Calgary Amalgamation Lawyer

Contact Neufeld Legal PC for your incorporation legal work at 403-400-4092 or Chris@NeufeldLegal.com

Amalgamation is a corporate restructuring process where two or more corporations combine to form a single new corporation. Unlike a simple acquisition where one company buys another, in an amalgamation, the predecessor corporations essentially merge their legal existences into the new entity. All assets and liabilities of the original corporations continue to be the assets and liabilities of the newly amalgamated corporation.

The rationale for undertaking an amalgamation can include:

A. Streamlining Corporate Structure and Reducing Administrative Costs

• Simplification: If a company operates through multiple subsidiaries (e.g., a parent company with several wholly-owned operating companies, or multiple sister companies), amalgamating them into a single entity can significantly simplify the corporate structure.

• Reduced Compliance: Fewer corporate entities mean fewer annual returns to file, fewer sets of financial statements to prepare, fewer minute books to maintain, and fewer corporate resolutions to pass. This translates directly into cost savings on legal, accounting, and administrative fees.

• Centralized Decision-Making: A simplified structure can lead to more efficient decision-making processes, as approvals might only be needed at one corporate level instead of across multiple entities.

B. Tax Efficiencies and Planning

• Tax-Deferred Basis: Under Section 87 of the Income Tax Act (Canada), qualifying amalgamations can be structured on a tax-deferred basis. This means assets and liabilities transfer to the new corporation without triggering immediate tax consequences (like capital gains on deemed dispositions).

• Consolidation of Losses: One of the most common tax-driven reasons is to combine profitable companies with companies that have accumulated non-capital losses. The losses of one predecessor corporation can potentially be used to offset the future income of the amalgamated corporation, maximizing tax benefits.

• Accessing Tax Attributes: Other tax attributes, such as investment tax credits, can also be consolidated and utilized by the new entity.

• Internal Asset Transfers: Amalgamation can facilitate the transfer of assets between related entities without triggering taxes that might otherwise apply to a sale or transfer between separate legal entities.

• C. Operational Efficiencies and Synergies

• Economies of Scale: Combining operations can lead to greater purchasing power, reduced overhead, more efficient use of resources (e.g., shared administrative staff, R&D, marketing), and better overall operational efficiency.

• Integration of Business Lines: If different corporations within a group are involved in complementary business lines, amalgamation can facilitate their seamless integration, leading to a more unified brand, product offering, and customer experience.

• Eliminating Redundancies: This can include consolidating management teams, sales forces, IT systems, and other functions that might be duplicated across multiple entities.

D. Facilitating Acquisitions and Divestitures

• Acquisition Strategy: Amalgamation can be a tool in an acquisition strategy, where an acquiring company (or its subsidiary) amalgamates with a target company to achieve specific corporate or tax objectives, often with a tax-deferred rollover.

• Preparing for Sale: A simplified and consolidated corporate structure can make a business more attractive and easier to sell in the future.

E. Debt Restructuring and Financing

• Consolidating Debt: Amalgamation allows for the consolidation of all debts and liabilities under a single entity, which can sometimes simplify debt servicing and reporting.

• Improved Access to Capital: A larger, more financially robust amalgamated corporation may have better access to financing and be able to negotiate more favorable terms with lenders.

F. Succession Planning and Estate Planning

• In family-owned businesses or complex corporate groups, amalgamations can be part of a broader succession or estate plan to simplify the transfer of wealth and control across generations, or to streamline ownership for beneficiaries.

There are two forms of amalgamations available under the Alberta Business Corporations Act (for Alberta provincial corporations) and the Canada Business Corporations Act (for federal corporations) and similar provincial statutes (like Alberta's ABCA):

1. Long-Form Amalgamation: This is typically used when the amalgamating corporations are not wholly-owned subsidiaries of the same parent, or if there are complex share structures or dissenting shareholder rights to consider. It requires an amalgamation agreement and shareholder approval (usually by special resolution) from all amalgamating corporations.

2. Short-Form Amalgamation: This is a simpler process, often used for internal reorganizations where there's less risk to creditors or minority shareholders.

   • Vertical Short-Form: A parent corporation amalgamates with one or more wholly-owned subsidiaries.

   • Horizontal Short-Form: Two or more wholly-owned subsidiaries of the same parent corporation amalgamate.

   • These types usually only require director approval and do not need an amalgamation agreement or shareholder vote, making them faster and less costly.

As a corporate business lawyer, I have been dealing with the corporate law and business matters for over a quarter century, and understand the importance of asking the appropriate questions, and follow-up questions, such that we might optimize the structure of an incorporated business and maximize it corporate legal capacity in furtherance of one's commercial ventures.

If you are looking for a business incorporation lawyer in Calgary, serving businesses throughout the province of Alberta and beyond, we welcome you to contact our law firm at 403-400-4092 or via email at Chris@NeufeldLegal.com to schedule an initial consultation and learn more about our law firm's business incorporation legal practice.