Amalgamations and Dissolutions Lawyers

What is amalgamation?

When two or more corporations combine their operations, assets, and liabilities to become a single new entity, this legal process is called amalgamation. The assets and liabilities of the two entities will now belong to the new amalgamated corporation, and the shares of the amalgamated company will be issued to the shareholders. 

What are the different types of amalgamations?

Short-form amalgamation:

Short-form amalgamation refers to the amalgamation process wherein both corporations are wholly owned by the same holding company or when one of them is the subsidiary of the other. 

• Vertical amalgamation: This is a simple amalgamation between the holding company and one of its subsidiaries to form a new amalgamated company. 
• Horizontal amalgamation: When two or more subsidiaries of the same holding company amalgamate to form a new entity, this is called horizontal amalgamation.

Long-form amalgamation:

All other forms of amalgamations, generally between unrelated corporations, are considered long-form amalgamations, where it is an essential requirement to prepare the Amalgamation Agreement. The Amalgamation Agreement will clearly state the terms of the amalgamation and how the shares of the amalgamated corporation will be distributed among the shareholders of the predecessor corporations.

What are the steps involved in an amalgamation?

There are some differences in the initial steps between short-form and long-form amalgamation. The formal process of amalgamation will involve the following steps. 

Amalgamation Agreement:

This document will contain the terms of the amalgamation and how the shares of the amalgamated corporation will be distributed among the shareholders of the predecessor corporations. This is a requirement only in the case of long-form amalgamation.

Approval from shareholders on the amalgamation agreement:

The shareholders of both corporations must approve the Amalgamation Agreement. Again, this is not a requirement in the case of short-form amalgamation.

Submitting the Articles of Amalgamation to the appropriate authorities:

The Articles of Amalgamation must be prepared in the prescribed form, containing details such as the name of the amalgamated entity, distribution of the shares, proposed bylaws, and the directors. It must be filed with the appropriate authority, either the Ontario Business Registry (in case of provincial corporation) or Corporations Canada (in case of federal corporation). 

Statutory declaration:

A statutory declaration by the directors affirming the new corporation’s ability to meet all liabilities. 

Certificate of Amalgamation:

Once all the requirements are met, the business registry will issue a certificate of amalgamation confirming the merger of amalgamated corporations into a single entity. This is the date on which the amalgamated corporation came into existence, taking over the operations, assets, liabilities, and obligations from its predecessor corporations. 

What is dissolution?

This is the legal process through which the corporation ceases to exist as a legal entity. The name of the corporation will be removed from the registry, and all the assets of the corporation will be sold off to clear all the liabilities. Any remaining proceeds will be settled among the shareholders according to the percentage of their ownership. 

What are the different types of dissolution?

Voluntary dissolution: For various reasons, such as insolvency or having achieved their business objectives, the shareholders may decide to voluntarily initiate the process of dissolution. 

Involuntary dissolution: A corporation might be forced to dissolve by a court order or by the corporate registry for not filing the annual corporate return for successive years or for not paying the incorporation fee. 

What are the steps involved in a dissolution?

Shareholder approval through a special resolution: 

As per the bylaws, the board of directors will pass a resolution for the dissolution of the corporation and send it to the shareholders for approval.

Clearing all financial obligations and the liquidation of assets:

All the funds of the corporation must be used to settle all claims, debts, liabilities, and other pending payments. Assets will be liquidated to meet these obligations, and the remaining proceeds will be distributed among the shareholders according to their percentage of ownership.

Articles of dissolution:

The articles of dissolution must be submitted in the prescribed format to Corporations Canada or the provincial governing body for approval. It should contain details such as the name of the corporation, the proposed date of dissolution, and the signatures of all the directors 

Certificate of dissolution:

Once the articles of dissolution are approved and the formalities are completed, you will receive the certificate of dissolution confirming the legal termination of the corporation and the end date. 

Cancel business permits, licenses, and registrations:

You need to cancel all the business licenses and permits related to your business operations. After filing the final tax returns, close the tax accounts, such as the GST/HST and PST accounts. 

How can our business lawyer help you?

A business lawyer can help you with the legal aspects involved in the process of amalgamation or dissolution, including the drafting and filing of various documents required for approval. 

Legal guidance and advice: An experienced business lawyer can advise you on the correct legal procedure to initiate the process of amalgamation or dissolution. For example, a corporation incorporated under the Ontario Business Corporations Act cannot amalgamate with a corporation incorporated under the Canada Business Corporations Act. The provincial corporation must become a federal corporation under the Canada Business Corporations Act before such an amalgamation can take place. Our business lawyer will guide you through such business law matters, including the continuance of the corporation in another jurisdiction.

Legal documentation and compliance: A qualified business lawyer can assist you in the preparation and filing of legally required documents, such as the articles of amalgamation or the articles of dissolution, the amalgamation agreement, and the Board resolution for dissolution. 

Dispute resolution: Such big changes to the business often result in significant differences and disputes among the shareholders or other stakeholders. If the case goes to court, you will need the services of an experienced business lawyer to represent your case in court.