WHAT IS AN AMALGAMATION?
An amalgamation is a type of merger whereby two or more corporations combine to become a distinct new corporation. For example, if Corporation A and Corporation B agree to amalgamate, they would combine their assets and liabilities through the formation of Corporation C. Amalgamation can only occur between two or more corporations that are incorporated under the same legislation. This means that corporations incorporated under the Ontario Business Corporations Act can only amalgamate with other Ontario corporations, while Canada corporations incorporated under the Canada Business Corporations Act¸ can only amalgamate with other Canada corporations. If a provincial corporation wishes to amalgamate with a federal corporation, the provincial corporation must first continue to a Canada corporation under the Canada Business Corporations Act.
STEPS TO AN AMALGAMATION
STEP 1: DRAFTING THE AMALGAMATION AGREEMENT
Under the Ontario Business Corporations Act and the Canada Business Corporations Act, a corporation must first draft an amalgamation agreement that sets out the provisions of the articles of incorporation of the new amalgamated entity, instructions of whether new bylaws will be drafted, or if one of the amalgamating corporation’s bylaws will persist, and any other terms or conditions as necessary for the operation of the amalgamated entity. The articles of incorporation for the amalgamated entity will also include details of whether the existing shareholders of the amalgamating corporations are to receive securities of the amalgamated entity, money for their existing shares, or securities of another corporation that is not the amalgamated entity.
STEP 2: Shareholder Approval by Special Resolution
Once the amalgamation agreement is drafted, the directors of the amalgamating corporations must call a meeting of the shareholders to approve the amalgamation agreement by special resolution. During the shareholder meeting, the shareholders must either be provided a copy of the amalgamation agreement or a summary of its terms. During the shareholder meeting dissenting shareholders should be informed of their entitlement to have their outstanding shares bought out at fair market value.
STEP 3: Sending the Articles of Amalgamation and Necessary Documentation to Directors
After the amalgamation agreement has been adopted by the shareholders, articles of amalgamation and all necessary documentation must be sent to the directors of each amalgamating corporation. At this stage, even if the shareholders have adopted the amalgamation agreement, the directors may still terminate the amalgamation agreement if they have not issued a certificate of amalgamation.
STEP 4: Issuing a Statutory Declaration
Once the directors have received the necessary documentation and articles of amalgamation, they must issue a statutory declaration in the case of a Canadian corporation and a directors’ statement in the case of Ontario corporations stating that the amalgamated corporation has sufficient funds to pay any liabilities that become due, that the value of the amalgamated corporation’s assets is not less than its liabilities or stated capital of all classes, that no creditors are prejudiced by the amalgamation, and that sufficient notice has been given to all known creditors of the amalgamating corporations and none of the creditors objected to the amalgamation.
STEP 5: Directors issue a Certificate of Amalgamation
After issuing the statutory declaration, the directors of the amalgamating corporations must then issue a certificate of amalgamation, which confirms that the amalgamating corporations will now operate as a new entity, thereby dissolving both amalgamating corporations.
HOW CAN WE HELP
Amalgamations can be difficult to navigate, and you will likely require a business lawyer to guide you through its steps. At Jahanshahi Law Firm, our business law team has the knowledge and experience to advise your corporation throughout the amalgamation process. We will begin by conducting an initial consultation where we will evaluate your business and personal needs and ask you questions about the proposed amalgamation. After the completion of the amalgamation, our business law team will compile the amalgamated corporation’s records and ensure the corporation is in compliance with applicable legislation and regulatory requirements.
Corporate dissolution may be a complex process that requires an experienced business lawyer to ensure the steps are correctly carried out in accordance with the applicable legislation. Under the Ontario Business Corporations Act and the Canada Business Corporations Act, a provincial or federal corporation may be voluntarily dissolved by a special resolution of the shareholders of a corporation. Once the shareholders approve the special resolution, articles of dissolution must be drafted and the directors must issue a certificate of dissolution, thereby dissolving the corporation. Prior to dissolving the corporation, it is important to ensure you have complied with the necessary legal obligations like filing tax returns and paying outstanding taxes or debts. In Ontario, you must obtain the Minister of Finance’s consent to the dissolution of an Ontario corporation, which consent must be filed together with the articles of dissolution. Our business law team can help draft the necessary documents for the dissolution and ensure the corporation’s legal obligations are met prior to the dissolution.