens to losses, tax balances and tax accounts of each predecessor?
• Is a short-form amalgamation better for us than a wind-up of the subsidiary into the parent?
• Does the amalgamation affect GST/HST and QST registrations, payroll accounts or the business number we use?
• Should the amalgamation date be chosen to align with a fiscal year-end?

After the amalgamation

How Incorpo handles your amalgamation

1. 1Guided questionnaireYou describe the corporations, their jurisdiction and their shareholders. We show whether the short form appears available and what the registry requires.
2. 2Resolutions and agreementWe prepare the directors' resolutions and, for a long-form amalgamation, a draft amalgamation agreement and shareholder resolutions from your answers, for review by you and your advisers.
3. 3Articles and filingWe prepare the articles of amalgamation and the supporting statements, then file them with the registry and pay the government fee, shown separately on your quote.
4. 4Minute book of the amalgamated corporationYou receive the certificate and an updated digital minute book with the registers of the amalgamated corporation.