Amalgamating Business Corporations

An amalgamation of two or more corporations involves a number of steps under the Canada Business Corporations Act (CBCA). It is recommended that you consult a lawyer or other professional advisor to ensure that the requirements of the CBCA are met. The information provided here will assist you in completing the amalgamation process quickly and accurately. It is not intended to replace legal advice.

Table of Contents

• What is an Amalgamation?
• What documents must be filed to amalgamate two or more corporations?
• What must be included in the statutory declaration?
• Can a provincial corporation amalgamate with a federal corporation?
• Related Information
• Annex A – Instructions for completing Form 9 – Articles of Amalgamation
• Annex B – Instructions for completing Form 2 – Initial Registered Office Address and First Board of Directors

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What is an Amalgamation?

An amalgamation is a process by which two or more corporations governed by the CBCA ("amalgamating corporations") merge and carry on as one corporation ("amalgamated corporation").

There are two ways to amalgamate under the CBCA:

1. A long-form amalgamation requires each amalgamating corporation to sign an amalgamation agreement and submit it for approval at a meeting of shareholders. The amalgamation agreement sets out the terms and means of carrying out the amalgamation and must include:

1. the provisions required in the Articles of Amalgamation;
2. the name and address of each proposed director of the amalgamated corporation;
3. an explanation of how shares of each amalgamating corporation will be converted into shares or other securities of the amalgamated corporation;
4. if any shares of an amalgamating corporation are not to be converted into securities of the amalgamated corporation, a statement of the amount of money or securities of any body corporate that the holders of such shares are to receive in addition to or instead of securities of the amalgamated corporation;
5. a description of the manner of payment of money instead of the issue of fractional shares of the amalgamated corporation or of any other body corporate the securities of which are to be received in the amalgamation;
6. the proposed by-laws, whether they are new or consist of the by-laws of one of the amalgamating corporations;
7. details of any arrangements necessary to complete the amalgamation and to provide for the subsequent management and operation of the amalgamated corporation.

The Articles of Amalgamation as submitted to Corporations Canada must include the provisions agreed upon in the amalgamation agreement.

2. A short-form amalgamation is often faster since the amalgamation is approved by a resolution of the directors and does not require approval of the shareholders. There are two types of short-form amalgamation:

• A vertical short-form amalgamation involves a holding corporation and one or more wholly-owned subsidiaries. In this case the Articles of Amalgamation must be the same as the articles of the amalgamating holding corporation, except for the name which may be different.
• A horizontal short-form amalgamation involves two or more wholly-owned subsidiaries of the same holding corporation. The shares of all but one of the subsidiaries will be cancelled as part of the amalgamation with no repayment of capital in respect of those shares. The Articles of Amalgamation must be the same as the articles of the amalgamating subsidiary corporation whose shares are not cancelled, except for the name which may be different.

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What documents must be filed to amalgamate two or more corporations?

An application to amalgamate must include the following:

1. a completed and signed copy of Form 9 – Articles of Amalgamation (see instructions in Annex A)
2. a completed and signed copy of Form 2 – Initial Registered Office Address and First Board of Directors (see instructions in Annex B)
3. a statutory declaration from a director or officer of each amalgamating corporation (see the sample statutory declaration)
4. a NUANS Name Search Report, unless the amalgamated corporation will use the corporate name of one of the amalgamating corporations;
5. the filing fee.

The articles can be in English or French or in a bilingual format.

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What must be included in the statutory declaration?

The statutory declaration (see the sample statutory declaration) must include statements to the effect that:

• (i) each amalgamating corporation is able, and the amalgamated corporation will be able, to pay its liabilities as they become due;
• (ii) the realizable value of the amalgamated corporation's assets will not be less than the aggregate of its liabilities; and
• (iii) either a or b:
  • (a) there are reasonable grounds for believing that no creditor will be prejudiced by the amalgamation; or
  • (b) that adequate notice has been given to all known creditors of the amalgamating corporation and no creditor objects to the amalgamation otherwise than on grounds that are frivolous or vexatious.

The statutory declarations must be signed by a director or officer of each amalgamating corporation, and must be dated within two weeks of the proposed effective date of the amalgamation, which will be the date the application is received or any later date requested.

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Can a provincial corporation amalgamate with a federal corporation?

In order for an application for amalgamation to proceed, all of the amalgamating corporations must be incorporated under the CBCA. This means that if one of the corporations is incorporated under another statute, it must first continue to the CBCA before it can amalgamate with the other corporations. ^{Footnote 1} See Continuing (Importing) an Incorporated Business.

In addition, the CBCA does not apply until after a Certificate of Continuance has been issued. Consequently, the meeting convened to pass the resolution to amalgamate must be held according to the CBCA requirements for a meeting of shareholders while the meeting to approve the resolution to continue must meet the requirements of the legislation that governed the corporation prior to the continuance . To simplify and speed up this process, Articles of Continuance can be filed at the same time as Articles of Amalgamation.

Related Information

• How do I file my application?
• What happens after I submit my application?

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Annex A - Instructions for Completing Form 9 – Articles of Amalgamation

Item 1: Name of the amalgamated corporation

Indicate the proposed corporate name of the corporation to be created by the amalgamation.

The proposed name must be distinctive and it must not be misleading or likely to be confused with names used by other organizations and businesses. In general, a corporate name is distinctive if it does not make those who encounter it think of another organization or business. See Name a Corporation for more information.

For your corporate name you can choose:

• a unilingual name (i.e., English or French)
• a combined bilingual name (e.g., Cars ABC Autos Inc.)
• separate English and French forms of the name – start each name on a separate line: e.g., Cars ABC Ltd / ABC Autos Ltée
• a number name – leave a blank space (in which Corporations Canada will insert an assigned number), followed by the word "Canada" and the legal element of your choice, such as Incorporated, Inc., Limited, Ltd., Corporation, Corp., etc.

Example: Canada Limited

You must include a valid NUANS Name Search Report unless the new corporation will have a name identical to that of one of the amalgamating corporations or a number name (e.g., 123456 Canada Inc.). A NUANS report is also not needed if the only change to the name is to the legal element.

Corporations Canada will use the NUANS Name Search Report to determine whether the name is distinctive and otherwise meets the requirements of the CBCA. The NUANS Name Search Report must be dated not more than ninety (90) days prior to the receipt of the articles by Corporations Canada.

More information about choosing a name is available on the Corporations Canada website.

Item 2: The province or territory in Canada where the registered office is to be situated

Indicate the province or territory in Canada where the amalgamated corporation's registered office is to be situated.

Item 3: The classes and any maximum number of shares that the corporation is authorized to issue

Indicate the class or classes of shares that the corporation is authorized to issue. For each class, a maximum limit for the number of shares to be issued may be indicated or the number of shares can be described as unlimited.

If there is to be more than one class of shares, the rights, privileges, restrictions and conditions that apply to each class must be indicated. At least one class of shares must have:

• the right to vote
• the right to receive dividends
• the right to receive the remaining property of the corporation on dissolution.

The three rights don't have to be attached to the same class of shares (e.g., class A can have the right to vote while class B has the right to dividends and the remaining property). However, if there is only one class of shares, all three rights will apply to it.

The following clauses are examples of the most common kinds of share structures. They are by no means mandatory or exhaustive. You may wish to seek legal advice if you want to use other clauses to be sure that they are permitted under the CBCA.

Examples:

Single class of shares:

"The corporation is authorized to issue an unlimited number of shares of one class."

or

"Unlimited number of shares in a single class."

Two or more classes of shares:

"The corporation is authorized to issue an unlimited number of Class A and Class B shares. The Class A shareholders shall be entitled to vote at all shareholder meetings, except meetings at which only holders of a specified class of shares are entitled to vote. Class A shareholders are also entitled to receive such dividends as the board of directors in their discretion shall declare. Subject to the provisions of the Canada Business Corporations Act, the Class B shares shall be non-voting. Upon liquidation or dissolution, the holders of Class A and Class B shares shall share equally in the remaining property of the corporation."

or

"The corporation is authorized to issue Class A and Class B shares with the following rights, privileges, restrictions and conditions:

• 1. Class A shares, without nominal or par value, the holders of which are entitled:
  • a. to vote at all meetings of shareholders except meetings at which only holders of a specified class of shares are entitled to vote; and
  • b. to receive the remaining property of the corporation upon dissolution.
• 2. Class B shares, without nominal or par value, the holders of which are entitled:
  • a. to a dividend as fixed by the board of directors; and
  • b. upon the dissolution or liquidation of the corporation, to repayment of the amount paid for such share (plus any declared and unpaid dividends) in priority to the Class A shares, but they shall not confer a right to any further participation in profits or assets.
• 3. The holders of Class B shares shall not, subject to the provisions of the Canada Business Corporations Act, be entitled to vote at any meetings of shareholders."

Share redemption:

If a fixed price is not stated, a redemption formula that can be determined in dollars must be used.

"Class X shares or any part thereof shall be redeemable at the option of the corporation without the consent of the holders thereof (at a price of $__ per share) or (at a price equal to the amount paid per share) plus any declared and unpaid dividend."

Item 4: Restrictions, if any, on share transfers

No restrictions

If there are to be no restrictions, simply state "none."

Non-distributing corporations

Under provincial securities law a corporation that sells shares to the public is considered a reporting issuer. The CBCA calls these "distributing corporations". Such corporations are subject to a number of requirements under provincial securities law. Private issuers are exempt from these requirements.

In order to be a private issuer (i.e., not a reporting issuer) National Instrument 45-106 requires that the corporation's securities, excluding non-convertible debt securities, be:

• subject to restrictions on transfer that are contained in the issuer's constating documents or security holders' agreements;
• beneficially owned, directly or indirectly, by not more than 50 persons, not including employees and former employees of the issuer or its affiliates, provided that each person is counted as one beneficial owner unless the person is created or used solely to purchase or hold securities of the issuer in which case each beneficial owner or each beneficiary of the person, as the case may be, must be counted as a separate beneficial owner; and
• distributed only to persons described in securities legislation or regulations (e.g., people at non-arms length with the corporation such as directors, officers, employees, family and friends).

To meet the first requirement (i.e., restrictions on the transfer of securities in constating documents), it is suggested that a provision restricting the transfer of shares should appear in Item 4- Restrictions, if any, on share transfer of the articles. To meet the requirement for restrictions on the transfer of securities other than shares, a provision should be added to Item 7 – Other provisions, if any.

Example:

Item 4 - Restrictions, if any, on share transfers

"No shares of the capital of the corporation shall be transferred without either (a) the approval of a majority of the directors of the corporation or alternatively (b) the approval of the majority of the shareholders of the corporation."

Item 7 - Other provisions, if any

"The corporation's securities, other than non-convertible debt securities, shall not be transferred without either (a) the approval of a majority of the directors of the corporation, or (b) the approval of the majority of the shareholders of the corporation, or alternatively (c), if applicable, respecting the restriction contained in security holders' agreements."

There are other exemptions in provincial securities legislation that prevent a corporation from becoming a "reporting issuer", and consequently being designated as "distributing corporation" under the CBCA. You may want to consult with legal counsel or other professional advisers to consider the impact of securities legislation on your corporation.

Constrained share corporations

Sometimes a corporation restricts the transfer of its shares to meet the requirements of another law. For example, some industries restrict the percentage of non-Canadians who can own the shares of a corporation (i.e., limit the percentage of foreign ownership). In these cases it may be necessary to constrain (i.e., control) the transfer of shares to ensure that the corporation's shares are not owned by too many non-Canadians. When the limits are exceeded, the CBCA provides a mechanism to force the sale of shares to lower the percentage of non-Canadian shareholders.

Examples:

"No shares of the capital of the corporation shall be transferred without either (a) the approval of a majority of the directors of the corporation or alternatively (b) the approval of the majority of the shareholders of the corporation."

or

"No shares of the corporation shall be transferred without the approval of the directors as evidenced by a resolution of the board. The approval of any transfer of shares may be given after the transfer has been entered in the corporate records and shall be valid and take effect as of the date of entry in such records unless the board resolution stipulates otherwise."

Item 5: Minimum and maximum number of directors

Every corporation must have at least one director, except a distributing corporation. A distributing corporation must have no fewer than three directors. If a corporation is to have cumulative voting, the number of directors must be fixed.

Item 6: Restrictions, if any, on the business the corporation may carry on

Indicate any restrictions on the business that the corporation may carry on. If there are no restrictions required, indicate "none."

If, however, there are reasons why you wish to restrict the business of the corporation, the following preamble is suggested:

"The business of the corporation shall be limited to the following: ..."

Item 7: Other provisions, if any

Include any other provisions your corporation would like to have in its articles (e.g., any provisions required to satisfy the requirements of other legislation). If there are no other provisions, indicate "none".

While there is no limit to the number of provisions that could be part of this section of the articles, the following sections provide suggested wording for some possible topics. Note that these provisions are merely examples, i.e., the list is not definitive and the wording is not mandatory. If you want to use other provisions, you may wish to consult a lawyer or other business professional to be sure that they are permitted under the CBCA.

A. Restrictions on the transfer of securities other than shares

You may want a provision that restricts the transfer of the corporation's securities other than shares in order to comply with certain requirements of provincial securities law. See information provided at Item 4: Restrictions, if any, on Share Transfers.

B. Borrowing powers

The CBCA allows directors to borrow and grant security on property without the authorization of shareholders. However, your corporation can restrict this power by including a provision in the articles or by-laws or in any unanimous shareholders' agreement. A provision regarding directors' borrowing powers and the delegation of those powers is sometimes used to limit the authority of directors and/or to satisfy lending institutions. The following wording could be used in the articles:

"If authorized by a by-law which is duly adopted by the directors and confirmed by ordinary resolution of the shareholders, the directors of the corporation may from time to time:

• (i) borrow money on the credit of the corporation;
• (ii) issue, reissue, sell, pledge or hypothecate debt obligations of the corporation; and
• (iii) mortgage, hypothecate, pledge or otherwise create a security interest in all or any property of the corporation, owned or subsequently acquired, to secure any debt obligation of the corporation.

Any such by-law may provide for the delegation of such powers by the directors to such officers or directors of the corporation to such extent and in such manner as may be set out in the by-law.

Nothing herein limits or restricts the borrowing of money by the corporation on bills of exchange or promissory notes made, drawn, accepted or endorsed by or on behalf of the corporation."

C. Cumulative voting for directors:

This clause is allowed only if the number of directors is a fixed number:

"There shall be cumulative voting for directors."

D. Increase the majority vote by shareholders:

The CBCA specifies that an ordinary resolution is a simple majority and a special resolution is a two-thirds majority. Your corporation can set out a different majority in its articles, which must be greater than the statutory majorities. The requirements for passage of a resolution to remove a director cannot be increased. The following wording could be used:

"In order to adopt any (ordinary and/or special) resolution at a meeting of shareholders, a majority of not less than per cent of the votes cast by the shareholders who voted in respect of that resolution shall be required."

E. Foreign corporate name

You may want to specify the foreign form of your corporate name. This form of the name may only be used outside Canada. The following wording could be used:

"The corporation may use and may be equally designated by the following form outside Canada: ...."

F. Fractional shares

Specify voting rights on fractional shares:

"A holder of a fractional share shall be entitled to exercise voting rights and to receive dividends in respect of said fractional share."

G. Pre-emptive rights

Specify that some shareholders have a pre-emptive right:

"No shares of a class of shares shall be issued unless the shares have first been offered to the shareholders holding shares of that class, and that those shareholders have a pre-emptive right to acquire the offered shares in proportion to their holdings of the shares of that class, at such price and on such terms as those shares are to be offered to others."

H. Require directors to own shares

Under the CBCA, directors are not required to own shares of the corporation. However, where incorporators do wish to provide for directors to own shares, the following wording is normally used:

"No person otherwise qualified shall be elected or appointed as a director unless such person beneficially owns at least one share issued by the corporation."

I. Quorum for meetings of directors

You may specify a quorum of directors:

"The quorum for any meeting of the board of directors shall be __________ ."

J. Fill a vacancy on the board of directors

The CBCA allows a quorum of directors to fill a vacancy on the board of directors, but not a vacancy created by an increase in the number of directors or a failure to elect the minimum number of directors specified in the articles (see section 132 of the CBCA). Alternatively, the articles could specify that only the shareholders can fill a vacancy on the board of directors. If you want to restrict the ability of the board of directors to fill a vacancy, the following wording could be used in the articles:

"Any vacancy on the board of directors shall be filled by an ordinary resolution of the shareholders."

K. Additional Directors

The CBCA permits the articles to provide the board of directors with the authority to appoint one or more additional directors between annual meetings, for a term expiring not later than the close of the next annual meeting of shareholders (see subsection 128(8) of the CBCA). This authority does not apply to filling a vacancy on the board. The number of appointed directors cannot exceed one-third (1/3) of all directors elected at the last annual meeting of shareholders. The following wording can be used in the articles to allow directors to appoint additional directors:

"The directors may appoint one or more directors, who shall hold office for a term expiring not later than the close of the next annual general meeting of shareholders, provided that the total number of directors so appointed may not exceed one-third of the number of directors elected at the previous annual general meeting of shareholders."

Item 8: The amalgamation has been approved pursuant to that section or subsection of the Act which is indicated as follows

You must indicate whether the amalgamation complies with section 183 ("long-form"), subsection 184(1) ("vertical short-form") or subsection 184(2) ("horizontal short form") of the CBCA. For more information on the three types of amalgamation, see What is an amalgamation?.

Item 9: Declaration

Indicate the names of the corporations that will be amalgamated and their respective corporation numbers. The director or authorized officer of each corporation must date and sign the declaration accordingly.

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Annex B - Instructions for Completing Form 2 – Initial Registered Office Address and First Board of Directors

You are providing information required by the CBCA. Note that both the CBCA and the Privacy Act allow this information to be disclosed to the public. It will be stored in personal information bank number IC/PPU-049.

Item 1: Corporate name

Provide the name of your corporation as indicated in the articles of the corporation.

Item 2: Address of registered office

The registered office address is the legal address of the corporation. All official documents that are sent by registered mail to, or that are served on, a corporation at the registered office address are deemed to be received by the corporation.

Indicate the street name and number, city, province/territory and postal code of the registered office.

Item 3: Additional address

If you want annual return reminder notices and other general correspondence from Corporations Canada to be sent to a mailing address that is different from the registered office address, indicate it here. An additional address is really only useful if the corporation wants another organization, such as a law firm, to file documents on its behalf.

Item 4: Members of the board of directors

Indicate the first and last name as well as the residential address or other address for service of each member of the board of directors and indicate if he/she is a Canadian resident.

Item 5: Declaration

This form must be signed by a director or an officer of the amalgamated corporation.

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Sample Statutory Declaration

In the matter of the Canada Business Corporations Act
and
In the matter of articles of amalgamation filed pursuant to section 185 in the name

__________(name of corporation)__________

Statutory Declaration

I, ____________________ of the City of ____________________ in the Province of ____________________, DO SOLEMNLY DECLARE that:

1. I am a director or officer of ____________________, an amalgamating corporation and I have personal knowledge of the matters herein deposed to.
2. I am satisfied that there are reasonable grounds for believing that:
   1. each amalgamating corporation can and the amalgamated corporation will be able to pay its liabilities as they become due;
   2. the realizable value of the amalgamated corporation's assets will not be less than the aggregate of its liabilities and stated capital of all classes, and
   3. no creditor will be prejudiced by the amalgamation or that adequate notice has been given to all known creditors of the amalgamating corporation and no creditor objects to the amalgamation otherwise than on grounds that are frivolous or vexatious.

AND I make this solemn declaration conscientiously believing it to be true, and knowing that it is of the same force and effect as if made under oath.

DECLARED before me

City of ____________________,

in the Province of ____________________

this_____ day of ____________________, 20_____

Footnotes

Footnote 1

Provincial and federal corporations can also amalgamate through an arrangement, which is a court supervised corporate transaction.

Return to footnote 1 referrer