2019-0794571R3 Cross-Border Butterfly

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA. Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.

Principal Issues: Whether the Canadian butterfly transactions, as described below, in the context of a cross-border butterfly, meet legislative and administrative requirements?

Position: Transactions meet requirements.

Reasons: Consistent with law and administrative requirements.

Author: XXXXXXXXXX

Section: 55(2), 55(3)(b), 55(3.1), 55(3.2)(h), 212.1(1), 212.1(1.1), 212.1(1.2)

XXXXXXXXXX                                                          2019-079457
                                                                                  XXXXXXXXXX

 

XXXXXXXXXX, 2019

 

Dear XXXXXXXXXX:

Re:   XXXXXXXXXX
         Advance Income Tax Ruling Request

This is in reply to your letter of XXXXXXXXXX, in which you requested an advance income tax ruling on behalf of the above-noted taxpayer.  We also acknowledge the additional information provided to us in subsequent letters and emails, and during our various telephone conversations.

To the best of your knowledge, and that of the taxpayer involved, none of the issues involved in this ruling request is:

(i)   in a previously filed tax return of the taxpayer or a person related to the taxpayer;

(ii)  being considered by a tax services office or taxation center in connection with a previously filed tax return of the taxpayer or a person related to the taxpayer;

(iii) under objection by the taxpayer or a person related to the taxpayer;

(iv)  the subject of a current or completed court process involving the taxpayer or a person related to the taxpayer; or

(v)   the subject of an advance income ruling previously issued by the Income Tax Rulings Directorate.

I.    ENTITIES INVOLVED

Throughout this letter, the entities below will be referred to as follows:

“Canco 1” means XXXXXXXXXX, a corporation governed by Act 2 that is and will be, at any relevant time, a Taxable Canadian Corporation and a Private Corporation, as described in Paragraph 9(a);

“Canco 2” means XXXXXXXXXX, a corporation governed by Act 3 that is and will be, at any relevant time, a Taxable Canadian Corporation and a Private Corporation, as described in Paragraph 9(b);

“Canco 3” means XXXXXXXXXX, a corporation governed by Act 3 that is and will be, at any relevant time, a Taxable Canadian Corporation and a Private Corporation, as described in Paragraph 8.1;

“CanGP 1” means XXXXXXXXXX, a general partnership governed by the laws of Province 2 that is and will be, at any relevant time, a Canadian Partnership, as described in Paragraphs 91-94;

“CanGP 2” means XXXXXXXXXX, a general partnership governed by the laws of Province 2 that is and will be, at any relevant time, a Canadian Partnership, as described in Paragraph 95-98;

“CanLP 1” means XXXXXXXXXX, a limited partnership governed by the laws of Province 2 that is and will be, at any relevant time, a Canadian Partnership, as described in Paragraphs 43-44;

“CanLP 2” means XXXXXXXXXX, a limited partnership governed by the laws of Province 2 that is and will be, at any relevant time, a Canadian Partnership, as described in Paragraphs 45-46;

“CanLP 3” means XXXXXXXXXX, a limited partnership governed by the laws of Province 2 that is and will be, at any relevant time, a Canadian Partnership, as described in Paragraphs 47-48;

“CanLP 4” means XXXXXXXXXX, a limited partnership governed by the laws of Province 2 that is and will be, at any relevant time, a Canadian Partnership, as described in Paragraphs 49-50;

“CanLP 5” means XXXXXXXXXX, a limited partnership governed by the laws of Province 2 that is and will be, at any relevant time, a Canadian Partnership, as described in Paragraphs 51-52;

“CanLP 6” means XXXXXXXXXX, a limited partnership governed by the laws of Province 2 that is and will be, at any relevant time, a Canadian Partnership, as described in Paragraphs 53-56;

“CanLP 7” means XXXXXXXXXX, a limited partnership governed by the laws of Province 2 that is and will be, at any relevant time, a Canadian Partnership, as described in Paragraphs 57-59;

“CanLP 8” means XXXXXXXXXX, a limited partnership governed by the laws of Province 2 that is and will be, at any relevant time, a Canadian Partnership as described in Paragraphs 60-61;

“CanLP 9” means XXXXXXXXXX, a limited partnership governed by the laws of Province 2 that is and will be, at any relevant time, a Canadian Partnership, as described in Paragraphs 62-63;

“CanLP 10” means XXXXXXXXXX, a limited partnership governed by the laws of Province 2 that is and will be, at any relevant time, a Canadian Partnership, as described in Paragraphs 64-65;

“CanLP 11” means XXXXXXXXXX, a limited partnership governed by the laws of Province 2 that is and will be, at any relevant time, a Canadian Partnership, as described in Paragraphs 66-68;

“CanLP 12” means XXXXXXXXXX, a limited partnership governed by the laws of Province 2 that is and will be, at any relevant time, a Canadian Partnership, as described in Paragraphs 69-70;

“CanLP 13” means XXXXXXXXXX, a limited partnership governed by the laws of Province 2 that is and will be, at any relevant time, a Canadian Partnership, as described in Paragraphs 71-73;

“CanLP 14” means XXXXXXXXXX, a limited partnership governed by the laws of Province 2 that is and will be, at any relevant time, a Canadian Partnership, as described in Paragraphs 74-76;

“CanLP 15” means XXXXXXXXXX, a limited partnership governed by the laws of Province 2 that is and will be, at any relevant time, a Canadian Partnership, as described in Paragraphs 77-79;

“CanLP 16” means XXXXXXXXXX, a limited partnership governed by the laws of Province 2 that is and will be, at any relevant time, a Canadian Partnership, as described in Paragraphs 80-81;

“CanLP 17” means XXXXXXXXXX, a limited partnership governed by the laws of Province 2 that is and will be, at any relevant time, a Canadian Partnership, as described in Paragraphs 82-84;

“CanLP 18” means XXXXXXXXXX, a limited partnership governed by the laws of Province 2 that is and will be, at any relevant time, a Canadian Partnership, as described in Paragraphs 85-87;

“CanLP 19” means XXXXXXXXXX, a limited partnership governed by the laws of Province 2 that is and will be, at any relevant time, a Canadian Partnership, as described in Paragraphs 88-90;

“CanParent” means XXXXXXXXXX., a corporation formerly governed by the laws of Province 1 that was, at all times, prior to Amalgamation 1, a Taxable Canadian Corporation and a Private Corporation.  CanParent amalgamated with Newco ULC to form DC ULC on Amalgamation 1, as described in Paragraph 120.11;

“Cansub 1” means XXXXXXXXXX, a corporation formerly governed by Act 2 that was, at all times, prior to the Amalgamation, a Taxable Canadian Corporation and a Private Corporation.  Cansub 1 amalgamated with Cansub 8 to form Cansub 4 on the Amalgamation, as described in Paragraph 118(a);

“Cansub 2” means XXXXXXXXXX, a corporation governed by Act 2 that is and will be, at any relevant time, a Taxable Canadian Corporation and a Private Corporation, as described in Paragraph 22;

“Cansub 3” means XXXXXXXXXX, a corporation governed by Act 1 that is and will be, at any relevant time, a Taxable Canadian Corporation and a Private Corporation, as described in Paragraphs 28-33;

“Cansub 4” means XXXXXXXXXX, a corporation formed on the Amalgamation of Cansub 1 and Cansub 8, and governed by Act 2 that is and will be, at any relevant time, a Taxable Canadian Corporation and a Private Corporation, as described in Paragraphs 33.1 to 35.1;

“Cansub 5” means XXXXXXXXXX, a corporation governed by Act 3 that is and will be, at any relevant time, a Taxable Canadian Corporation and a Private Corporation, as described in Paragraphs 36 to 38;

“Cansub 6” means XXXXXXXXXX, a corporation governed by Act 3 that is and will be, at any relevant time, a Taxable Canadian Corporation and a Private Corporation, as described in Paragraphs 39-40;

“Cansub 7” means XXXXXXXXXX, a corporation governed by Act 2 that is and will be, at any relevant time, a Taxable Canadian Corporation and a Private Corporation, as described in Paragraphs 41-42.1;

“Cansub 8” means XXXXXXXXXX, a corporation formerly governed by Act 2 that was, at all times, prior to the Amalgamation of Cansub 1 and Cansub 8 to form Cansub 4, as described in Paragraph 118(a), a Taxable Canadian Corporation and a Private Corporation;

“DC ULC” means XXXXXXXXXX, the unlimited liability corporation formed under Act 2 on Amalgamation 1 of CanParent and Newco ULC. DC ULC  is and will be, at any relevant time, a Taxable Canadian Corporation and a Private Corporation, as described in Paragraphs 11 to 13;

 “Forco 1” means XXXXXXXXXX, a corporation governed by the laws of State 1;

“Forco 2” means XXXXXXXXXX, a corporation governed by the laws of State 1;

“Forco 3” means XXXXXXXXXX governed by the laws of State 1;

“Forco 4” means XXXXXXXXXX, a corporation governed by the laws of Country 3;

“Forco 5” means XXXXXXXXXX, a corporation governed by the laws of State 1, that carries on a business in Business Segment 4;

“Forco 6” means XXXXXXXXXX, a corporation governed by the laws of State 1, that carries on a business in Business Segment 4;

“Forco 7” means XXXXXXXXXX governed by the laws of State 1 that carries on a business in Business Segment 4;

“Forco 8” means XXXXXXXXXX governed by the laws of State 1 that carries on a business in Business Segment 4;

“Forco 9” means XXXXXXXXXX, a corporation governed by the laws of State 1 that carries on a business in Business Segment 4;

“Forco 10” means XXXXXXXXXX, a corporation governed by the laws of State 1 that carries on a business in Business Segment 4;

[Reserved];

[Reserved];

“Forco 13” means XXXXXXXXXX, a corporation governed by the laws of Country 7;

“Forco 14” means XXXXXXXXXX, a corporation governed by the laws of Country 8;

“Forco 15” means XXXXXXXXXX, a corporation governed by the laws of Country 4 that carries on a business in Business Segment 4;

“Foreign Pubco” means XXXXXXXXXX, a corporation governed by the laws of State 1, as described in Paragraph 1;

“Foreign Pubco Spinco” means XXXXXXXXXX, a corporation governed by the laws of State 1, as described in Paragraph 112.1;

“Foreign Spinco” means XXXXXXXXXX incorporated under, and governed by, the laws of State 1, as described in Paragraph 113;

“Foreign Spinco Finco” means XXXXXXXXXX incorporated under, and governed by, the laws of State 1, as described in Paragraph 120.6;

“Forsub 1” means XXXXXXXXXX, a corporation governed by the laws of Country 2, as described in Paragraphs 99-100.1;

“Forsub 2” means XXXXXXXXXX, a corporation governed by the laws of Country 3, as described in Paragraph 114(c);

“Forsub 3” means XXXXXXXXXX, a corporation governed by the laws of Country 3, as described in Paragraph 114(d);

“Forsub 4” means XXXXXXXXXX, a corporation governed by the laws of Country 3, as described in Paragraph 114(e);

[Reserved];

“Forsub 6” means XXXXXXXXXX, a corporation governed by the laws of Country 4, as described in Paragraphs 101-103;

“Forsub 7” means XXXXXXXXXX, a corporation governed by the laws of Country 5, as described in Paragraphs 104-106;

“Forsub 8” means XXXXXXXXXX, a corporation governed by the laws of Country 2, as described in Paragraphs 107-109;

“Forsub 9” means XXXXXXXXXX, a corporation governed by the laws of Country 9, as described in Paragraphs 109.1-109.3;

“Forsub 10” means XXXXXXXXXX, a corporation governed by the laws of State 1, as described in Paragraphs 109.4-109.6;

[Reserved];

“New Canco 1” means XXXXXXXXXX, a corporation governed by Act 2 that is and will be, at any relevant time, a Taxable Canadian Corporation and a Private Corporation, as described in Paragraph 10.1.

“New Canco 2” means XXXXXXXXXX, a corporation governed by Act 2 that is and will be, at any relevant time, a Taxable Canadian Corporation and a Private Corporation, as described in Paragraph 10.2;

“New CanLP 1” means XXXXXXXXXX, a limited partnership governed by the laws of Province 1 that is and will be, at any relevant time, a Canadian Partnership, as described in Paragraph 10.3;

“New CanLP 2” means XXXXXXXXXX, a limited partnership governed by the laws of Province 1 that is and will be, at any relevant time, a Canadian Partnership, as described in Paragraph 10.4;

“Newco XXXXXXXXXX” means XXXXXXXXXX incorporated under, and governed by, the laws of State 1, as described in Paragraph 120.13;

“Newco ULC” means XXXXXXXXXX, an unlimited liability corporation governed by Act 2 that was, prior to Amalgamation 1, a Taxable Canadian Corporation and a Private Corporation, as described in Paragraph 120.5.  Newco ULC and CanParent amalgamated to form DC ULC on Amalgamation 1, as described in Paragraph 120.11;

“New DC ULC” means the unlimited liability corporation to be formed under

Act 2 on Amalgamation 2 of DC ULC and New Canco 1 and New Canco 2, as described in Paragraph 189.  New DC ULC will be, at any relevant time, a Taxable Canadian Corporation and a Private Corporation;

“New DC ULC II” means the unlimited liability corporation to be formed under Act 2 on Amalgamation 3 of New DC ULC and Cansub 2, as described in Paragraph 191.3. New DC ULC II will be, at any relevant time, a Taxable Canadian Corporation and a Private Corporation;

“Partnerco ULC” means XXXXXXXXXX, an unlimited liability corporation governed by Act 2 that is and will be, at any relevant time, a Taxable Canadian Corporation and a Private Corporation, as described in Paragraph 120(b);

“Spinco ULC” means XXXXXXXXXX, an unlimited liability corporation governed by Act 2 that is and will be, at any relevant time, a Taxable Canadian Corporation and a Private Corporation, as described in Paragraph 120(a);

“Target” means XXXXXXXXXX, a corporation dealing at Arm’s Length with the Foreign Pubco Group, as described in Paragraph 110; 

“TC Finance” means XXXXXXXXXX, a corporation governed by Act 2 that is and will be, at any relevant time, a Taxable Canadian Corporation and a Private Corporation, as described in Paragraph 119.1;

“TC ULC” means XXXXXXXXXX, an unlimited liability corporation governed by Act 2 that is and will be, at any relevant time, a Taxable Canadian Corporation and a Private Corporation, as described in Paragraph 10.6;

“TC ULC GP” means XXXXXXXXXX., a corporation governed by Act 2 that is and will be, at any relevant time, a Taxable Canadian Corporation and a Private Corporation, as described in Paragraph 10.7; and

“Vendor” means the XXXXXXXXXX, a corporation dealing at Arm’s Length with the Foreign Pubco Group, as described in Paragraph 110.1.

II.   DEFINITIONS

Unless otherwise expressly stated, every reference herein to the “Act” or to a part, section or subsection, paragraph or subparagraph and clause or subclause is a reference to the relevant provision of the Income Tax Act (Canada), R.S.C. 1985 (5th Supp.) c.1, as amended from time to time and consolidated to the date of this letter and the Income Tax Regulations thereunder are referred to as the “Regulations.”

Unless otherwise noted, all references herein to a currency are a reference to Canadian dollars.

In this letter, the following terms have the meanings specified and, where the circumstances so require, the singular should be read as plural and vice versa:

“ACB” means adjusted cost base, as defined in section 54;

“Acquisition 1” has the meaning set out in Paragraph 110;

“Acquisition 2” has the meaning set out in Paragraph 110.1;

“Act 1” means the XXXXXXXXXX;

“Act 2” means the XXXXXXXXXX;

“Act 3” means the XXXXXXXXXX;

“Additional Cash Transfer” has the meaning described in Paragraph 179;

“Agreed Amount” means the amount agreed on by the transferor and transferee in respect of the transfer of an Eligible Property in a joint election filed pursuant to subsection 85(1);

“Amalgamation” means the amalgamation of Cansub 8 and Cansub 1 to form Cansub 4, as more particularly described in Paragraph 118(a);

“Amalgamation 1” means the amalgamation of CanParent and Newco ULC to form DC ULC, as more particularly described in Paragraph 120.11;

“Amalgamation 2” means the amalgamation of DC ULC, New Canco 1 and New Canco 2 to form New DC ULC, as more particularly described in Paragraph 189;

“Amalgamation 3” means the amalgamation of New DC ULC and Cansub 2 to form New DC ULC II, as more particularly described in Paragraph 191.3;

“Arm’s Length” has the meaning assigned by subsection 251(1);

“Business Segment 1” means the business segment described in Paragraph 3(a);

“Business Segment 2” means the business segment described in Paragraph 3(b);

“Business Segment 3” means the business segment described in Paragraph 3(c);

“Business Segment 4” means the business segment described in Paragraph 3(d);

“Butterfly Percentage” means the proportion, expressed as a percentage, that the aggregate net FMV of the business property owned by the DC ULC Group that relates to the Canadian Spin Business is of the aggregate net FMV of all the business property of the DC ULC Group, determined (a) immediately before the DC ULC Transfer, and (b) using the principles set out in Paragraphs 173 and 174;

“Canadian Keep Businesses” has the meaning set out in Paragraph 14;

“Canadian Partnership” has the meaning assigned by subsection 102(1);

“Canadian Spin Business” has the meaning set out in Paragraph 14;

“CanParent Common Shares” means the common shares which CanParent was authorized to issue, as described in Paragraph 11;

“CanParent Interest Note” has the meaning set out in Paragraph 120.8;

“Cansub 2 PUC Reduction” has the meaning set out in Paragraph 157(b);

“Cansub 2 PUC Reduction 2” has the meaning set out in Paragraph 157(c);

“Cansub 2 Retained Loans” has the meaning set out in Paragraph 23;

“Cansub 2 Loans” has the meaning set out in Paragraph 22;

“Cansub 2 Spin Loans” has the meaning set out in Paragraph 23;

“Cansub 2 Spin Loan Purchase Note” has the meaning set out in Paragraph 157(a);

“Cansub 5 Loan” has the meaning set out in Paragraph 36;

“Cansub 7 Common Shares” means the common shares which Cansub 7 is authorized to issue, as described in Paragraph 116;

“Capital Property” has the meaning assigned by section 54;

“Capital Reorganization” has the meaning set out in Paragraph 159;

XXXXXXXXXX;

“Controlled Foreign Affiliate” has the meaning assigned by subsection 95(1);

“Cost Amount” has the meaning assigned by subsection 248(1);

“Country 1” means the XXXXXXXXXX;

“Country 2” means the XXXXXXXXXX;

“Country 3” means XXXXXXXXXX;

“Country 4” means XXXXXXXXXX;

“Country 5” means XXXXXXXXXX;

“Country 6” means XXXXXXXXXX;

“Country 7” means XXXXXXXXXX;

“Country 8” means XXXXXXXXXX;

“Country 9” means XXXXXXXXXX;

“Court” means the XXXXXXXXXX;

“CRA” means the Canada Revenue Agency;

“DC ULC Common Shares” means the common shares which DC ULC is authorized to issue, as described in Paragraph 120.11(a);

“DC ULC Dividend” means the dividend, deemed by subsection 84(3), to have been paid by DC ULC and received by TC ULC, arising on the redemption of the DC ULC Special Shares, as described in Ruling D;

“DC ULC Group” means, collectively, DC ULC and all corporations and partnerships over which DC ULC exercises Significant Influence consisting of Cansub 2, Cansub 3, Cansub 4, Cansub 5, Cansub 6, Cansub 7, CanLP 1, CanLP 2, CanLP 3, CanLP 4, CanLP 5, CanLP 6, CanLP 7, CanLP 8, CanLP 9, CanLP 10, CanLP 11, CanLP 12, CanLP 13, CanLP 14, CanLP 15, CanLP 16, CanLP 17, CanLP 18, CanLP 19, CanGP 1, CanGP 2, Forsub 1, Forsub 6, Forsub 7, Forsub 8, Forsub 9, Forsub 10, Spinco ULC and Partnerco ULC;

“DC ULC New Common Shares” means the common shares which DC ULC will be authorized to issue, as described in Paragraph 159;

“DC ULC Redemption” has the meaning set out in Paragraph 186(b);

“DC ULC Redemption Amount” has the meaning set out in Paragraph 159(b)(i);

“DC ULC Redemption Note” has the meaning set out in Paragraph 186(b);

“DC ULC New Shares” means the DC ULC New Common Shares and the DC ULC Special Shares, as described in Paragraph 159;

“DC ULC Special Shares” means the preferred shares which DC ULC will be authorized to issue, as described in Paragraph 159;

“DC ULC Transfer” has the meaning set out in Paragraph 176;

“Designated Stock Exchange” has the meaning assigned by subsection 248(1);

“Distributed Cansub 2 Spin Loans” has the meaning set out in Paragraph 176;

“Distribution Property” has the meaning described in Paragraph 176;

“Eligible Distribution” has the meaning assigned by subsection 86.1(2);

“Eligible Dividend” has the meaning assigned by subsection 89(1);

“Eligible Property” has the meaning assigned by subsection 85(1.1);

“ERDTOH” means eligible refundable dividend tax on hand, within the meaning of subsection 129(4);

“Exempt Surplus” has the meaning assigned by subsection 5907(1) of the Regulations;

“Financial Intermediary Corporation” has the meaning assigned by subsection 191(1);

XXXXXXXXXX;

“FMV” means fair market value, being the highest price available in an open and unrestricted market between informed prudent parties acting at Arm's Length and without compulsion to act, expressed in term of cash;

“Foreign Affiliate” has the meaning assigned by subsection 95(1);

“Forco 2 Loan” has the meaning assigned by Paragraph 16;

“Forco 3 – CanParent FSA” has the meaning assigned by Paragraph 18;

“Forco 3 – DC ULC FSA”  has the meaning assigned by Paragraphs 18 and 120.11;

“Forco 3 – New DC ULC FSA” has the meaning assigned by Paragraph 189(b);

“Forco 3 – New DC ULC II FSA” has the meaning assigned by Paragraph 191.3(b);

“Forco 3 Exchange 1” has the meaning assigned by Paragraph 161;

“Foreign Keep Businesses” has the meaning assigned by Paragraph 111(b);

“Foreign Pubco Group” means Foreign Pubco and the direct and indirect subsidiaries and partnerships that are directly or indirectly controlled by Foreign Pubco;

“Foreign Pubco Spinco Group” means Foreign Pubco Spinco and the direct and indirect subsidiaries and partnerships that are directly or indirectly controlled by Foreign Pubco Spinco;

“Foreign Spin Business” has the meaning assigned by Paragraph 111(a);

“Foreign Spinco Finco – Forco 1 Loan” has the meaning assigned by Paragraph 133.3;

“Foreign Spinco XXXXXXXXXX” has the meaning assigned by Paragraph 113;

“Forgiven Amount” has the meaning assigned by subsections 80(1) and 80.01(1);

XXXXXXXXXX

“Merger” means the merger of Forco 2 into its parent corporation Newco XXXXXXXXXX, as more particularly described in Paragraph 130;

“NERDTOH” means non-eligible refundable dividend tax on hand, within the meaning of subsection 129(4);

“New Canco 1 Common Shares” means the common shares which New Canco 1 is authorized to issue, as described in Paragraph 120.1(a);

“New Canco 2 Common Shares” means the common shares which New Canco 2 is authorized to issue, as described in Paragraph 120.2(a);

“New DC ULC Common Shares” means the common shares which New DC ULC is authorized to issue, as described in Paragraph 189(a);

“New DC ULC II Common Shares” means the common shares which New DC ULC II is authorized to issue, as described in Paragraph 191.3(a);

“New DC ULC II PUC Reduction” has the meaning set out in Paragraph 191.7;

“New DC ULC II Repayment Note” has the meaning set out in Paragraph 191.4;

“Newco XXXXXXXXXX Assumed Loan” has the meaning set out in Paragraph 180(a);

“Newco XXXXXXXXXX Loan” has the meaning set out in Paragraph 130;

“Newco XXXXXXXXXX Retained Loan” has the meaning set out in Paragraph 180(a);

“Newco ULC Common Shares” means the common shares which Newco ULC is authorized to issue, as described in Paragraph 120.5;

“Offering” has the meaning set out in Paragraph 110.2;

“Partnerco ULC Common Shares” means the common shares which Partnerco ULC is authorized to issue, as described in Paragraph 120(b);

“Pertinent Loan or Indebtedness” has the meaning assigned by subsection 15(2.11);

“Principal Amount” has the meaning assigned by subsection 248(1);

“Private Corporation” has the meaning assigned by subsection 89(1);

“Proceeds of Disposition” has the meaning assigned by section 54;

“Proposed Transactions” means the transactions described in Paragraph 121 to Paragraph 192;

“Province 1” means the Province of XXXXXXXXXX;

“Province 2” means the Province of XXXXXXXXXX;

“PUC” means paid-up capital which has the meaning assigned by subsection 89(1);

“Related Persons” means, in relation to a particular person, another person who is related to the particular person by virtue of subsection 251(2), as modified for the purposes of section 55 by paragraph 55(5)(e);

“Restricted Financial Institution” has the meaning assigned by subsection 248(1);
“Retained Cansub 2 Spin Loans” has the meaning set out in Paragraph 176;

“Rulings” means the advance income tax rulings labelled “A” to “I” in this letter;

“Securities Exchange” means the XXXXXXXXXX;

“Series of Transactions or Events” has the meaning assigned by subsection 248(10);

“Short-Term Preferred Share” has the meaning assigned by subsection 248(1);

“Significant Influence” has the meaning assigned by section XXXXXXXXXX;

“Specified Financial Institution” has the meaning assigned by subsection 248(1);

“Specified Investment Business” has the meaning assigned by subsection 125(7);

“Spinco ULC Common Shares” means the common shares which Spinco ULC is authorized to issue, as described in Paragraph 120(a);
“Spinco ULC PUC Reduction” has the meaning set out in Paragraph 191.73;

“Spin-Out” means the distribution of the common shares of Foreign Pubco Spinco to the shareholders of Foreign Pubco as described in Paragraph 192(i);

“State 1” means XXXXXXXXXX;

“Stated Capital” in respect of the share capital of a corporation, has the meaning assigned by the statute by which the corporation is governed;

“Subject Transactions” means the transactions described in Paragraph 112.1 to Paragraph 120.12;

“Substantial Interest” has the meaning assigned by subsection 191(2);

“Taxable Canadian Corporation” has the meaning assigned by subsection 89(1);

“Taxable Canadian Property” has the meaning assigned by subsection 248(1);

“Taxable Dividend” has the meaning assigned by subsection 89(1);

“Taxable Preferred Share” has the meaning assigned by subsection 248(1);

“Taxable RFI Shares” has the meaning assigned by subsection 248(1);

“Taxable Surplus” has the meaning assigned by subsection 5907(1) of the Regulations;

“Taxation Year” has the meaning assigned by subsection 249(1);

“TC ULC Assumed Liabilities” has the meaning set out in Paragraph 180(a);

“TC ULC Common Shares” means the common shares which TC ULC is authorized to issue, as described in Paragraph 119(b);

“TC ULC Dividend” means the dividend, deemed by subsection 84(3), to have been paid by TC ULC and received by DC ULC, arising on the redemption of the TC ULC Preferred Shares, as described in Ruling D;

“TC ULC GP Common Shares” means the common shares which TC ULC GP is authorized to issue, as described in Paragraph 119(a);

“TC ULC Preferred Shares” means the preferred shares which TC ULC is authorized to issue, as described in Paragraph 121;

“TC ULC PUC Reduction” has the meaning set out in Paragraph 191.8;

“TC ULC Redemption” has the meaning set out in Paragraph 186(a);

“TC ULC Redemption Amount” has the meaning set out in Paragraph 121(a);

“TC ULC Redemption Note” has the meaning described in Paragraph 186(a);

“Term Preferred Share” has the meaning assigned by subsection 248(1);

“Three-Party Share Exchange” has the meaning assigned by Paragraph 168;

“Treaty” means XXXXXXXXXX; and

“USD” means United States Dollars.

III.  FACTS

Foreign Pubco

1.    Foreign Pubco is a corporation formed under the laws of State 1. The outstanding common shares of Foreign Pubco are publicly traded and listed on the Securities Exchange.  The Securities Exchange is a Designated Stock Exchange. As of the close of business on XXXXXXXXXX, the market capitalization of Foreign Pubco was approximately $XXXXXXXXXX USD. 

Foreign Pubco is widely held and the only shareholders owning more than XXXXXXXXXX% of the common shares of the capital stock of Foreign Pubco are:

(a)   XXXXXXXXXX (XXXXXXXXXX%);

(b)   XXXXXXXXXX (XXXXXXXXXX%); and

(c)   XXXXXXXXXX (XXXXXXXXXX%).

No person, or group of persons, controls Foreign Pubco.

2.    Foreign Pubco has a XXXXXXXXXX fiscal year that ends on XXXXXXXXXX.

Business of the Foreign Pubco Group

3.    Foreign Pubco has organized its businesses into the following reportable business segments:

(a)   Business Segment 1— XXXXXXXXXX.

XXXXXXXXXX.

XXXXXXXXXX.

For the fiscal year ended XXXXXXXXXX, the net sales for this business segment amounted to $XXXXXXXXXX USD and represented XXXXXXXXXX% of Foreign Pubco’s consolidated annual revenues;

(b)   Business Segment 2—XXXXXXXXXX.

XXXXXXXXXX.

XXXXXXXXXX.

XXXXXXXXXX.

XXXXXXXXXX.

XXXXXXXXXX.

For the fiscal year ended XXXXXXXXXX, the net sales for this business segment amounted to $XXXXXXXXXX USD and represented XXXXXXXXXX% of Foreign Pubco’s consolidated annual revenues;

(c)   Business Segment 3—XXXXXXXXXX
XXXXXXXXXX
XXXXXXXXXX.

XXXXXXXXXX.

XXXXXXXXXX.

XXXXXXXXXX.

For the fiscal year ended XXXXXXXXXX, the net sales for this business segment amounted to $XXXXXXXXXX USD and represented XXXXXXXXXX% of Foreign Pubco’s consolidated annual revenues; and

(d)   Business Segment 4— XXXXXXXXXX.

XXXXXXXXXX.

For the fiscal year ended XXXXXXXXXX, the net sales for this business segment amounted to $XXXXXXXXXX USD and represented XXXXXXXXXX% of Foreign Pubco’s consolidated annual revenues.

Foreign Pubco Group

Global Structure

Foreign Pubco Direct Ownership

4.    Foreign Pubco conducts its business operations globally through subsidiary corporations and partnerships. 

4.1   [Reserved].

5.    The portion of the Foreign Pubco Group that does not directly or indirectly own DC ULC shares or that is not involved in the “pre-butterfly packaging” of Foreign Spinco is not described in this letter.

6.    Foreign Pubco directly owns: (a) all of the issued and outstanding shares of Forco 1, and (b) all of the issued and outstanding common shares of Foreign Pubco Spinco. 

Direct and Indirect Entities in the Foreign Pubco Group

      Foreign Pubco Spinco

6.1.  Foreign Pubco Spinco is a corporation governed by the laws of State 1.  All of the issued and outstanding common shares of Foreign Pubco Spinco (being XXXXXXXXXX shares) are owned by Foreign Pubco, as described in Paragraph 112.1.

      Forco 1

7.    XXXXXXXXXX.  Forco 1 directly owns all of the issued and outstanding shares of Forco 2.

8.    Forco 1 indirectly owns:

(a)   XXXXXXXXXX% of the issued and outstanding common shares of Cansub 3, not including the XXXXXXXXXX% interest held by CanLP 11, as described in Paragraph 31;

(b)   all of the issued and outstanding shares of Forco 4;

(c)   all of the issued and outstanding shares of Forco 5;

(d)   all of the issued and outstanding shares of Forco 6;

(e)   all of the issued and outstanding shares of Forco 7;

(f)   all of the issued and outstanding shares of Forco 8;

(g)   all of the issued and outstanding shares of Forco 9;

(h)   all of the issued and outstanding shares of Forco 10;

(h.1) all of the issued and outstanding shares of Forco 13;

(h.2) all of the issued and outstanding shares of Forco 14;

(h.3) all of the issued and outstanding shares of Forco 15; and

(i)   all of the issued and outstanding shares of Canco 3.

Canco 3

8.1   Canco 3 directly owns XXXXXXXXXX general partner unit in CanLP 7, as described in Paragraphs 59(f), 114(h) and 114 (h.1).

Forco 2, Canco 1 and Canco 2

9.    Forco 2 directly owns:

(a)   all of the issued and outstanding common shares of Canco 1.

Canco 1 directly owns: (i) XXXXXXXXXX unit in each of CanLP 1, CanLP 4, CanLP 8, CanLP 9, CanLP 10, CanLP 11, CanLP 12, CanLP 13, CanLP 15, CanLP 16, CanLP 17, CanLP 18, CanLP 19, CanGP 2, New CanLP 1 and New CanLP 2; (ii) XXXXXXXXXX unit in each of CanLP 2 and CanLP 3; and (iii) XXXXXXXXXXunits in CanLP 14; and carries on business in Canada as the general partner of such partnerships.

Canco 1 also owns: (I) XXXXXXXXXX limited partner unit in CanLP 7; and (II) XXXXXXXXXX Cansub 4 class A common shares;

(b)   all of the issued and outstanding common shares of Canco 2.

Canco 2 directly owns: (i) XXXXXXXXXX general partner unit in CanGP 1; and (ii) XXXXXXXXXX Cansub 4 class B common shares; and

(c)   all of the issued and outstanding XXXXXXXXXX in Forco 3.

      Forco 3

10.   XXXXXXXXXX.  Forco 3 directly owns:

(a)   all of the issued and outstanding DC ULC Common Shares, as described in Paragraphs 12 and 120.11(b)(iii);

(b)   all of the issued and outstanding New Canco 1 Common Shares, as described in Paragraphs 10.1 and 120.1(b);

(c)   all of the issued and outstanding New Canco 2 Common Shares, as described in Paragraphs 10.2 and 120.2(b); and

(d)   all of the issued and outstanding Foreign Spinco XXXXXXXXXX, as described in Paragraph 10.5.

New Canco 1

10.1. New Canco 1 is a Taxable Canadian Corporation and a Private Corporation.

All of the shares of New Canco 1 are owned by Forco 3, as described in Paragraph 10(b).

New Canco 1’s assets include XXXXXXXXXX units, as a limited partner, in New CanLP 1, as described in Paragraph 10.3. 

New Canco 2

10.2. New Canco 2 is a Taxable Canadian Corporation and a Private Corporation.

All of the shares of New Canco 2 are owned by Forco 3, as described in Paragraph 10(c).

New Canco 2’s assets include XXXXXXXXXX units, as a limited partner, in New CanLP 2, as described in Paragraph 10.4.

New CanLP 1

10.3. New CanLP 1 is a Canadian Partnership.  New Canco 1 owns XXXXXXXXXX units, as a limited partner, and Canco 1 owns XXXXXXXXXX unit, as a general partner, in New CanLP 1, as described in Paragraph 120.1(c).

           New CanLP 2

10.4. New CanLP 2 is a Canadian Partnership.  New Canco 2 owns XXXXXXXXXX units, as a limited partner, and Canco 1 owns XXXXXXXXXX unit, as a general partner, in New CanLP 2, as described in Paragraph 120.2(c). 

           Foreign Spinco

10.5. XXXXXXXXXX.  All of the issued and outstanding Foreign Spinco XXXXXXXXXX are owned by Forco 3, as described in Paragraph 113.

Foreign Spinco’s assets include: (a) XXXXXXXXXX TC ULC Common Shares, as described in Paragraph 10.6; and (b) XXXXXXXXXX TC ULC GP Common Shares, as described in Paragraph 10.7.

           TC ULC

10.6. TC ULC is an unlimited liability corporation, a Taxable Canadian Corporation and a Private Corporation.  All of the issued and outstanding TC ULC Common Shares are owned by Foreign Spinco, as described in Paragraph 119(b).

     TC ULC’s assets include XXXXXXXXXX TC Finance common shares, as described in Paragraph 119.1. 

TC ULC GP

10.7. TC ULC GP is a Taxable Canadian Corporation and a Private Corporation.  All of the issued and outstanding TC ULC GP Common Shares are owned by Foreign Spinco, as described in Paragraph 119(a).

DC ULC

11.   DC ULC is an unlimited liability corporation, a Taxable Canadian Corporation and a Private Corporation. 

DC ULC was formed on Amalgamation 1 of CanParent and its newly incorporated subsidiary, Newco ULC, under Act 2 on XXXXXXXXXX, as described in Paragraph 120.11.

Prior to Amalgamation 1, Forco 3 owned all of the issued and outstanding CanParent Common Shares, and CanParent, in turn, owned all of the issued and outstanding Newco ULC Common Shares, as described in Paragraph 120.11.

DC ULC will request that the CRA ensure that DC ULC will retain CanParent’s business number after Amalgamation 1. CanParent’s business number was XXXXXXXXXX. DC ULC will file its annual corporate income tax return at the XXXXXXXXXX Taxation Centre and will be serviced by the XXXXXXXXXX Tax Services Office. DC ULC’s Taxation Year end for tax reporting purposes is XXXXXXXXXX.

XXXXXXXXXX.

12.   The authorized share capital of DC ULC consists of an unlimited number of DC ULC Common Shares. Currently, there are XXXXXXXXXX DC ULC Common Shares issued and outstanding, each of which is entitled to one vote per share.  All of the issued and outstanding DC ULC Common Shares are owned by Forco 3.

13.   DC ULC, through its subsidiary corporations and partnerships, carries on business activities in Canada that involve each of Business Segment 1, Business Segment 2, Business Segment 3 and Business Segment 4. 

14.   The Business Segment 4 that is carried on in Canada by CanLP 5, CanLP 6, CanLP 7, CanLP 11, CanLP 12, CanLP 13, CanLP 14, CanLP 15, CanLP 18, CanLP 19 and CanGP 2 (having an aggregate FMV of approximately $XXXXXXXXXX) (the Canadian Spin Business) will be transferred to TC ULC on the DC ULC Transfer.

The business carried on by the DC ULC Group, other than the Canadian Spin Business, is referred to as the Canadian Keep Businesses.

15.   [Reserved].

16.   DC ULC’s liabilities include a loan payable to Forco 2 in the amount of approximately $XXXXXXXXXX (the Forco 2 Loan).  The Forco 2 Loan was advanced by Forco 2 to CanParent to recapitalize CanParent on XXXXXXXXXX. The Forco 2 Loan became a liability of DC ULC on Amalgamation 1. 

The Forco 2 Loan was evidenced by an interest-bearing promissory note, issued by CanParent to Forco 2, on XXXXXXXXXX, having a Principal Amount and FMV equal to $XXXXXXXXXX. 

The Forco 2 Loan is a term loan providing DC ULC with the ability to prepay subject to a prepayment penalty.

17.   The proceeds from the Forco 2 Loan were used by CanParent to:

(a)   repay $XXXXXXXXXX in principal and $XXXXXXXXXX in interest (an aggregate of $XXXXXXXXXX) previously owing by CanParent to Forco 2, which previous debt was used by CanParent to finance the acquisition of the subsidiary corporations and partnerships owned by CanParent; and 

(b)   return $XXXXXXXXXX in share capital to Forco 3.

18.   Forco 3 and DC ULC are parties to a forward subscription agreement (the “Forco 3 - DC ULC FSA”).

The Forco 3-DC ULC FSA was initially between Forco 3 and CanParent (the Forco 3 -CanParent FSA).  As described in Paragraph 120.11, on Amalgamation 1, the rights and obligations of CanParent under the Forco 3 - CanParent FSA became rights and obligations of DC ULC. 

Pursuant to the Forco 3 – DC ULC FSA, at any time DC ULC makes a payment of interest or principal on the Forco 2 Loan, the  Forco 3 - DC ULC FSA requires Forco 3 to subscribe for shares of DC ULC in an amount equal to the payment made by DC ULC.

19.   XXXXXXXXXX

19.1.      In its XXXXXXXXXX Taxation Year, CanParent’s net income totalled approximately $XXXXXXXXXX, with approximately XXXXXXXXXX% of the net income attributable to the Canadian Spin Business. 

DC ULC Group

20.   DC ULC directly maintains voting control over Cansub 2 and Cansub 4, and indirectly, through its interest in corporations and majority interest in partnerships, as described below, maintains voting control over Cansub 3, Cansub 5, Cansub 6 and Cansub 7.

Prior to Amalgamation 1, CanParent directly maintained voting control over Cansub 2 and Cansub 4, and indirectly, through its interest in corporations and majority interest in partnerships, maintained voting control over Cansub 3, Cansub 5, Cansub 6 and Cansub 7.

DC ULC Direct Ownership

21.   DC ULC directly owns:

(a)   all of the issued and outstanding Partnerco ULC Common Shares, as described in Paragraph 21.2;

(b)   all of the issued and outstanding Spinco ULC Common Shares, as described in Paragraph 21.1;

(c)   all of the issued and outstanding common shares of Cansub 2, as described in Paragraph 22;

(d)   XXXXXXXXXX% of the issued and outstanding class A common shares of Cansub 4, as described in Paragraph 35(a);

(d.1)      all of the issued and outstanding preferred shares of Cansub 4, as described in Paragraph 35(e);

(e)   as a limited partner, XXXXXXXXXX units in CanLP 1, as described in Paragraph 44(a);

(f)   as a limited partner, XXXXXXXXXX units in CanLP 3, as described in Paragraph 48(a);

(g)   as a limited partner, XXXXXXXXXX units in CanLP 4, as described in Paragraph 50(a);

(h)   as a limited partner, XXXXXXXXXX units in CanLP 5, as described in Paragraph 52(a);

(i)   as a limited partner, XXXXXXXXXX units in CanLP 6, as described in Paragraph 54(a);

(j)   [Reserved];

(k)   as a limited partner, XXXXXXXXXX units in CanLP 8, as described in Paragraph 61(a);

(l)   as a limited partner, XXXXXXXXXX units in CanLP 9, as described in Paragraph 63(a);

(m)   as a limited partner, XXXXXXXXXX units in CanLP 10, as described in Paragraph 65(a);

(n)   as a limited partner, XXXXXXXXXX units in CanLP 11, as described in Paragraph 67(a); and

(o)   as a general partner, XXXXXXXXXX units in CanGP 1, as described in Paragraph 92(a).

Direct and Indirect Entities in the DC ULC Corporate Group

           Spinco ULC

21.1. Spinco ULC is an unlimited liability corporation, a Taxable Canadian Corporation and a Private Corporation.  All of the issued and outstanding Spinco ULC Common Shares are owned by DC ULC. 

     Spinco ULC was incorporated by CanParent on XXXXXXXXXX, as described in Paragraph 120(a), for the purpose of packaging property, as described in Paragraph 153. 

On Amalgamation 1, CanParent’s Spinco ULC Common Shares became DC ULC’s Spinco ULC Common Shares. 

           Partnerco ULC

21.2. Partnerco ULC is an unlimited liability corporation, a Taxable Canadian Corporation and a Private Corporation.  All of the issued and outstanding Partnerco ULC Common Shares are owned by DC ULC. 

     Partnerco ULC was incorporated by CanParent on XXXXXXXXXX, as described in Paragraph 120(b), for the purposes of Partnerco ULC holding general partner units in CanLP 5, as described in Paragraphs 120.12(a) and (b), and general partner units in CanLP 6, as described in Paragraphs 120.12(c) and (d). 

On Amalgamation 1, CanParent’s Partnerco ULC Common Shares became DC ULC’s Partnerco ULC Common Shares. 

Partnerco ULC’s assets include: (a) XXXXXXXXXX units (XXXXXXXXXX%) in CanLP 5, as the XXXXXXXXXX general partner of CanLP 5, as described in Paragraphs 120.12(a) and (b); and (b) XXXXXXXXXX units (XXXXXXXXXX%) in CanLP 6, as the sole general partner of CanLP 6, as described in Paragraphs 120.12 (c) and (d).  

Cansub 2

22.   Cansub 2 is a Taxable Canadian Corporation and a Private Corporation. All of its shares are owned by DC ULC. 

Prior to Amalgamation 1, CanParent owned all of the issued and outstanding  shares of CanParent.  On Amalgamation 1, DC ULC acquired all of CanParent’s Cansub 2 shares.

Cansub 2 carries on a XXXXXXXXXX business in Canada which XXXXXXXXXX to members of the Foreign Pubco Group that are not directly or indirectly owned by DC ULC (the Cansub 2 Loans). 

The Cansub 2 Loans are term loans providing the debtor the ability to prepay without penalty.

Cansub 2’s only source of funding has been equity subscriptions made by CanParent to Cansub 2.  DC ULC has not advanced funding to Cansub 2 by way of debt.

23.   Of the Cansub 2 Loans, XXXXXXXXXX were made to members of the Foreign Pubco Group that will be included in the Foreign Spin Business (the Cansub 2 Spin Loans). All Cansub 2 Loans other than the Cansub 2 Spin Loans will be referred to as the Cansub 2 Retained Loans.

The debtors under the Cansub 2 Spin Loans are Forco 5 (the principal amount of such loan being $XXXXXXXXXX USD) and Forco 6 (the principal amount of such loan being $XXXXXXXXXX USD).

All of the issued and outstanding shares of Forco 5 and Forco 6 will be transferred to the Foreign Pubco Spinco Group as part of the Spin-Out.

24.   Cansub 2 and Forco 3 have filed an election in the manner provided by subsection 15(2.11) to treat each Cansub 2 Loan as a Pertinent Loan or Indebtedness. 

25.   The proceeds of the Forco 2 Loan, as described in Paragraphs 16 and 17, may reasonably be considered to have indirectly funded, in whole or in part, the Cansub 2 Loans. Specifically, a portion of the proceeds from the Forco 2 Loan (i.e., $XXXXXXXXXX) were used by CanParent to repay $XXXXXXXXXX in principal and $XXXXXXXXXX in interest (an aggregate of $XXXXXXXXXX) previously owing to Forco 2 which previous debt was used by CanParent to finance the acquisition of the subsidiary corporations and partnerships owned by CanParent.

In XXXXXXXXXX a predecessor corporation by amalgamation to CanParent sold a number of the subsidiaries that were purchased using the proceeds from the previous debt owing to Forco 2 and used a portion of the Proceeds of Disposition realized on those sales to subscribe for Cansub 2 shares. Cansub 2 used the share subscription proceeds to provide the Cansub 2 Loans.

26.   [Reserved].

27.   [Reserved].

Cansub 3

28.   Cansub 3 is in the business of XXXXXXXXXX.

29.   The issued share capital of Cansub 3 consists of:

(a)   common shares;

(b)   class A preferred shares having an aggregate redemption amount of $XXXXXXXXXX USD;

(c)   class B preferred shares having an aggregate redemption amount of $XXXXXXXXXX USD;

(d)   class C preferred shares having an aggregate redemption amount of $XXXXXXXXXX USD;

(e)   class D preferred shares having an aggregate redemption amount of $XXXXXXXXXX USD;

(f)   class E preferred shares having an aggregate redemption amount of $XXXXXXXXXX USD; and

(g)   class F preferred shares having an aggregate redemption amount of $XXXXXXXXXX USD.

30.   [Reserved].

31.   The holders of Cansub 3 common shares consist of:

(a)   CanLP 11 as to XXXXXXXXXX%; and

(b)   as to XXXXXXXXXX%, members of the Foreign Pubco Group that are not directly or indirectly owned by DC ULC.

The aggregate FMV of all of the issued and outstanding Cansub 3 common shares is nil.

32.   The following entities that are directly or indirectly owned by DC ULC hold Cansub 3 preferred shares as follows:

(a)   [Reserved];

(b)   [Reserved];

(c)   [Reserved];

(c.1) CanLP 11 as to XXXXXXXXXX% of the issued and outstanding Class D preferred shares;

(d)   CanLP 13 as to XXXXXXXXXX% of the issued and outstanding class D preferred shares;

(e)   CanLP 14 as to XXXXXXXXXX% of the issued and outstanding class D preferred shares;

(f)   CanLP 18 as to XXXXXXXXXX% of the issued and outstanding class D preferred shares;

(g)   CanLP 19 as to XXXXXXXXXX% of the issued and outstanding class D preferred shares; and

(h)   CanLP 7 as to XXXXXXXXXX% of the issued and outstanding class F preferred shares.

All other Cansub 3 preferred shares are held by members of the Foreign Pubco group that are not directly or indirectly owned by DC ULC.

33.   Cansub 3 directly owns:

(a)   all of the issued and outstanding shares of Cansub 6; and

(b)   XXXXXXXXXX% of the issued and outstanding shares of Forsub 1, a corporation that is and will be, at any relevant time and for all purposes of the Act, a Foreign Affiliate and a Controlled Foreign Affiliate of Cansub 3.

Cansub 4

33.1  Cansub 4 is a Taxable Canadian Corporation and a Private Corporation. It is governed by Act 2.  Cansub 4 was formed on the Amalgamation of Cansub 8 and Cansub 1, as described in Paragraph 118.

The issued share capital of Cansub 4 consists of:

(a)   class A common shares;

(b)   class B common shares; and

(c)   preferred shares.

The Cansub 4 class A common shares and class B common shares carry one vote per share and, subject to the prior rights of the holders of preferred shares, pari passu participation rights. Dividends cannot be paid on the class A common shares or the class B common shares unless the value of the net assets of Cansub 4 will not be less than the aggregate redemption amount of all Cansub 4 preferred shares.

The Cansub 4 preferred shares are redeemable and retractable at a redemption amount set by the Cansub 4 directors and rank in priority to the class A common shares and class B common shares on liquidation, dissolution or winding up.  The Cansub 4 preferred shares do not have a right to vote, unless required by applicable law.

     The holders of the Cansub 4 shares are described in Paragraph 35.

34.   Cansub 4 directly owns:

(a)   all of the issued and outstanding shares of Cansub 7;

(b)   all of the issued and outstanding shares of Forsub 6;

(c)   all of the issued and outstanding shares of Forsub 7;

(d)   all of the issued and outstanding shares of Forsub 8; and

(e)   [Reserved].

35.   The holders of Cansub 4 shares consist of:

(a)   DC ULC as to XXXXXXXXXX (XXXXXXXXXX%) class A common shares (representing a total voting interest in Cansub 4 of XXXXXXXXXX%).

These Cansub 4 class A common shares were acquired by CanParent on the Amalgamation, as described in Paragraph 118(a)(iii)(A), and they became property of DC ULC on Amalgamation 1, as described in Paragraph 120.11; 

(b)   Canco 1 as to XXXXXXXXXX (XXXXXXXXXX%) class A common shares (representing a total voting interest in Cansub 4 of XXXXXXXXXX%).

Canco 1 acquired these Cansub 4 class A common shares on the Amalgamation, as described in Paragraph 118(a)(iii)(C);

(c)   CanGP 1 as to XXXXXXXXXX (XXXXXXXXXX%) class B common shares (representing a total voting interest in Cansub 4 of XXXXXXXXXX%).

Canco GP 1 acquired these Cansub 4 class B common shares on the Amalgamation, as described in Paragraph 118(a)(iii)(B);

(d)   Canco 2 as to XXXXXXXXXX (XXXXXXXXXX%) class B common shares (representing a total voting interest in Cansub 4 of XXXXXXXXXX%). 

Canco 2 acquired these Cansub 4 class B common shares on the Amalgamation, as described in Paragraph 118(a)(iii)(D); and

(e)   DC ULC as to XXXXXXXXXX (XXXXXXXXXX%) preferred shares.

These Cansub 4 preferred shares were acquired by CanParent on the Amalgamation, as described in Paragraph 118(a)(iii)(E), and they became property of DC ULC on Amalgamation 1, as described in Paragraph 120.11.

35.1       Cansub 4 carries on a business in Canada that is included in Business Segment 1.

Cansub 5

36.   Cansub 5 carries on a XXXXXXXXXX business in Canada which provides XXXXXXXXXX to members of the Foreign Pubco Group that are not directly or indirectly owned by DC ULC. Currently Cansub 5 has one loan outstanding to Forco 13 in the principal amount of $XXXXXXXXXX USD (the Cansub 5 Loan).

The Cansub 5 Loan is a term loan providing the debtor the ability to prepay without penalty.

37.   Cansub 5 and Forco 2 filed an election in the manner provided by subsection 15(2.11) to treat the Cansub 5 Loan as a Pertinent Loan or Indebtedness. Consequently, subsection 17.1(1) will include in Cansub 5’s income the amount determined by paragraph 17.1(1)(b).

38.   All of the issued and outstanding shares of Cansub 5 are owned by CanLP 15.

Cansub 6

39.   Cansub 6 is in the business of XXXXXXXXXX.

40.   All of the issued and outstanding shares of Cansub 6 are owned by Cansub 3.

Cansub 7

41.   Cansub 7 carries on a business in Canada that is included in Business Segment 2.

42.   All of the issued and outstanding shares of Cansub 7 are owned by Cansub 4.

42.1       Cansub 7 directly owns, as the general partner, XXXXXXXXXX unit in CanLP 2.

CanLP 1

43.   CanLP 1 is in the business of XXXXXXXXXX.  Its assets include XXXXXXXXXX units in CanLP 2, as a limited partner of CanLP 2.

44.   The partners of CanLP 1 consist of:

(a)   DC ULC, the limited partner, as to XXXXXXXXXX units (XXXXXXXXXX%); and

(b)   Canco 1, the general partner, as to XXXXXXXXXX unit (XXXXXXXXXX%).

CanLP 2

45.   CanLP 2 carries on a business in Canada that is included in Business Segment 2.

46.   The partners of CanLP 2 consist of:

(a)   Cansub 7, a general partner, as to XXXXXXXXXX unit (XXXXXXXXXX%);

(b)   CanLP 1, the limited partner, as to XXXXXXXXXX units (XXXXXXXXXX%); and

(c)   Canco 1, a general partner, as to XXXXXXXXXX unit (XXXXXXXXXX%).

CanLP 3

47.   CanLP 3 carries on a business in Canada that is included in Business Segment 2.

48.   The partners of CanLP 3 consist of

(a)   DC ULC, the limited partner, as to XXXXXXXXXX units (XXXXXXXXXX%); and

(b)   Canco 1, the general partner, as to XXXXXXXXXX unit (XXXXXXXXXX%).

CanLP 4

49.   CanLP 4 carries on a business in Canada that is included in Business Segment 2 and Business Segment 3.

50.   The partners of CanLP 4 consist of

(a)   DC ULC, the limited partner, as to XXXXXXXXXX units (XXXXXXXXXX%); and

(b)   Canco 1, the general partner, as to XXXXXXXXXX unit (XXXXXXXXXX%).

CanLP 5

51.   CanLP 5 is in the business of XXXXXXXXXX.  Its assets include XXXXXXXXXX preferred partnership units in CanLP 6.

52.   The partners of CanLP 5 consist of:

(a)   DC ULC, the limited partner, as to XXXXXXXXXX units (XXXXXXXXXX%); and

(b)   Partnerco ULC, the general partner, as to XXXXXXXXXX units (XXXXXXXXXX%).

CanLP 6

53.   CanLP 6 is in the business of XXXXXXXXXX.

54.   The partners of CanLP 6 consist of:

(a)   DC ULC, the limited partner, as to XXXXXXXXXX units (XXXXXXXXXX%);

(b)   Partnerco ULC, the general partner, as to XXXXXXXXXX units (XXXXXXXXXX%); and

(c)   CanLP 5, a preferred partnership unitholder, as to XXXXXXXXXX units.

55.   CanLP 6 has two classes of partnership units—common units and preferred units.

(a)   The common units carry the right to vote and, subject to the prior rights of the holders of preferred units, the right to allocations of profit and loss and to share in distributable cash. The common units are held by DC ULC as the limited partner, and Partnerco ULC as the general partner.

(b)   The preferred units carry a preferential return equal to XXXXXXXXXX per cent XXXXXXXXXX%) of the subscription price.  The preferred units have no other right to share in distributable cash and do not have a right to vote, unless required by applicable law.

The aggregate subscription price paid by CanLP 5 for the XXXXXXXXXX preferred units issued to CanLP 5 was $XXXXXXXXXX (or, $XXXXXXXXXX per unit).

56.   CanLP 6 directly owns:

(a)   as a limited partner, XXXXXXXXXX units in CanLP 12;

(b)   as a limited partner, XXXXXXXXXX units in CanLP 13;

(c)   as a limited partner, XXXXXXXXXX units in CanLP 14;

(d)   as a limited partner, XXXXXXXXXX units in CanLP 15;

(e)   as a limited partner, XXXXXXXXXX units in CanLP 16;

(f)   as a limited partner, XXXXXXXXXX units in CanLP 17;

(g)   as a limited partner, XXXXXXXXXX units in CanLP 19; and

(h)   as a general partner, XXXXXXXXXX units in CanGP 2.

CanLP 7

57.   CanLP 7 is in the business of XXXXXXXXXX.

58.   CanLP 7’s assets include XXXXXXXXXX% of the issued and outstanding class F preferred shares of Cansub 3.

 59.   The partners of CanLP 7 consist of:

(a)   CanLP 13, a limited partner, as to XXXXXXXXXX units (XXXXXXXXXX%);

(b)   CanLP 18, a limited partner, as to XXXXXXXXXX units (XXXXXXXXXX%);

(c)   CanLP 19, a limited partner, as to XXXXXXXXXX units (XXXXXXXXXX%);

(d)   [Reserved];

(e)   Canco 1, a limited partner, as to XXXXXXXXXX unit (XXXXXXXXXX%); and

(f)   Canco 3, the general partner, as to XXXXXXXXXX unit (XXXXXXXXXX%).

CanLP 8

60.   CanLP 8 carries on a business in Canada that is included in Business Segment 1.

61.   The partners of CanLP 8 consist of:

(a)   DC ULC, the limited partner, as to XXXXXXXXXX units (XXXXXXXXXX%); and

(b)   Canco 1, the general partner, as to XXXXXXXXXX unit (XXXXXXXXXX%).

CanLP 9

62.   CanLP 9 carries on a business in Canada that is included in Business Segment 3.

63.   The partners of CanLP 9 consist of:

(a)   DC ULC, the limited partner, as to XXXXXXXXXX units (XXXXXXXXXX%); and

(b)   Canco 1, the general partner, as to XXXXXXXXXX unit (XXXXXXXXXX%).

CanLP 10

64.   CanLP 10 is currently inactive.

65.   The partners of CanLP 10 consist of:

(a)   DC ULC, the limited partner, as to XXXXXXXXXX units (XXXXXXXXXX%); and

(b)   Canco 1, the general partner, as to XXXXXXXXXX unit (XXXXXXXXXX%).

CanLP 11

66.   CanLP 11 carries on a business in Canada that is included in Business Segment 4.

67.   The partners of CanLP 11 consist of:

(a)   DC ULC, a limited partner, as to XXXXXXXXXX units (XXXXXXXXXX%);

(b)   CanLP 17, a limited partner, as to XXXXXXXXXX units (XXXXXXXXXX%);

(c)   Canco 1, the general partner, as to XXXXXXXXXX unit (XXXXXXXXXX%); and

(d)   CanGP 2, a limited partner, as to XXXXXXXXXX units (XXXXXXXXXX%).

68.   CanLP 11 directly owns:

(a)   XXXXXXXXXX% of the issued and outstanding class D preferred shares of Cansub 3; and

(b)   XXXXXXXXXX% of the common shares of Cansub 3.

CanLP 12

69.   CanLP 12 is in the business of XXXXXXXXXX.

70.   The partners of CanLP 12 consist of:

(a)   CanLP 6, the limited partner, as to XXXXXXXXXX units (XXXXXXXXXX%); and

(b)   Canco 1, the general partner, as to XXXXXXXXXX unit (XXXXXXXXXX%).

CanLP 13

71.   CanLP 13 is in the business of XXXXXXXXXX.

72.   The partners of CanLP 13 consist of:

(a)   CanLP 6, the limited partner, as to XXXXXXXXXX units (XXXXXXXXXX%); and

(b)   Canco 1, the general partner, as to XXXXXXXXXX unit (XXXXXXXXXX%).

73.   CanLP 13 directly owns:

(a)   as a limited partner, XXXXXXXXXX units in CanLP 7;

(b)   as a limited partner, XXXXXXXXXX units in CanLP 18; and

(c)   XXXXXXXXXX% of the issued and outstanding class D preferred shares of Cansub 3.

CanLP 14

74.   CanLP 14 is in the business of XXXXXXXXXX.

75.   The partners of CanLP 14 consist of:

(a)   CanLP 6, the limited partner, as to XXXXXXXXXX units (XXXXXXXXXX%); and

(b)   Canco 1, the general partner, as to XXXXXXXXXX units (XXXXXXXXXX%).

76.   CanLP 14 directly owns XXXXXXXXXX% of the issued and outstanding class D preferred shares of Cansub 3.

CanLP 15

77.   CanLP 15 is in the business of XXXXXXXXXX.

78.   The partners of CanLP 15 consist of:

(a)   CanLP 6, the limited partner, as to XXXXXXXXXX units (XXXXXXXXXX%); and

(b)   Canco 1, the general partner, as to XXXXXXXXXX unit (XXXXXXXXXX%).

79.   CanLP 15 directly owns:

(a)   as a limited partner, XXXXXXXXXX units in CanLP 18;

(b)   all of the issued and outstanding shares of Cansub 5; and

(c)   XXXXXXXXXX% of the issued and outstanding shares of Forsub 1, a corporation that is and will be, at any relevant time and for all purposes of the Act, a Foreign Affiliate and a Controlled Foreign Affiliate of CanLP 15.

CanLP 16

80.   CanLP 16 carries on a business in Canada that is included in Business Segment 3.

81.   The partners of CanLP 16 consist of:

(a)   CanLP 6, the limited partner, as to XXXXXXXXXX units (XXXXXXXXXX%); and

(b)   Canco 1, the general partner, as to XXXXXXXXXX unit (XXXXXXXXXX%).

CanLP 17

82.   CanLP 17 carries on a business in Canada that is included in Business Segment 1.

83.   The partners of CanLP 17 consist of:

(a)   CanLP 6, the limited partner, as to XXXXXXXXXX units (XXXXXXXXXX%); and

(b)   Canco 1, the general partner, as to XXXXXXXXXX unit (XXXXXXXXXX%).

84.   CanLP 17 directly owns, as a limited partner, XXXXXXXXXX units in CanLP 11.

CanLP 18

85.   CanLP 18 is in the business of XXXXXXXXXX.

86.   The partners of CanLP 18 consist of:

(a)   CanLP 15, a limited partner, as to XXXXXXXXXX units (XXXXXXXXXX%);

(b)   CanLP 13, a limited partner, as to XXXXXXXXXX units (XXXXXXXXXX%); and

(c)   Canco 1, the general partner, as to XXXXXXXXXX unit (XXXXXXXXXX%).

87.   CanLP 18 directly owns:

(a)   as a limited partner, XXXXXXXXXX units in CanLP 7; and

(b)   XXXXXXXXXX% of the issued and outstanding class D preferred shares of Cansub 3.

CanLP 19

88.   CanLP 19 is in the business of XXXXXXXXXX.

89.   The partners of CanLP 19 consist of:

(a)   CanLP 5, the limited partner, as to XXXXXXXXXX units (XXXXXXXXXX%); and

(b)   Canco 1, the general partner, as to XXXXXXXXXX unit (XXXXXXXXXX%).

90.   CanLP 19 directly owns:

(a)   as a limited partner, XXXXXXXXXX units in CanLP 7; and

(b)   XXXXXXXXXX% of the issued and outstanding class D preferred shares of Cansub 3.

CanGP 1

91.   CanGP 1 is in the business of XXXXXXXXXX.

92.   The partners of CanGP 1 consist of:

(a)   DC ULC, a general partner, as to XXXXXXXXXX units (XXXXXXXXXX%); and

(b)   Canco 2 a general partner, as to XXXXXXXXXX unit (XXXXXXXXXX%).

93.   The managing partner of CanGP 1 is Canco 2.

94.   CanGP 1 directly owns XXXXXXXXXX class B common shares of Cansub 4 (XXXXXXXXXX% of the issued and outstanding class B common shares of Cansub 4).

CanGP 2

95.   CanGP 2 is in the business of XXXXXXXXXX.

96.   The partners of CanGP 2 consist of:

(a)   CanLP 6, a general partner, as to XXXXXXXXXX units (XXXXXXXXXX%); and

(b)   Canco 1, a general partner, as to XXXXXXXXXX unit (XXXXXXXXXX%).

97.   The managing partner of CanGP 2 is Canco 1.

98.   CanGP 2 directly owns, as a limited partner, XXXXXXXXXX units in CanLP 11.

Forsub 1

99.   Forsub 1 carries on a business in Country 2 that is included in Business Segment 4.

99.1. Forsub 1 owns all of the issued and outstanding shares of:

(a)   Forsub 9;

(b)   Forsub 10; and

(c)   [Reserved].

100.  All of the issued and outstanding shares of Forsub 1 are owned by: (a) XXXXXXXXXX% by Cansub 3; (b) XXXXXXXXXX% by CanLP 15; and (c) the remaining XXXXXXXXXX% by members of the Foreign Pubco Group that are not directly or indirectly owned by DC ULC.

100.1      Forsub 1 is a Foreign Affiliate and a Controlled Foreign Affiliate of Cansub 3.

Forsub 6

101.  Forsub 6 carries on a business in Country 4 that is included in Business Segment 1.

102.  All of the issued and outstanding shares of Forsub 6 are owned by Cansub 4.

103.  Forsub 6 is a Foreign Affiliate and a Controlled Foreign Affiliate of Cansub 4.

Forsub 7

104.  Forsub 7 carries on a business in Country 5 that is included in Business Segment 1.

105.  All of the issued and outstanding shares of Forsub 7 are owned by Cansub 4.

106.  Forsub 7 is a Foreign Affiliate and a Controlled Foreign Affiliate of Cansub 4.

Forsub 8

107.  Forsub 8 carries on a business in Country 2 that is included in Business Segment 1.

108.  All of the issued and outstanding shares of Forsub 8 are owned by Cansub 4.

109.  Forsub 8 is a Foreign Affiliate and a Controlled Foreign Affiliate of Cansub 4.

Forsub 9

109.1 Forsub 9 carries on a business in Country 9 that is included in Business Segment 4.

109.2 All of the issued and outstanding shares of Forsub 9 are owned by Forsub 1.

109.3 Forsub 9 is a Foreign Affiliate and a Controlled Foreign Affiliate of Cansub 3.

Forsub 10

109.4 Forsub 10 carries on a business in Country 1 that is included in Business Segment 4.

109.5 All of the issued and outstanding shares of Forsub 10 are owned by Forsub 1.

109.6 Forsub 10 is a Foreign Affiliate and a Controlled Foreign Affiliate of Cansub 3.

[Reserved]

109.7 [Reserved].

109.8 [Reserved].

109.9      [Reserved].

Other Transactions of Note

110.  XXXXXXXXXX

110.1 XXXXXXXXXX

110.2 XXXXXXXXXX

Overview of Proposed Transactions

111.  On XXXXXXXXXX, Foreign Pubco announced its intention to spin off Business Segment 4 (i.e., XXXXXXXXXX) into an independent, publicly-traded company (the “Spin-Out”) as follows:

(a)   Business Segment 4 (the Foreign Spin Business) will be transferred to Foreign Pubco Spinco; and 

(b)   Business Segment 1, Business Segment 2 and Business Segment 3 will be retained by Foreign Pubco (the Foreign Keep Businesses).

112.  Foreign Pubco plans to accomplish the Spin-Out by paying a dividend-in-kind of Foreign Pubco Spinco common shares to Foreign Pubco shareholders, as described in Paragraph 192(i). 

Currently, the aggregate FMV of all of the issued and outstanding common shares of Foreign Pubco Spinco is estimated to be in the range of $XXXXXXXXXX USD to $XXXXXXXXXX USD and the aggregate FMV of all of the issued and outstanding Foreign Spinco XXXXXXXXXX is estimated to be in the range of $XXXXXXXXXX USD to $XXXXXXXXXX USD.

IV.   SUBJECT TRANSACTIONS

The following transactions were completed prior to the Proposed Transactions (the Subject  Transactions):

Incorporation of Foreign Pubco Spinco

112.1      On XXXXXXXXXX, Foreign Pubco incorporated Foreign Pubco Spinco having a capital consisting of common shares.

On the incorporation of Foreign Pubco Spinco, Foreign Pubco subscribed for XXXXXXXXXX Foreign Pubco Spinco common shares for a subscription price of $XXXXXXXXXX USD. 

XXXXXXXXXX.

Incorporation of Foreign Spinco

113.  On XXXXXXXXXX, Forco 3 formed Foreign Spinco having a capital consisting of XXXXXXXXXX (each interest referred to as a Foreign Spinco XXXXXXXXXX). The initial Foreign Spinco XXXXXXXXXX was issued to Forco 3 in consideration for $XXXXXXXXXX USD.

XXXXXXXXXX.

Removal of Cross-Chain Ownership: Cansub 3, Forsub 2, Forsub 3, Forsub 4 and CanLP 7

113.1.     Prior to XXXXXXXXXX:

(a)   Cansub 3 owned XXXXXXXXXX% of the issued and outstanding common shares of Forsub 2;

(b)   CanLP 11 owned XXXXXXXXXX% of the issued and outstanding common shares of Forsub 2;

(c)   CanLP 11 owned XXXXXXXXXX% of the issued and outstanding common shares of Forsub 3;

(d)   CanLP 11 owned XXXXXXXXXX% of the issued and outstanding common shares of Forsub 4;

(e)   CanParent owned XXXXXXXXXX% of the issued and outstanding common shares of Cansub 3;

(f)   CanParent owned XXXXXXXXXX limited partner unit (XXXXXXXXXX%) in CanLP 7;

(g)   CanLP 9 owned XXXXXXXXXX% of the issued and outstanding common shares of Cansub 3;

(h)   Cansub 3 owned XXXXXXXXXX% of the issued and outstanding common shares of Cansub 5;

(i)   CanLP 9 owned XXXXXXXXXX% of the issued and outstanding class D preferred shares of Cansub 3;

(j)   CanLP 2 owned XXXXXXXXXX% of the issued and outstanding class D preferred shares of Cansub 3; and

(k)   Canco 1 owned XXXXXXXXXX unit in CanLP 7, as a general partner of CanLP 7. 

114.  On XXXXXXXXXX:

(a)   CanParent sold all of the common shares of Cansub 3 owned by it (i.e., XXXXXXXXXX% of the issued and outstanding common shares) to CanLP 11 in consideration for $XXXXXXXXXX, such amount being equal to the aggregate FMV of those Cansub 3 shares immediately before the sale.

CanParent incurred a capital loss of $XXXXXXXXXX on the sale of the Cansub 3 shares, which capital loss will be suspended pursuant to subsection 40(3.4).

(b)   CanLP 9 sold all of the common shares of Cansub 3 owned by it (i.e., XXXXXXXXXX% of the issued and outstanding common shares) to CanLP 11 in consideration for $XXXXXXXXXX, such amount being equal to the aggregate FMV of those Cansub 3 shares immediately before the sale.

CanLP 9 incurred a capital loss of $XXXXXXXXXX on the sale of the Cansub 3 shares, which capital loss will be suspended pursuant to subsection 40(3.4).

(c)   Cansub 3 sold all the common shares of Forsub 2 owned by it (i.e., XXXXXXXXXX% of the issued and outstanding common shares) to Forco 4 in consideration for $XXXXXXXXXX USD, such amount being equal to the FMV of those Forsub 2 shares immediately before the sale.

Cansub 3 realized a capital gain of $XXXXXXXXXX USD on the sale of its Forsub 2 shares.

(d)   CanLP 11 sold all of the shares in Forsub 3 owned by it (i.e., XXXXXXXXXX% of the issued and outstanding common shares) to Forco 4 in consideration for $XXXXXXXXXX USD, such amount being equal to the aggregate FMV of those Forsub 3 shares immediately before the sale.

CanLP 11 incurred a capital loss of $XXXXXXXXXX USD on the sale of its Forsub 3 shares, which capital loss will be suspended pursuant to subsection 40(3.4).

(e)   CanLP 11 sold all of the shares in Forsub 4 owned by it (i.e., XXXXXXXXXX% of the issued and outstanding common shares) to Forco 4 for $XXXXXXXXXX USD, such amount being equal to the aggregate FMV of those Forsub 4 shares immediately before the sale.

CanLP 11 incurred a capital loss of $XXXXXXXXXX USD on the sale of its Forsub 4 shares,  which capital loss will be suspended pursuant to subsection 40(3.4).

(f)   CanLP 11 sold all of the shares in Forsub 2 owned by it (i.e., XXXXXXXXXX% of the issued and outstanding common shares) to Forco 4 in consideration for $XXXXXXXXXX USD, such amount being equal to the aggregate FMV of those Forsub 2 shares immediately before the sale.

CanLP 11 realized a capital gain of $XXXXXXXXXX USD on the sale of its Forsub 2 shares.

It is anticipated that CanLP 11 will file an election under subsection 93(1) to ensure that a portion of the Proceeds of Disposition will be treated as a dividend that will be prescribed to be paid from Forsub 2’s Exempt Surplus and/or Taxable Surplus balance in respect of CanLP 11. Surplus balances will be adjusted accordingly.

(g)   [Reserved].

(h)   CanParent, as a limited partner of CanLP 7, sold XXXXXXXXXX unit (XXXXXXXXXX%) in CanLP 7 to Canco 3 in consideration for $XXXXXXXXXX USD, such amount being equal to the FMV of that interest in CanLP 7 immediately before the sale.

CanParent did not realize a capital gain on the sale of its interest in CanLP 7.

(h.1) The partners of CanLP 7 agreed that Canco 3 would become the general partner of, and Canco 1 would continue as a limited partner of, CanLP 7.

(i)   Cansub 5 purchased for cancellation its common shares owned by Cansub 3 (i.e., XXXXXXXXXX% of the issued and outstanding common shares) in consideration for $XXXXXXXXXX USD, such amount being equal to the aggregate FMV of those Cansub 5 shares immediately before their purchase for cancellation.

Cansub 3 realized a capital gain of $XXXXXXXXXX USD on the purchase for cancellation its Cansub 5 shares.

(j)   CanLP 9 sold all the class D preferred shares of Cansub 3 owned by it (i.e., XXXXXXXXXX% of the issued and outstanding class D preferred shares) to CanLP 11 in consideration for $XXXXXXXXXX USD, such amount being equal to the aggregate FMV of those Cansub 3 shares immediately before the sale.

CanLP 9 realized a capital gain of $XXXXXXXXXX USD on the sale of its Cansub 3 shares.

(k)   CanLP 2 sold all the class D preferred shares of Cansub 3 owned by it (i.e., XXXXXXXXXX% of the issued and outstanding class D preferred shares) to CanLP 11 in consideration for $XXXXXXXXXX USD, such amount being equal to the aggregate FMV of those Cansub 3 shares immediately before the sale.

CanLP 2 realized a capital gain of $XXXXXXXXXX USD on the sale of its Cansub 3 shares.

Amalgamation

115.  Prior to XXXXXXXXXX, Cansub 1 was a Taxable Canadian Corporation and a Private Corporation. All of the issued and outstanding shares of Cansub 1 were owned by CanParent. 

On XXXXXXXXXX, Cansub 1 continued from Province 2 to Province 1 and, as a result, ceased to be governed by Act 3 and became governed by Act 2.

116.  On XXXXXXXXXX, Cansub 1 incorporated Cansub 7 under Act 2.

Cansub 7 is XXXXXXXXXX.

The authorized capital of Cansub 7 consists of common shares (the Cansub 7 Common Shares). After the incorporation, Cansub 1 subscribed for XXXXXXXXXX Cansub 7 Common Shares for an aggregate consideration of $XXXXXXXXXX.

116.1      Prior to XXXXXXXXXX, CanParent owned all of the issued and outstanding common shares of Cansub 1 and XXXXXXXXXX% of the issued and outstanding common shares of Cansub 8. The remaining common shares of Cansub 8 were owned as follows: CanGP 1 as to XXXXXXXXXX%, Canco 1 as to XXXXXXXXXX% and Canco 2 as to XXXXXXXXXX%.

Cansub 8 was an unlimited liability corporation, which was governed by Act 2. It was a Taxable Canadian Corporation and a Private Corporation. 

117.  On XXXXXXXXXX, CanParent transferred all of its common shares of Cansub 1 to Cansub 8 in consideration for Cansub 8 preferred shares, having an aggregate redemption amount and FMV at that time equal to the aggregate FMV of the Cansub 1 common shares so transferred to Cansub 8.

The aggregate PUC of the Cansub 8 preferred shares so issued to CanParent in exchange for the Cansub 1 common shares was equal to the aggregate PUC of the Cansub 1 common shares so transferred to Cansub 8. 

CanParent and Cansub 8 jointly elected, in prescribed form and within the time limits referred to in subsection 85(6), to have the rules in subsection 85(1) apply to the transfer of the Cansub 1 common shares to Cansub 8.

117.1      Immediately before the Amalgamation, the holders of Cansub 8 shares were as follows:

(a)   CanParent owned XXXXXXXXXX% of the issued and outstanding common shares;

(b)   CanGP 1 owned XXXXXXXXXX% of the issued and outstanding common shares;

(c)   Canco 1 owned XXXXXXXXXX% of the issued and outstanding common shares;

(d)   Canco 2 owned XXXXXXXXXX% of the issued and outstanding common shares; and

(e)   CanParent owned all of the issued and outstanding preferred shares.

118.  On XXXXXXXXXX:

(a)   Cansub 8 and Cansub 1 amalgamated (the Amalgamation) under Act 2 to form Cansub 4.

The Amalgamation was governed by subsections 87(1). On the Amalgamation:

(i)   all of the property (except amounts receivable from any predecessor corporation or shares of the capital stock of any predecessor corporation) of the predecessor corporations immediately before the merger became property of Cansub 4 by virtue of the merger. In particular, all of the Cansub 7 shares owned by Cansub 1 immediately before the Amalgamation became property of Cansub 4 on the Amalgamation;

(ii)  all of the liabilities (except amounts payable to any predecessor corporation) of the predecessor corporations immediately before the merger became liabilities of Cansub 4 by virtue of the merger; and

(iii) all of the shareholders (except any predecessor corporation), who owned shares of the capital stock of any predecessor corporation immediately before the merger, received newly issued shares of the capital stock of Cansub 4 because of the merger. 

In particular, on the Amalgamation, Cansub 8 shares were cancelled on their exchange for Cansub 4 class A common shares, class B common shares and preferred shares as follows:

A.    CanParent exchanged its Cansub 8 common shares for XXXXXXXXXX class A common shares of Cansub 4, having an aggregate FMV equal to the aggregate FMV of the Cansub 8 common shares owned by CanParent immediately before the Amalgamation. This share ownership represented XXXXXXXXXX% of the issued and outstanding class A common shares of Cansub 4;

B.    CanGP 1 exchanged its Cansub 8 common shares for XXXXXXXXXX class B common shares of Cansub 4, having an aggregate FMV equal to the aggregate FMV of the Cansub 8 common shares owned by CanGP 1 immediately before the Amalgamation. This share ownership represented XXXXXXXXXX% of the issued and outstanding class B common shares of Cansub 4;

C.    Canco 1 exchanged its Cansub 8 common shares for XXXXXXXXXX class A common shares of Cansub 4, having an aggregate FMV equal to the aggregate FMV of the Cansub 8 common shares owned by Canco 1 immediately before the Amalgamation. This share ownership represented XXXXXXXXXX% of the issued and outstanding class A common shares of Cansub 4;

D.    Canco 2 exchanged its Cansub 8 common shares for XXXXXXXXXX class B common shares of Cansub 4 having an aggregate FMV equal to the aggregate FMV of the Cansub 8 common shares immediately before the Amalgamation. This share ownership represented XXXXXXXXXX% of the issued and outstanding class B common shares of Cansub 4; and

E.    CanParent exchanged its Cansub 8 preferred shares for Cansub 4 preferred shares, having an aggregate FMV equal to the aggregate FMV of the Cansub 8 preferred shares owned by CanParent immediately before the Amalgamation. This share ownership represented all of the issued and outstanding preferred shares of Cansub 4; and

(iv)  the aggregate PUC of the Cansub 4 class A common shares and the Cansub 4 class B common shares immediately after the Amalgamation, was equal to the aggregate PUC of the Cansub 8 common shares immediately before the Amalgamation, and such PUC was allocated between Cansub 4 class A common shares and the Cansub 4 class B common shares based on the proportion that the aggregate FMV of the Cansub 4 class A common shares, or the Cansub 4 class B common shares, as the case may be, issued in exchange for the Cansub 8 common shares, was of the aggregate FMV of all the Cansub 4 class A common shares and the Cansub 4 class B common shares issued for the Cansub 8 common shares on the Amalgamation.   

The aggregate PUC of the Cansub 4 preferred shares immediately after the Amalgamation was equal to the aggregate PUC of the Cansub 8 preferred shares immediately before the Amalgamation.

Immediately after the Amalgamation, CanParent controlled Cansub 4 through its shareholding interest in Cansub 4.

(b)   Cansub 4 transferred all of its business assets to Cansub 7 in consideration for Cansub 7 Common Shares having an aggregate FMV at that time equal to the aggregate FMV of the property transferred to Cansub 7.

Cansub 4 and Cansub 7 jointly elected, in prescribed form and within the time limits referred to in subsection 85(6), to have the rules in subsection 85(1) apply to the transfer of each Eligible Property to Cansub 7.

Incorporation of Foreign Spinco Canadian Holding Structure

119.  On XXXXXXXXXX, Foreign Spinco incorporated:

(a)   TC ULC GP, XXXXXXXXXX. The authorized share capital of TC ULC GP consists of an unlimited number of common shares having one vote per share (the TC ULC GP Common Shares).

On incorporation, Foreign Spinco subscribed for XXXXXXXXXX TC ULC GP Common Shares for an aggregate consideration of $XXXXXXXXXX; and

(b)   TC ULC, XXXXXXXXXX. The authorized share capital of TC ULC consists of an unlimited number of common shares having one vote per share (the TC ULC Common Shares).

On incorporation, Foreign Spinco subscribed for XXXXXXXXXX TC ULC Common Shares for an aggregate consideration of $XXXXXXXXXX.

119.1 On XXXXXXXXXX TC ULC incorporated TC Finance, XXXXXXXXXX. The authorized share capital of TC Finance consists of an unlimited number of common shares having one vote per share.

On incorporation, TC ULC subscribed for XXXXXXXXXX shares for an aggregate consideration of $XXXXXXXXXX

Incorporation of DC ULC Holding Structure

120.  On XXXXXXXXXX, CanParent incorporated:

(a)   Spinco ULC, XXXXXXXXXX. The authorized capital of Spinco ULC consists of an unlimited number of common shares having one vote per share (the Spinco ULC Common Shares).

After the incorporation, CanParent subscribed for XXXXXXXXXX Spinco ULC Common Shares for an aggregate consideration of $XXXXXXXXXX; and

(b)   Partnerco ULC, XXXXXXXXXX. The authorized capital of Partnerco ULC consists of an unlimited number of common shares having one vote per share (the Partnerco ULC Common Shares).

After the incorporation, CanParent subscribed for XXXXXXXXXX Partnerco ULC Common Shares for an aggregate consideration of $XXXXXXXXXX.

Formation of New CanLP 1

120.1.     On XXXXXXXXXX:

(a)   Forco 3 incorporated New Canco 1, XXXXXXXXXX. The authorized capital of New Canco 1 consists of common shares (the New Canco 1 Common Shares);

(b)   Forco 3 subscribed for XXXXXXXXXX New Canco 1 Common Shares in consideration for an aggregate consideration of $XXXXXXXXXX;

(c)   New Canco 1 and Canco 1 formed New CanLP 1 under the laws of Province 1.

New Canco 1, as a limited partner, contributed $XXXXXXXXXX to New CanLP 1 in consideration for XXXXXXXXXX units in the partnership. Canco 1, as a general partner, contributed $XXXXXXXXXX USD to New CanLP 1 in consideration for XXXXXXXXXX unit in the partnership; and

(d)   New CanLP 1 XXXXXXXXXX.

Formation of New CanLP 2

120.2.     On XXXXXXXXXX:

(a)   Forco 3 incorporated New Canco 2, XXXXXXXXXX. The authorized capital of New Canco 2 consists of common shares (the New Canco 2 Common Shares);

(b)   Forco 3 subscribed for XXXXXXXXXX New Canco 2 Common Shares in consideration for an aggregate consideration of $XXXXXXXXXX;

(c)   New Canco 2 and Canco 1 formed New CanLP 2 under the laws of Province 1.

New Canco 2, as a limited partner, contributed $XXXXXXXXXX to New CanLP 2 in consideration for XXXXXXXXXX units in the partnership. Canco 1, as a general partner, contributed $XXXXXXXXXX USD to New CanLP 2 in consideration for XXXXXXXXXX unit in the partnership; and

(d)   New CanLP 2 XXXXXXXXXX.

Removal of Cross-Chain Ownership: CanLP 7 and Cansub 3

120.3.     Prior to XXXXXXXXXX, Cansub 4 owned XXXXXXXXXX units in CanLP 7.     

On XXXXXXXXXX, CanLP 7 redeemed XXXXXXXXXX units owned by Cansub 4 in consideration for $XXXXXXXXXX, such amount being equal to the aggregate FMV of the units immediately before the redemption. Cansub 4 realized a gain of approximately $XXXXXXXXXX on the redemption of its interest in CanLP 7.

120.4.     Prior to XXXXXXXXXX, Cansub 4 owned XXXXXXXXXX% of the issued and outstanding class D preferred shares of Cansub 3.

On XXXXXXXXXX, Cansub 4 sold all its class D preferred shares of Cansub 3 to CanLP 11 in consideration for $XXXXXXXXXX, such amount being equal to the aggregate FMV of the Cansub 3 shares immediately before the sale. Cansub 4 realized a gain of approximately $XXXXXXXXXX on the sale of its Cansub 3 shares.

Incorporation of Newco ULC

120.5.     On XXXXXXXXXX, CanParent incorporated Newco ULC, XXXXXXXXXX. The authorized capital of Newco ULC consisted of common shares (the Newco ULC Common Shares). After the incorporation, CanParent subscribed for XXXXXXXXXX Newco ULC Common Shares for an aggregate consideration of $XXXXXXXXXX.

Incorporation of Foreign Spinco Finco

120.6.     On XXXXXXXXXX, Foreign Spinco formed Foreign Spinco Finco having a capital consisting of XXXXXXXXXX. The initial Foreign Spinco Finco XXXXXXXXXX was issued to Foreign Spinco in consideration for $XXXXXXXXXX USD. XXXXXXXXXX.

Repayment of Debt to Cansub 5

120.7.     Prior to XXXXXXXXXX, Forco 14 owed to Cansub 5 $XXXXXXXXXX USD.

On XXXXXXXXXX, Forco 14 repaid in full all amounts owing by Forco 14 to Cansub 5.

Payment of Interest by CanParent

120.8.     On XXXXXXXXXX CanParent paid all accrued interest owing on the Forco 2 Loan ($XXXXXXXXXX) by issuing to Forco 2 a Canadian-dollar denominated, demand, non-interest-bearing promissory note having a Principal Amount and FMV equal to the amount of interest owing (the CanParent Interest Note). Forco 2 accepted the receipt of the CanParent Interest Note as payment in full of the interest owing under the Forco 2 Loan. The CanParent Interest Note was not convertible into any other property.

120.9.     Forco 2 contributed the CanParent Interest Note to Forco 3 by way of a capital contribution. No XXXXXXXXXX in Forco 3 were issued in consideration for the contribution.

120.10.Pursuant to the terms of the Forco 3 – CanParent FSA, Forco 3 subscribed for CanParent Common Shares having an aggregate subscription amount (and aggregate FMV) equal to the Principal Amount and FMV of the CanParent Interest Note.  Forco 3 paid the subscription amount using the CanParent Interest Note which CanParent cancelled as payment in full of the subscription amount.

Amalgamation 1

120.11.On XXXXXXXXXX, CanParent and Newco ULC amalgamated (the Amalgamation 1) under Act 2 pursuant to a court-approved plan of arrangement to form DC ULC. Amalgamation 1 was governed by subsection 87(1).

DC ULC is XXXXXXXXXX.

(a)   The authorized share capital of DC ULC consists of an unlimited number of common shares (the DC ULC Common Shares); and

(b)   on Amalgamation 1:

(i)   all of the property (except amounts receivable from any predecessor corporation or shares of the capital stock of any predecessor corporation) of the predecessor corporations immediately before the merger became property of DC ULC by virtue of the merger;

(ii)  all of the liabilities (except amounts payable to any predecessor corporation) of the predecessor corporations immediately before the merger became liabilities of DC ULC by virtue of the merger. For greater certainty, the Forco 2 Loan became a liability of DC ULC;

(iii) all of the shareholders (except any predecessor corporation), who owned shares of the capital stock of any predecessor corporation immediately before the merger, received shares of the capital stock of DC ULC because of the merger. In particular, each CanParent Common Share owned by Forco 3 immediately before Amalgamation 1 was exchanged for one DC ULC Common Share. The aggregate FMV of the DC ULC Common Shares received by Forco 3 on Amalgamation 1 was equal to the aggregate FMV of the CanParent Common Shares owned by Forco 3 immediately before Amalgamation 1.

For greater certainty, after Amalgamation 1, the rights and obligations of CanParent under the Forco 3- CanParent FSA became rights and obligations of DC ULC and the Forco 3 - CanParent FSA is referred to as the Forco 3 - DC ULC FSA;

(c)   on Amalgamation 1, CanParent and Newco ULC continued as one company to form DC ULC pursuant to the provisions of Act 2. XXXXXXXXXX; and

(d)   the aggregate PUC of the DC ULC Common Shares that were issued on Amalgamation 1 was equal to the aggregate PUC of the CanParent Common Shares immediately before Amalgamation 1.

Removal of Cross-Chain Ownership: CanLP 5 and CanLP 6

120.12     Prior to XXXXXXXXXX, Canco 1 owned XXXXXXXXXX unit in CanLP 5, as a general partner of CanLP 5, and Canco 2 owned 1 unit in CanLP 6, as a general partner of CanLP 6.

On XXXXXXXXXX:

(a)   DC ULC, as a limited partner of CanLP 5, sold XXXXXXXXXXunits (XXXXXXXXXX%) in CanLP 5 to Partnerco ULC in consideration for $XXXXXXXXXXUSD, such amount being equal to the aggregate FMV of the units immediately before the sale.  DC ULC realized a capital gain of approximately $XXXXXXXXXX USD on the sale of its interest in CanLP 5. The partners of CanLP 5 agreed that Partnerco ULC would become an additional general partner of CanLP 5;

(b)   CanLP 5 redeemed the XXXXXXXXXX unit owned by Canco 1 in consideration for $XXXXXXXXXX USD, such amount being equal to the FMV of the unit immediately before the redemption. Canco 1 did not realize a gain on the redemption of its interest in CanLP 5. After the redemption the sole remaining general partner in CanLP 5 was Partnerco ULC;

(c)   DC ULC, as a limited partner of CanPL 6, sold XXXXXXXXXX (XXXXXXXXXX%) units in CanLP 6 to Partnerco ULC in consideration for $XXXXXXXXXX USD, such amount being equal to the aggregate FMV of the units immediately before the sale. DC ULC did not realize a capital gain on the sale of its interest in CanLP 6.  The partners of CanLP 6 agreed that Partnerco ULC would become an additional general partner of CanLP 6; and

(d)   CanLP 6 redeemed the XXXXXXXXXX unit held by Canco 2 in consideration for $XXXXXXXXXX USD, such amount being equal to the FMV of the unit immediately before the redemption. Canco 2 did not realize a gain on the redemption of its interest in CanLP 6. After the redemption the sole remaining general partner in CanLP 6 was Partnerco ULC.

Incorporation of Newco XXXXXXXXXX

120.13 On XXXXXXXXXX, Forco 1 formed Newco XXXXXXXXXX having a capital consisting of XXXXXXXXXX.

Continuation of Cansub 2

120.14 On XXXXXXXXXX, Cansub 2 continued from Province 2 to Province 1 and, as a result, ceased to be governed by Act 3 and became governed by Act 2.

V.    PROPOSED TRANSACTIONS

Reorganization of TC ULC Share Capital

121.  TC ULC will amend its authorized capital to create an unlimited number of preferred shares (the TC ULC Preferred Shares) having the following attributes:

(a)   each TC ULC Preferred Share will be redeemable, subject to applicable law, at any time at the option to TC ULC at an amount (such amount being the TC ULC Redemption Amount) equal to the amount by which the aggregate FMV of the Distribution Property (for greater certainty, including any Additional Cash Transfer) transferred by DC ULC to TC ULC on the DC ULC Transfer exceeds the aggregate FMV of the TC ULC Assumed Liabilities, and then dividing such amount by the number of TC ULC Preferred Shares issued in consideration for the DC ULC Transfer, plus the amount of all declared but unpaid dividends thereon;

(b)   each TC ULC Preferred Share is retractable, subject to applicable law, at any time at the option of the holder thereof for an amount equal to the TC ULC Redemption Amount;

(c)   the holder of each TC ULC Preferred Share is entitled to a non-cumulative cash dividend as and when declared by the directors of TC ULC from time to time, which dividend need not also be declared on any other class of shares of TC ULC;

(d)   there is a provision restricting the payment of dividends on other classes of shares so that no such dividends may be paid on any other class of shares of TC ULC if the resulting realizable value of the net assets of TC ULC after payment of the dividends would be less than the aggregate TC ULC Redemption Amount of all of the TC ULC Preferred Shares then outstanding;

(e)   the holder of each TC ULC Preferred Share is entitled, upon the liquidation, dissolution or winding-up of TC ULC, to a payment in priority to all other classes of shares of TC ULC of an amount equal to the TC ULC Redemption Amount plus any declared but unpaid dividends thereon to the extent of the amount of value of property available under applicable law for the payments to the shareholders of TC ULC upon liquidation, dissolution or winding-up, but will be entitled to no more than the amount of that payment; and

(f)   the holder of each TC ULC Preferred Share is not entitled to vote at any meeting of the shareholders of TC ULC, other than as provided under the statute by which TC ULC is governed.

122.  [Reserved].

[Reserved]

123.  [Reserved].

124.  [Reserved].

[Reserved]

125.  [Reserved].

126.  [Reserved].

127.  [Reserved].

[Reserved]

128.  [Reserved].

129.  [Reserved].

Merger of Newco XXXXXXXXXX and Forco 2

129.1 [Reserved].

129.2 Forco 1 will contribute to Newco XXXXXXXXXX all of its issued and outstanding XXXXXXXXXX of Forco 2 by way of a capital contribution. No XXXXXXXXXX in Newco XXXXXXXXXX will be issued.

130.  Forco 2 will merge into Newco XXXXXXXXXX (the Merger) pursuant to the laws of State 1, XXXXXXXXXX. No new shares will be issued.

All of the shares of Forco 2 will be cancelled and XXXXXXXXXX. 

On the Merger, Newco XXXXXXXXXX will acquire the Forco 3 shares and the Forco 2 Loan. After the Merger, the Forco 2 Loan will be referred to as the Newco XXXXXXXXXX Loan.

Packaging Foreign Spinco

130.1      All of the issued and outstanding shares of Forco 7, Forco 8, Forco 9 and Forco 10 will be transferred to Forco 1. None of the transfers will involve DC ULC or an entity directly or indirectly owned by DC ULC.

130.2      Forco 1 will contribute to Newco XXXXXXXXXX $XXXXXXXXXX USD and all of the issued and outstanding shares of Forco 7, Forco 8, Forco 9 and Forco 10 by way of a capital contribution. No XXXXXXXXXX in Newco XXXXXXXXXX will be issued.

131.  Newco XXXXXXXXXX will contribute to Forco 3 $XXXXXXXXXX USD and all of the issued and outstanding shares of Forco 7, Forco 8, Forco 9 and Forco 10 by way of a capital contribution. No XXXXXXXXXX in Forco 3 will be issued.

132.  Forco 3 will contribute to Foreign Spinco $XXXXXXXXXX USD and all of the issued and outstanding shares of Forco 7, Forco 8, Forco 9 and Forco 10 by way of a capital contribution. No XXXXXXXXXX in Foreign Spinco will be issued.

133.  The contribution of the $XXXXXXXXXX USD and all of the issued and outstanding shares of Forco 7, Forco 8, Forco 9 and Forco 10 to Foreign Spinco, as described in Paragraph 132, will occur before the transfer of the Distribution Property to TC ULC on the DC ULC Transfer.

133.1.     [Reserved].

133.2.     Foreign Spinco will contribute $XXXXXXXXXX USD to Foreign Spinco Finco by way of a capital contribution. No XXXXXXXXXX in Foreign Spinco Finco will be issued.

133.3.     Foreign Spinco Finco will lend $XXXXXXXXXX USD to Forco 1 (the Foreign Spinco Finco - Forco 1 Loan). The Foreign Spinco Finco – Forco 1 Loan will be evidenced by a USD, interest bearing, demand promissory note having a principal amount and a FMV equal to $XXXXXXXXXX USD which will be issued by Forco 1 to Foreign Spinco Finco.

[Reserved]

134.  [Reserved].

[Reserved]

135.  [Reserved].

136.  [Reserved].

137.  [Reserved].

138.  [Reserved].

Removal of Cross-Chain Ownership: CanLP 17

139.  [Reserved].

140.  [Reserved].

141.  [Reserved].

142.  [Reserved].

143.  CanLP 17 will sell its business assets to New CanLP 1 in consideration for $XXXXXXXXXX USD, such amount being equal to the aggregate FMV of the business assets immediately before the sale. It is expected that CanLP 17 will realize a capital gain of approximately $XXXXXXXXXX USD on the sale of its business assets to New CanLP 1.

144.  [Reserved].

144.1 CanLP 17 will distribute on a pro rata basis to CanLP 6 and Canco 1: (a) the $XXXXXXXXXX USD cash sales proceeds received from New CanLP 1, as described in Paragraph 143; and (b) $XXXXXXXXXX USD cash on hand prior to that sale.

Consequently, the aggregate ACB of the CanLP 17 units owned by CanLP 6 and Canco 1 will be reduced by an amount equal to the amount received by each of them on the distribution, as described in this Paragraph 144.1.  No gain will arise on such ACB reduction.  

145.  CanLP 17 will be liquidated and its property (which will consist only of its XXXXXXXXXX CanLP 11 units) will be distributed to CanLP 6 and Canco 1 on a pro rata basis. Each of CanLP 6 and Canco 1 will receive a pro rata, undivided interest in the CanLP 11 interest distributed on the dissolution.

CanLP 6 and Canco 1 will jointly file an election in prescribed form and within the time limits referred to in subsection 96(4) to have the rules in subsection 98(3) apply to the distribution of the XXXXXXXXXX CanLP 11 units to CanLP 6 and Canco 1.

145.1 CanLP 6 and Canco 1 will partition the undivided interest in the XXXXXXXXXX CanLP 11 units acquired on the liquidation of CanLP 17 such that after the partition, Canco 1 will own a XXXXXXXXXX% divided interest consisting of XXXXXXXXXX CanLP 11 units, and CanLP 6 will own a XXXXXXXXXX% divided interest consisting of XXXXXXXXXX CanLP 11 units.

The partition described in this Paragraph 145.1 will be governed by subsection 248(20). 

145.2      Canco 1 will sell its XXXXXXXXXX CanLP 11 units to TC ULC GP in consideration for an amount  equal to the aggregate FMV of that XXXXXXXXXX units immediately before the sale.

Removal of Cross-Chain Ownership: CanLP 16

146.  [Reserved].

147.  [Reserved].

148.  [Reserved].

149.  [Reserved].

150.  CanLP 16 will sell its business assets to New CanLP 2 in consideration for $XXXXXXXXXX USD, such amount being equal to the aggregate FMV of those business assets immediately before the sale. It is expected that CanLP 16 will realize a capital gain of approximately $XXXXXXXXXX USD on the sale of its business assets to New CanLP 2.

151.  [Reserved].

152.  CanLP 16 will be liquidated and its property (which will consist only of cash from the sale to New CanLP 2, as described in Paragraph 150) will be distributed to CanLP 6 and Canco 1. On the liquidation, each of CanLP 6 and Canco 1 will receive a pro rata portion of the cash owned by CanLP 16.

The partners of CanLP 16 (being CanLP 6 and Canco 1) will incur a capital loss of approximately $XXXXXXXXXX as a result of the disposition of their CanLP 16 partnership interests on the liquidation, which loss will not be suspended under subsection 40(3.4), because CanLP 16 partnership interests will cease to exist on the liquidation.

Packaging Spinco ULC

153.  DC ULC will transfer all of its interests in CanLP 5, CanLP 6 and CanLP 11 to Spinco ULC in consideration for Spinco ULC Common Shares, having an aggregate FMV equal to the aggregate FMV of the property so transferred to Spinco ULC.

DC ULC will jointly elect with Spinco ULC, in prescribed form and within the time limits referred to in subsection 85(6), to have the rules in subsection 85(1) apply to the transfer of each Eligible Property to Spinco ULC.

154.  The Agreed Amount in each election described in Paragraph 153 will be an amount equal to the lesser of the amounts specified in subparagraphs 85(1)(c.1)(i) and (ii), which amount will not be less than the amount permitted under paragraph 85(1)(b).

155.  The amount that will be added to the Stated Capital of the Spinco ULC Common Shares issued by Spinco ULC as consideration for the interests in CanLP 5, CanLP 6 and CanLP 11 will not exceed the aggregate cost, determined pursuant to subsection 85(1), where applicable, to Spinco ULC of those interests acquired from DC ULC, as described in Paragraph 153.

For greater certainty, the increase to the aggregate PUC of the Spinco ULC Common Shares issued to DC ULC, as described in Paragraph 153, will not exceed the maximum amount that could be added to the aggregate PUC of such shares, having regard to subsection 85(2.1).

Interest Payments and Removing Cross-Chain Debt

155.1.     All Cansub 2 Retained Loans will be repaid in full to Cansub 2.

Cansub 2 will retain ownership of the Cansub 2 Spin Loans.

156.  Forco 5 and Forco 6 will pay to Cansub 2 all accrued interest owing on the Cansub 2 Spin Loans.

157.  Cansub 2 will:

(a)   sell the Cansub 2 Spin Loans to DC ULC in consideration for an amount equal to the aggregate FMV of the Cansub 2 Spin Loans immediately before the sale.

The transfer of the Cansub 2 Spin Loans to DC ULC will constitute an assignment of the Cansub 2 Spin Loans by Cansub 2 to DC ULC such that the Cansub 2 Spin Loans will remain in existence and not be considered to be a new debt.

As consideration for the purchase of the Cansub 2 Spin Loans, DC ULC will issue a promissory note, payable to Cansub 2, on demand, without interest, having a Principal Amount and FMV equal to the aggregate FMV of the Cansub 2 Spin Loans immediately before the sale (the Cansub 2 Spin Loan Purchase Note). 

Cansub 2 will accept the Cansub 2 Spin Loan Purchase Note in full payment of the sale price.

All accrued interest owing on the Cansub 2 Spin Loans will be paid in full by Forco 5 and Forco 6, immediately prior to the sale of the Cansub 2 Spin Loans to DC ULC, such that Cansub 2 will only sell the Principal Amount of the Cansub 2 Spin Loans to DC ULC;

(b)   reduce the aggregate PUC of its shares in an amount equal to the Principal Amount and FMV of the Cansub 2 Spin Loan Purchase Note (the Cansub 2 PUC Reduction).

Cansub 2 will pay the amount of the Cansub 2 PUC Reduction in full by transferring the Cansub 2 Spin Loan Purchase Note to DC ULC for cancellation. DC ULC will cancel the Cansub 2 Spin Loan Purchase Note and will accept the cancellation in full satisfaction of the Cansub 2 PUC Reduction.

The amount of the Cansub 2 PUC Reduction will not exceed the aggregate ACB, determined immediately before the Cansub 2 PUC Reduction, to DC ULC of the Cansub 2 common shares owned by it.

For greater certainty, the aggregate ACB of the Cansub 2 common shares owned by DC ULC will be reduced by the Principal Amount and FMV of the Cansub 2 Spin Loan Purchase Note received by DC ULC on the Cansub 2 PUC Reduction under subparagraph 53(2)(a)(ii); and

(c)   if required, reduce the aggregate PUC of its shares owned by DC ULC in an amount equal to the amount of cash required to satisfy all, or a portion of, the Additional Cash Transfer (the Cansub 2 PUC Reduction 2).

Cansub 2 will pay the amount of the Cansub 2 PUC Reduction 2 in full by transferring cash to DC ULC.

The amount of the Cansub 2 PUC Reduction 2 will not exceed the aggregate ACB, determined immediately before the Cansub 2 PUC Reduction 2, to DC ULC of the Cansub 2 common shares owned by it.

For greater certainty, the aggregate ACB of the Cansub 2 common shares owned by DC ULC will be reduced by the cash amount received by DC ULC on the Cansub 2 PUC Reduction 2 under subparagraph 53(2)(a)(ii).

158.  [Reserved].

158.1.     Forco 5 and Forco 6 will, in aggregate, repay to DC ULC a portion of the Principal Amount owing on the Cansub 2 Spin Loans. It is anticipated that approximately $XXXXXXXXXX of the Cansub 2 Spin Loans will be repaid.

Reorganization of DC ULC Share Capital

159.  DC ULC will reorganize its capital (the Capital Reorganization) by amending its articles of incorporation to create a new class of an unlimited number of common shares having one vote per share (the DC ULC New Common Shares) and a new class of an unlimited number of preference shares (the DC ULC Special Shares) (the DC ULC New Common Shares and the DC ULC Special Shares are collectively referred to as the DC ULC New Shares).

The DC ULC New Shares will have the rights and conditions as described below:

(a)   the DC ULC New Common Shares will have all attributes currently attached to the DC ULC Common Shares and, in addition, will provide any holder owning more than XXXXXXXXXX% of the issued and outstanding DC ULC New Common Shares with the right to requisition the directors of DC ULC to call a meeting of the holders of DC ULC New Common Shares for any of the purposes stated in the requisition and should the directors of DC ULC not call such meeting within two days after receiving such requisition a shareholder who made such requisition may call a meeting in the manner in which such meeting may be called under the governing legislation and the articles of DC ULC; and

(b)   the DC ULC Special Shares will have the following attributes:

(i)   each DC ULC Special Share will be redeemable, subject to applicable law, at any time at the option to DC ULC at an amount equal to the amount (such amount being the DC ULC Redemption Amount) obtained by multiplying the aggregate FMV of the issued and outstanding DC ULC Common Shares immediately prior to the Forco 3 Exchange 1 by the Butterfly Percentage, and then dividing such product by the number of DC ULC Special Shares issued on the Forco 3 Exchange 1, plus the amount of all declared but unpaid dividends thereon;

(ii)  each DC ULC Special Share will be retractable, subject to applicable law, at any time at the option of the holder thereof for an amount equal to the DC ULC Redemption Amount, plus the amount of all declared but unpaid dividends thereon;

(iii) the holder of each DC ULC Special Share will be entitled to a non-cumulative cash dividend as and when declared by the directors of DC ULC from time to time, which dividend need not also be declared on any other class of shares of DC ULC;

(iv)  there will be a provision restricting the payment of dividends on other classes of shares so that no such dividends may be paid on any other class of shares of DC ULC if the resulting realizable value of the net assets of DC ULC after payment of the dividends would be less than the aggregate DC ULC Redemption Amount of all of the DC ULC Special Shares then outstanding, plus the amount of all declared but unpaid dividends thereon;

(v)   the holder of each DC ULC Special Share will be entitled, upon the liquidation, dissolution or winding-up of DC ULC, to a payment in priority to all other classes of shares of DC ULC of an amount equal to the DC ULC Redemption Amount plus any declared but unpaid dividends thereon to the extent of the amount of value of property available under applicable law for the payments to the shareholders of DC ULC upon liquidation, dissolution or winding-up, but will be entitled to no more than the amount of that payment; and

(vi)  the holder of each DC ULC Special Share will not be entitled to vote at any meeting of the shareholders of DC ULC, other than as provided under the statute by which DC ULC is governed.

160.  [Reserved].

161.  Forco 3 will exchange each issued and outstanding DC ULC Common Share for one DC ULC New Common Share and one DC ULC Special Share (the Forco 3 Exchange 1). All DC ULC Common Shares will be cancelled following the Forco 3 Exchange 1.

162.  The aggregate FMV of the DC ULC New Shares immediately following the Forco 3 Exchange 1 will be equal to the aggregate FMV of the DC ULC Common Shares immediately before the Forco 3 Exchange 1.

163.  The aggregate addition to the Stated Capital in respect of the DC ULC New Shares issued by DC ULC on the Forco 3 Exchange 1 will not exceed the aggregate PUC of the DC ULC Common Shares at the time of the Forco 3 Exchange 1.  Such aggregate Stated Capital will be apportioned between the DC ULC New Common Shares and the DC ULC Special Shares in proportion to the relative aggregate FMV of such shares.

164.  No election under subsection 85(1) will be filed in respect of the Forco 3 Exchange 1. 

165.  Forco 3 will hold: (a) the DC ULC Common Shares as Capital Property immediately before the Forco 3 Exchange 1; and (b) the DC ULC New Shares as Capital Property after the Forco 3 Exchange 1.

166.  [Reserved].

Three-Party Share Exchange

167.  [Reserved].

168.  Following the Forco 3 Exchange 1, Forco 3, TC ULC, and Foreign Spinco will enter into a three-party agreement, and pursuant to such agreement, Forco 3 will transfer all of its DC ULC Special Shares to TC ULC (the Three-Party Share Exchange) in the following manner:

(a)   TC ULC will agree to pay the purchase price for the DC ULC Special Shares transferred to it by Forco 3, on the Three-Party Share Exchange, by issuing TC ULC Common Shares to Foreign Spinco, having an aggregate FMV at that time equal to the aggregate FMV at that time of the DC ULC Special Shares so transferred to it by Forco 3, as described in Paragraph 168(b). 

TC ULC, Foreign Spinco and Forco 3 will agree that the TC ULC Common Shares will be issued by TC ULC to Foreign Spinco in respect of, and by virtue of, the disposition by Forco 3 of the DC ULC Special Shares to TC ULC;

(b)   Forco 3 will agree to pay the purchase price for the Foreign Spinco XXXXXXXXXX issued to it by Foreign Spinco, as described in Paragraph 168(c), by transferring all of its DC ULC Special Shares to TC ULC; and

(c)   Foreign Spinco will agree to pay the purchase price for the TC ULC Common Shares issued to it by TC ULC, as described in Paragraph 168(a), by issuing Foreign Spinco XXXXXXXXXX to Forco 3, having an aggregate FMV at that time equal to the aggregate FMV at that time of the TC ULC Common Shares so issued to it by TC ULC, which aggregate FMV will, in turn, be equal to the aggregate FMV at that time of the DC ULC Special Shares so transferred by Forco 3 to TC ULC, as described in Paragraph 168(b).

An amount equal to the aggregate PUC of the DC ULC Special Shares (so transferred to TC ULC) will be added to the Stated Capital of the TC ULC Common Shares issued to Foreign Spinco, as described in Paragraph 168(a).  TC ULC, Forco 3 and Foreign Spinco will agree that TC ULC Common Shares will be issued to Foreign Spinco in respect of, and by virtue of, the disposition by Forco 3 of its DC ULC Special Shares to TC ULC.

The aggregate FMV, at the time of the transfer, of the DC ULC Special Shares so transferred by Forco 3 to TC ULC, as described in Paragraph 168(b), will exceed the amount that TC ULC will add to the Stated Capital of the TC ULC Common Shares so issued to Foreign Spinco, as described in Paragraph 168(a). 

The purchase price paid by TC ULC for the DC ULC Special Shares, as described in Paragraph 168(a), will be an amount equal to the aggregate FMV of those shares at the time of their transfer by Forco 3 to TC ULC.  For greater certainty, that purchase price will be an amount that an Arm’s-Length purchaser would pay for those shares. 

169.  TC ULC will hold the DC ULC Special Shares as Capital Property.

170.  Immediately following the Three-Party Share Exchange: (a) Forco 3 will own all of the issued and outstanding Foreign Spinco XXXXXXXXXX; (b) Foreign Spinco will own all of the issued and outstanding TC ULC Common Shares; and (c) TC ULC will own all of the issued and outstanding DC ULC Special Shares.

No person other than Foreign Spinco will acquire shares in the capital of TC ULC as part of a Series of Transactions or Events that includes the Taxable Dividends referred to in Ruling D (except for the TC ULC Preferred Shares that will be issued to DC ULC as described in Paragraph 180(b) and the TC ULC Preferred Shares that will be redeemed by TC ULC as described in Paragraph 186(a)).

171.  [Reserved].

172.  The aggregate FMV, immediately before the DC ULC Transfer, of the Foreign Spinco XXXXXXXXXX owned by Forco 3 will be equal to or approximate the amount determined by the formula, on the assumption that Forco 3 is the participant, DC ULC is the distributing corporation and Foreign Spinco is the acquiror,

       (A × B/C) + D

 as found in subparagraph (b)(iii) of the definition of “permitted exchange” in subsection 55(1). 

For greater certainty, immediately before the DC ULC Transfer: (a) Forco 3 will own all of the issued and outstanding Foreign Spinco XXXXXXXXXX; (b) Foreign Spinco will own all of the issued and outstanding TC ULC Common Shares; and (c) TC ULC will own all of the issued and outstanding DC ULC Special Shares.

Classification of DC ULC Property

173.  Immediately before the DC ULC Transfer, the property of DC ULC will be determined on a consolidated look-through basis by including the appropriate pro rata share of the assets of any corporation and partnership over which DC ULC has the ability to exercise Significant Influence (being each member of the DC ULC Group other than DC ULC).  This look-through approach will be applied to every tier of corporation and partnership in the DC ULC Group.  The assets of DC ULC, determined on a consolidated look-through basis as described in this Paragraph 173, will be classified into the following three types of property for the purposes of the definition of “distribution” in subsection 55(1), as follows:

(a)   cash or near-cash property, comprising all of the current assets of the DC ULC Group, including cash, marketable securities (except for portfolio investments), accounts receivable, trade receivables, inventory and prepaid expenses;

(b)   business property, comprising all of the assets of the DC ULC Group, other than cash or near-cash property, any income from which would, for purposes of the Act, be income from an active business (other than a Specified Investment Business) including goodwill; and

(c)   investment property, comprising all of the assets of the DC ULC Group, other than cash or near-cash property, any income from which would, for purposes of the Act, be income from property or from a Specified Investment Business.

For greater certainty, for purposes of the determination described in this Paragraph 173 and Paragraph 174:

(d)   any tax accounts such as the balance of any non-capital losses of the DC ULC Group or the balance of any ERDTOH, NERDTOH or CDA of the DC ULC Group, if any, will not be considered property;

(e)   advances or receivables that are due within the next XXXXXXXXXX months or those with no fixed terms of repayment that the creditor can require the debtor to pay at any time (other than as described in Paragraph 173(g) below) will be considered cash or near-cash property;

(f)   DC ULC will be considered to have Significant Influence over a corporation or a partnership if it has Significant Influence over that corporation or that partnership or over any other corporation that has Significant Influence over that corporation or that partnership, or if DC ULC in combination with corporations over which it has Significant Influence have Significant Influence over that corporation or that partnership, and for greater certainty DC ULC will be considered to have Significant Influence over each of member of the DC ULC Group (other than DC ULC); and

(g)   for the purposes of determining the FMV of each type of property of DC ULC, the FMV of the shares of any corporation or the partnership interest of any partnership over which any of the above mentioned corporations or partnerships has the ability to exercise Significant Influence and of any indebtedness receivable by any such corporation or such partnership from a corporation or a partnership over which it has Significant Influence will be allocated among the three types of property described in Paragraphs 173(a), (b) and (c), by multiplying the aggregate FMV of the shares of the particular corporation or the partnership interest of the particular partnership or amount receivable from the particular corporation or the particular partnership, as the case may be, by the proportion that the net FMV of each type of property owned by the particular corporation or by the particular partnership (as determined in accordance with the principles described in Paragraphs 173 and 174) is of the aggregate net FMV of all the property owned by such corporation  or partnership (as determined in accordance with the principles described in Paragraphs 173 and 174).

174.  In determining, on a consolidated look-through basis, the net FMV of each of the three types of property of the DC ULC Group immediately before the DC ULC Transfer, the liabilities of DC ULC and any corporation or any partnership over which DC ULC exercises Significant Influence will be allocated to, and will be deducted in the calculation of the net FMV of, each type of property of DC ULC or such corporation or such partnership, as the case may be, in the following manner:

(a)   in determining the net FMV of each type of property of a corporation or of a partnership over which DC ULC exercises Significant Influence immediately before the DC ULC Transfer, the liabilities of that corporation or that partnership (other than any amount owing by such corporation or such partnership to another corporation that has Significant Influence over the debtor corporation or debtor partnership, which amount will be disregarded) will be allocated to, and deducted in the calculation of, the net FMV of each type of property of that particular corporation or partnership as follows:

(i)   current liabilities of such corporation or such partnership will be allocated to each cash or near-cash property of the corporation or partnership in the proportion that the FMV of each such property is of the aggregate FMV of all cash or near-cash property owned by such corporation or such partnership. To the extent that the total amount of current liabilities to be allocated to the cash or near-cash property exceeds the total FMV of all the cash or near-cash property, such corporation or partnership will be considered to have a negative amount of cash or near-cash property;

(ii)  following the allocation of current liabilities to cash or near-cash property as described in Paragraph 174(a)(i) provided that the net FMV of the cash or near-cash property of such corporation or such partnership is positive, any remaining net FMV of any accounts receivable, trade receivables, inventories and prepaid expenses of such corporation or such partnership will be reclassified as business property of such corporation or such partnership and excluded from the net FMV of the cash or near-cash property, to the extent that such property will be collected, sold, used or consumed in the ordinary course of business to which such property relates;

(iii) liabilities, other than current liabilities, of such corporation or of such partnership that relate to a particular property will be allocated to that particular property (and effectively to the type of property to which the particular property belongs) to the extent of its FMV.  Any excess of such liabilities over the FMV of a particular property and liabilities that pertain to a particular type of property, but not to a particular property, will then be allocated to that particular type of property.  To the extent that the total amount of liabilities that are to be allocated to a particular type of property as described in Paragraph 174(a)(iii), exceeds the total FMV of that type of property, that corporation or that partnership will be considered to have a negative amount of that type of property; and

(iv)  if any liabilities remain after the allocations described in Paragraphs 174(a)(i) and (iii) are made, such excess unallocated liabilities will then be allocated to the cash or near-cash property, investment property and business property of such corporation or of such partnership, based on the relative net FMV of each type of property prior to the allocation of such excess unallocated liabilities. However, where a corporation or a partnership is considered to have a negative amount of a type of property because of Paragraph 174(a)(i) or (iii), for the purposes of allocating those remaining liabilities, the net FMV of that type of property will be deemed to be nil resulting in none of those remaining liabilities being allocated to that type of property;

(b)   in determining, on a consolidated look-through basis, the net FMV of each type of property of DC ULC immediately before the DC ULC Transfer, DC ULC will include the appropriate pro rata share of the net FMV of each type of property of any corporation or partnership over which DC ULC exercises Significant Influence and, for greater certainty, the appropriate negative amount of such type of property of any such entity, as determined in accordance with Paragraph 174(a) above, and any liabilities of DC ULC will be allocated to, and be deducted in the calculation of, the net FMV of each type of property of DC ULC in the following manner:

(i)   current liabilities of DC ULC will be allocated to the cash or near-cash property of DC ULC in the proportion that the FMV of each such property is of the aggregate FMV of all cash or near-cash property of DC ULC. The allocation of current liabilities as described in this Paragraph 174(b)(i) will not exceed the aggregate FMV of all the cash or near-cash property of DC ULC;

(ii)  following the allocation of current liabilities to each cash or near-cash property as described in Paragraph 174(b)(i), any remaining net FMV of any accounts receivable, trade receivables, inventories and prepaid expenses of DC ULC will be reclassified as business property and excluded from the cash or near-cash property, to the extent that such property will be collected, sold or used in the ordinary course of the business to which such property relates;

(iii) liabilities of DC ULC, other than current liabilities, that relate to a particular property will be allocated to the particular property (and effectively to the type of property to which the particular property belongs) to the extent of its FMV. The liabilities that pertain to a type of property but not to a particular property (and any excess liability that pertains to a particular property but that exceeds the FMV of the particular property) will be allocated to that type of property, but not in excess of the net FMV of such type of property after the allocation of liabilities to a particular property as described in Paragraph 174(b)(iii); and

(iv)  if any liabilities remain after the allocations described in Paragraph 174(b)(i) and (iii) are made, such excess unallocated liabilities will then be allocated to the cash or near-cash property, investment property and business property of DC ULC, on the basis of the relative net FMV of each type of property prior to the allocation of such excess, but after the allocation of the liabilities described in Paragraph 174(b)(i) and (iii).

(c)   For greater certainty, for purposes of the determination described in Paragraphs 173 and 174:

(i)   the amount of any deferred income tax will not be considered a liability because such amount does not represent a legal obligation;

(ii)  income taxes and other taxes due and payable within a year will be classified as current liabilities;

(iii) current liabilities will include amounts normally classified as current liabilities, including accounts payable, bonuses payable, and the current portion of any long-term debt;

(iv)  any current pension plan liability (as determined by the method prescribed by the applicable pension legislation), current post-retirement benefit liability, and current liability insurance liabilities will be allocated to cash or near-cash property, and any non-current pension plan liability (as determined by the method prescribed by the applicable pension legislation), non-current post-retirement benefit liability, and non-current liability insurance liabilities will be allocated to business property;

(v)   any amounts collected from customers and set up as deferred revenue will be considered a liability if there is a legal obligation to repay the amount or provide further services;

(vi)  no amount will be considered to be a liability unless it represents a true legal liability which is capable of quantification; and

(vii) a contingent obligation will not be considered a liability.

175.  Based on the principles described in Paragraphs 173 and 174, it is anticipated that DC ULC will have cash or near-cash property, business property and investment property at the time of the DC ULC Transfer. Immediately before the DC ULC Transfer it is anticipated that the investment property held by the DC ULC Group will include the Cansub 2 Spin Loans (remaining after the partial repayment described in Paragraph 158.1) and the Cansub 5 Loan.

Distribution of Property to TC ULC

176.  Immediately after the determination of the types of property and the aggregate net FMV of each type of property described in Paragraphs 173 and 174 DC ULC will transfer (the DC ULC Transfer), and will be legally obligated to transfer the Additional Cash Transfer, if any, as described in Paragraph 179, a proportionate share of each type of its property to TC ULC (the Distribution Property) such that, immediately following such transfer, the Additional Cash Transfer and the liability assumption described in Paragraph 180(a), the aggregate net FMV of each type of property so transferred to TC ULC (determined in each case on the basis of the principles described in Paragraphs 173 and 174) will be equal to or approximate that proportion of the aggregate net FMV of all property of DC ULC of that type, determined immediately before such transfer that:

(a)   the aggregate FMV, immediately before the DC ULC Transfer, of all of the DC ULC Special Shares owned by TC ULC at that time

is of

(b)   the aggregate FMV, immediately before the DC ULC Transfer, of all of the issued and outstanding DC ULC New Shares at that time.

The Distribution Property will include all of DC ULC’s Spinco ULC Common Shares and Partnerco ULC Common Shares, and all or a portion of the Cansub 2 Spin Loans remaining after the partial repayment described in Paragraph 158.1 (which is currently estimated to be $XXXXXXXXXX and is referred to as the Distributed Cansub 2 Spin Loans) owned by DC ULC immediately before the DC ULC Transfer. The remaining portion of the Cansub 2 Spin Loans will be referred to as the Retained Cansub 2 Spin Loans.

The transfer of the Distributed Cansub 2 Spin Loans to TC ULC will constitute an assignment of the Distributed Cansub 2 Spin Loans by DC ULC to TC ULC such that the Distributed Cansub 2 Spin Loans will remain in existence and not be considered to be a new debt.

At the time of the DC ULC Transfer, the aggregate FMV of the Distribution Property will be approximately $XXXXXXXXXX.

177.  The expression “approximate that proportion” described in Paragraphs 176, 179 and 184  means that the discrepancy from that proportion, if any, would not exceed XXXXXXXXXX%, determined as a percentage of the aggregate net FMV of each type of property of DC ULC which TC ULC has received (or DC ULC has retained) as compared to what TC ULC would have received (or DC ULC would have retained) had it received (or retained) its appropriate pro rata share of the aggregate net FMV of that type of property of DC ULC.

178.  [Reserved].

179.  No later than XXXXXXXXXX days after the date of the DC ULC Transfer, DC ULC will transfer to TC ULC any required additional cash (the Additional Cash Transfer) necessary to ensure that the aggregate net FMV of that Additional Cash Transfer, and the cash or near-cash property of DC ULC previously transferred to TC ULC on the DC ULC Transfer, will be equal to or approximate that proportion, as described in Paragraphs 176(a) and (b), of the aggregate net FMV of all cash or near-cash property of DC ULC, determined immediately before the DC ULC Transfer and applying the principles described in Paragraphs 173 and 174.

The Additional Cash Transfer may be necessary, because it is very difficult for the DC ULC Group to have up to date daily information on precise cash balances, accounts receivables, trade payables, etc. The transfer of additional cash to TC ULC, within XXXXXXXXXX days after the DC ULC Transfer, is to ensure that DC ULC meets the definition of “distribution” and transfers the right percentage of the cash or near-cash property of DC ULC to TC ULC.

180.  As consideration for the Distribution Property, TC ULC will:

(a)   assume certain liabilities (the TC ULC Assumed Liabilities) of DC ULC, including a portion of the Newco XXXXXXXXXX Loan (the Newco XXXXXXXXXX Assumed Loan). The Principal Amount and FMV of the Newco XXXXXXXXXX Assumed Loan will be approximately $XXXXXXXXXX. The remaining portion of the Newco XXXXXXXXXX Loan (approximately $XXXXXXXXXX) will be referred to as the Newco XXXXXXXXXX Retained Loan; and

(b)   issue TC ULC Preferred Shares to DC ULC having an aggregate FMV at that time equal to the amount by which the aggregate FMV of the Distribution Property transferred to TC ULC at that time (for greater certainty including any Additional Cash Transfer) exceeds the TC ULC Assumed Liabilities, as described in Paragraph 180(a). 

181.  DC ULC will hold the TC ULC Preferred Shares as Capital Property.

182.  TC ULC will jointly elect with DC ULC, in prescribed form and within the time limits referred to in subsection 85(6), to have the rules in subsection 85(1) apply to the transfer of each Eligible Property to TC ULC as part of the DC ULC Transfer.  The Agreed Amount in each election will be an amount equal to the lesser of the amounts described in subparagraphs 85(1)(c.1)(i) and (ii), which amount will not be less than the amount permitted under paragraph 85(1)(b).

183.  The amount that will be added to the Stated Capital of the TC ULC Preferred Shares issued by TC ULC as consideration for the Distribution Property, will not exceed the aggregate cost, determined pursuant to subsection 85(1), to TC ULC of the Distribution Property acquired from DC ULC, less the TC ULC Assumed Liabilities, as described in Paragraph 180(a).

For greater certainty, the increase to the aggregate PUC of the TC ULC Preferred Shares issued to DC ULC, will not exceed the maximum amount that could be added to the aggregate PUC of such shares, having regard to subsection 85(2.1).

184.  Immediately following the DC ULC Transfer (taking into account the Additional Cash Transfer), the aggregate net FMV of each type of property retained by DC ULC (determined in each case on the basis of the principles described in Paragraphs 173 and 174) will be equal to or approximate that proportion of the aggregate net FMV of all property of DC ULC of that type, determined immediately before such transfer that:

(a)   the aggregate FMV, immediately before the DC ULC Transfer, of all the DC ULC New Common Shares owned by Forco 3 at that time,

is of

(b)   the aggregate FMV, immediately before the DC ULC Transfer, of all the issued and outstanding DC ULC New Shares at that time.

Sale of General Partnership Interests

185.  Immediately following the DC ULC Transfer, Canco 1 (which is not a member of the DC ULC Group) will sell to TC ULC GP (which is not a member of the DC ULC Group) its:

(a)   XXXXXXXXXXCanGP 2 unit in consideration for $XXXXXXXXXX USD;

(b)   XXXXXXXXXX CanLP 7 unit in consideration for $XXXXXXXXXX USD;

(c)   XXXXXXXXXX CanLP 11 unit in consideration for $XXXXXXXXXX USD;

(d)   XXXXXXXXXX CanLP 12 unit in consideration for $XXXXXXXXXX USD;

(e)   XXXXXXXXXX CanLP 13 unit in consideration for $XXXXXXXXXX USD;

(f)   XXXXXXXXXX CanLP 14 units in consideration for $XXXXXXXXXX USD;

(g)   XXXXXXXXXX CanLP 15 unit in consideration for $XXXXXXXXXX USD;

(h)   XXXXXXXXXX CanLP 18 unit in consideration for $XXXXXXXXXXUSD; and

(i)   XXXXXXXXXX CanLP 19 unit in consideration for $XXXXXXXXXXUSD.

For greater certainty, the purchase price paid by TC ULC GP in consideration for the interests in CanGP 2, CanLP 7, CanLP 11, CanLP 12, CanLP 13, CanLP 14, CanLP 15, CanLP 18 and CanLP 19, as described in this Paragraph 185, will be equal to the FMV of the interest sold. It is expected that Canco 1 will realize a nominal gain on the sale of its interests in CanGP 2, CanLP 7, CanLP 11, CanLP 12, CanLP 13, CanLP 14, CanLP 15, CanLP 18 and CanLP 19.

Share Redemptions

186.  Immediately following the DC ULC Transfer, the following transactions will occur in the following order:

(a)   TC ULC will redeem all of the TC ULC Preferred Shares owned by DC ULC (the TC ULC Redemption) for an amount equal to their aggregate TC ULC Redemption Amount. 

In satisfaction of the aggregate TC ULC Redemption Amount for such shares, TC ULC will issue a promissory note, payable to DC ULC on demand without interest, having a Principal Amount and FMV equal to the aggregate TC ULC Redemption Amount of the TC ULC Preferred Shares so redeemed (the TC ULC Redemption Note). 

DC ULC will accept the TC ULC Redemption Note in full payment of the redemption price of the TC ULC Preferred Shares, and will assume the full risk of the note being dishonoured.

TC ULC will not designate the TC ULC Dividend to be an Eligible Dividend under subsection 89(14), as all of the issued and outstanding shares of DC ULC (the dividend recipient) are owned by Forco 3, a foreign corporation, and, therefore, this designation will not be relevant.

(b)   DC ULC will redeem all of the DC ULC Special Shares owned by TC ULC (the DC ULC Redemption) for an amount equal to their aggregate DC ULC Redemption Amount. 

In satisfaction of the aggregate DC ULC Redemption Amount for such shares, DC ULC will issue a promissory note, payable to TC ULC on demand without interest, having a Principal Amount and FMV equal to the aggregate DC ULC Redemption Amount of the DC ULC Special Shares so redeemed (the DC ULC Redemption Note). 

TC ULC will accept the DC ULC Redemption Note in full payment of the redemption price of the DC ULC Special Shares, and will assume the full risk of the note being dishonoured.

DC ULC will not designate the DC ULC Dividend to be an Eligible Dividend under subsection 89(14), as all of the issued and outstanding shares of TC ULC (the dividend recipient) are owned by Foreign Spinco, a foreign corporation, and, therefore, this designation will not be relevant.

Promissory Note Set-Off

187.  Immediately following the TC ULC Redemption and the DC ULC Redemption, the Principal Amount owing by TC ULC under the TC ULC Redemption Note and the Principal Amount owing by DC ULC under the DC ULC Redemption Note will be set-off in full against each other and each such note will be marked paid in full and cancelled.

XXXXXXXXXX

188.  XXXXXXXXXX.

Amalgamation 2

189.  New Canco 1, New Canco 2 and DC ULC will amalgamate (the Amalgamation 2) under Act 2 to form New DC ULC. The Amalgamation 2 will be governed by subsection 87(1).

XXXXXXXXXX.

(a)   The authorized share capital of New DC ULC will consist of an unlimited number of common shares (the New DC ULC Common Shares).

(b)   On Amalgamation 2:

(i)   all of the property (except amounts receivable from any predecessor corporation or shares of the capital stock of any predecessor corporation) of the predecessor corporations immediately before the merger will become property of New DC ULC by virtue of the merger. For greater certainty, the Retained Cansub 2 Spin Loans will become property of New DC ULC;

(ii)  all of the liabilities (except amounts payable to any predecessor corporation) of the predecessor corporations immediately before the merger will become liabilities of New DC ULC by virtue of the merger. For greater certainty, the Newco XXXXXXXXXX Retained Loan will become a liability of New DC ULC; and

(iii) all of the shareholders (except any predecessor corporation), who owned shares of the capital stock of any predecessor corporation immediately before the merger, will receive shares of the capital stock of New DC ULC because of the merger.  

In particular, each New Canco 1 Common Share and New Canco 2 Common Share owned by Forco 3 immediately before Amalgamation 2 will be cancelled without any repayment of capital, and each DC ULC New Common Share owned by Forco 3 immediately before Amalgamation 2, will be exchanged for one New DC ULC Common Share. The aggregate FMV of the New DC ULC Common Shares issued to Forco 3 immediately after Amalgamation 2, will be equal to the aggregate FMV of the New Canco 1 Common Shares, New Canco 2 Common Shares and DC ULC New Common Shares owned by Forco 3 immediately before Amalgamation 2. 

For greater certainty, after Amalgamation 2 the rights and obligations of DC ULC under the Forco 3 - DC ULC FSA will become rights and obligations of New DC ULC and the Forco 3 - DC ULC FSA will be referred to as the Forco 3 - New DC ULC FSA.

(c)   On Amalgamation 2, DC ULC, New Canco 1 and New Canco 2 will continue as one company to form New DC ULC pursuant to the provisions of Act 2.

(d)   Pursuant to Act 2, the Stated Capital, and therefore the aggregate PUC, of the New DC ULC Common Shares issued to Forco 3 on Amalgamation 2, will be equal to the aggregate Stated Capital, and therefore the aggregate PUC, of the DC ULC New Common Shares, New Canco 1 Common Shares and New Canco 2 Common Shares immediately before Amalgamation 2.

Repayment by Forco 5 and Forco 6

190.  Forco 5 and Forco 6 will repay in cash:

(a)   all Retained Cansub 2 Spin Loans owing by Forco 5 and Forco 6 to New DC ULC; and

(b)   all Distributed Cansub 2 Spin Loans owing by Forco 5 and Forco 6 to TC ULC.

Repayment of Debt to Newco XXXXXXXXXX

191.  All amounts owing by TC ULC to Newco XXXXXXXXXX under the Newco XXXXXXXXXX Assumed Loan, as described in Paragraph 180(a), will be repaid in cash by TC ULC to Newco XXXXXXXXXX.

Repayment of Debt to Cansub 5

191.1.     Forco 13 will repay in cash the Cansub 5 Loan to Cansub 5.

Amalgamation 3

191.2.     XXXXXXXXXX.

191.3.     New DC ULC and Cansub 2 will amalgamate (the Amalgamation 3) under Act 2 to form New DC ULC II. Amalgamation 3 will be governed by subsection 87(1).

XXXXXXXXXX.

(a)   The authorized share capital of New DC ULC II will consist of an unlimited number of common shares (the New DC ULC II Common Shares).

(b)   On Amalgamation 3:

(i)   all of the property (except amounts receivable from any predecessor corporation or shares of the capital stock of any predecessor corporation) of the predecessor corporations immediately before the merger will become property of New DC ULC II by virtue of the merger;

(ii)  all of the liabilities (except amounts payable to any predecessor corporation) of the predecessor corporations immediately before the merger will become liabilities of New DC ULC II by virtue of the merger. For greater certainty, the Newco XXXXXXXXXX Retained Loan will become a liability of New DC ULC II; and

(iii) all of the shareholders (except any predecessor corporation), who owned shares of the capital stock of any predecessor corporation immediately before the merger, will receive shares of the capital stock of New DC ULC II because of the merger. 

In particular, each New DC ULC Common Share owned by Forco 3 immediately before Amalgamation 3 will be exchanged for one New DC ULC II Common Share. The aggregate FMV of the New DC ULC II Common Shares received by Forco 3 on Amalgamation 3 will be equal to the aggregate FMV of the New DC ULC Common Shares owned by Forco 3 immediately before Amalgamation 3. 

All of the New DC ULC Common Shares owned by Forco 3 immediately before Amalgamation 3 will be cancelled following Amalgamation 3.

For greater certainty, after Amalgamation 3, the rights and obligations of New DC ULC under the Forco 3 - New DC ULC FSA will become rights and obligations of New DC ULC II and the Forco 3 - New DC ULC FSA will be referred to as the Forco 3 - New DC ULC II FSA.

(c)   On Amalgamation 3, New DC ULC and Cansub 2 will continue as one company to form New DC ULC II pursuant to the provisions of Act 2.

(d)   The aggregate PUC of the New DC ULC II Common Shares issued to Forco 3 on Amalgamation 3 will be equal to the aggregate PUC of the New DC ULC Common Shares immediately before Amalgamation 3.

Repayment of Newco XXXXXXXXXX Retained Loan

191.4.     New DC ULC II will repay all or a portion of the Newco XXXXXXXXXX Retained Loan by issuing to Newco XXXXXXXXXX a Canadian-dollar denominated, demand, non-interest-bearing promissory note having a Principal Amount and FMV equal to the amount of the repayment (the New DC ULC II Repayment Note). 

Newco XXXXXXXXXX will accept the receipt of the New DC ULC II Repayment Note as payment in full of the amount of the repayment. The New DC ULC II Repayment Note will not be convertible into any other property. 

191.5      Newco XXXXXXXXXX will contribute the New DC ULC II Repayment Note to Forco 3 by way of a capital contribution. No XXXXXXXXXX in Forco 3 will be issued in consideration for the contribution.

191.6      Pursuant to the terms of the Forco 3 - New DC ULC II FSA Forco 3 will subscribe for New DC ULC II Common Shares having an aggregate subscription amount (and aggregate FMV) equal to the Principal Amount and FMV of the New DC ULC II Repayment Note.  

Forco 3 will pay the subscription amount using the New DC ULC II Repayment Note which New DC ULC II will cancel as payment in full of the subscription amount.

191.7 New DC ULC II will reduce the aggregate PUC of its shares owned by Forco 3 in an amount not less than the Principal Amount of the New DC ULC II Repayment Note cancelled in Paragraph 191.6 (the New DC ULC II PUC Reduction).

New DC ULC II will pay the amount of the New DC ULC II PUC Reduction in full by transferring cash to Forco 3.

The amount of the New DC ULC II PUC Reduction will not exceed the aggregate ACB, determined immediately before the New DC ULC II PUC Reduction, to Forco 3 of the New DC ULC II Common Shares owned by it.

TC ULC Reduction of Share Capital

191.71 CanLP 11 will lend approximately $XXXXXXXXXX to CanLP 5. The loan will be evidenced by a Canadian dollar, non-interest bearing, demand promissory note having a Principal Amount and FMV equal to the amount of the loan (approximately $XXXXXXXXXX) which will be issued by CanLP 5 to CanLP 11.

191.72 CanLP 5 will distribute approximately $XXXXXXXXXX pro rata among its partners, Partnerco ULC and Spinco ULC.

     Consequently, the aggregate ACB of the CanLP 5 units owned by the CanLP 5 partners will be reduced by an amount equal to the amount received by each of them on the distribution, as described in this Paragraph 191.72.

191.73 Spinco ULC will reduce the aggregate PUC of its shares in an amount equal to the amount received from CanLP 5 (the Spinco ULC PUC Reduction), as described in  Paragraph 191.72.
Spinco ULC will pay the amount of the Spinco ULC PUC Reduction in full by transferring cash to TC ULC.

The amount of the Spinco ULC PUC Reduction will not exceed the aggregate ACB, determined immediately before the Spinco ULC PUC Reduction, to TC ULC of the Spinco ULC Common Shares owned by it.

191.8      TC ULC will reduce the aggregate PUC of its shares in an amount equal to the amount received from Spinco ULC on the Spinco ULC PUC Reduction (the TC ULC PUC Reduction), as described in Paragraph 191.73.

TC ULC will pay the amount of the TC ULC PUC Reduction in full by transferring cash to Foreign Spinco. The cash will remain with the Foreign Pubco Spinco Group.

The amount of the TC ULC PUC Reduction will not exceed the aggregate ACB, determined immediately before the TC ULC PUC Reduction, to Foreign Spinco of the TC ULC Common Shares owned by it.

Spin-Out to Foreign Pubco Shareholders

192.  After the Proposed Transactions described in Paragraphs 121 to 191.8 are completed the following transactions will be effected to complete the distribution of Foreign Pubco Spinco to the Foreign Pubco shareholders:

(a)   Forco 3 will distribute all of its Foreign Spinco XXXXXXXXXX to Newco XXXXXXXXXX by way of dividend-in-kind and Newco XXXXXXXXXX will distribute all of its Foreign Spinco XXXXXXXXXX to Forco 1 by way of dividend-in-kind;

(a.1) [Reserved];

(a.2)      [Reserved];

(b)   [Reserved];

(c)   XXXXXXXXXX;

(c.1)      Forco 1 will distribute all of its Foreign Spinco XXXXXXXXXX to Foreign Pubco by way of dividend-in-kind;

(d)   Foreign Pubco will contribute all of its Foreign Spinco XXXXXXXXXX and any other relevant companies resulting from the packaging of the Foreign Spin Business (including, indirectly, Forco 5 and Forco 6) to Foreign Pubco Spinco in consideration for common shares of Foreign Pubco Spinco having an aggregate FMV equal to the aggregate FMV at that time of the contribution made to Foreign Pubco Spinco, as described in this Paragraph 192(d);

(e)   [Reserved];

(f)   [Reserved];

(g)   XXXXXXXXXX;

(h)   [Reserved]; and

(i)   XXXXXXXXXX, Foreign Pubco will distribute all of its issued and outstanding Foreign Pubco Spinco common shares pro rata to its shareholders as a dividend-in-kind.

VI.   ADDITIONAL INFORMATION

193.  The Proposed Transactions will occur in the order described above unless otherwise indicated, with the exception of the filing of any applicable election forms, which will be filed by the applicable due date following the completion of the Proposed Transactions.

193.1 XXXXXXXXXX

194.  No property of any kind whatever has or will become property of DC ULC (or its predecessor corporation CanParent) or of a corporation controlled by DC ULC (or CanParent), and no liabilities have been or will be incurred by DC ULC (or CanParent) or a corporation controlled by DC ULC (or CanParent), in contemplation of and before the DC ULC Transfer, otherwise than in a transaction described in subparagraphs 55(3.1)(a)(i) to (iv).

195.  As part of a Series of Transactions or Events that includes the Taxable Dividends described in Ruling D, there has not been and will not be:

(a)   a disposition of property in the circumstances described in subparagraph 55(3.1)(b)(i);

(b)   an acquisition of control in the circumstances described in subparagraph 55(3.1)(b)(ii); and

(c)   an acquisition of shares in the capital stock of DC ULC in the circumstances described in subparagraph 55(3.1)(b)(iii),

that has not been described herein.

196.  None of the shares of the capital stock of DC ULC or TC ULC has been or will be, at any time prior to the completion of the Proposed Transactions:

(a)   the subject of any undertaking that is referred to in subsection 112(2.2) as a “guarantee agreement”;

(a.1) the subject of any secured undertaking referred to in paragraph 112(2.4)(a), or issued for consideration that is or includes any obligation of the type referred to in subparagraph 112(2.4)(b)(i) or any right of the type described in subparagraph 112(2.4)(b)(ii);

(b)   a share that is issued or acquired as part of a transaction, event or Series of Transactions or Events of the type described in subsection 112(2.5); or

(c)   the subject of a “dividend rental arrangement” referred to in subsection 112(2.3), as that term is defined in subsection 248(1).

197.  Each of DC ULC and TC ULC is and will be a Specified Financial Institution.  Neither of these corporations is a Financial Intermediary Corporation nor a Restricted Financial Institution. 

198.  The acquisition by DC ULC of the TC ULC Preferred Shares will occur outside the ordinary course of DC ULC’s businesses.

199.  The acquisition by TC ULC of the DC ULC Special Shares will occur outside the ordinary course of TC ULC’s business.

200.  The DC ULC Special Shares and the TC ULC Preferred Shares will not be Taxable RFI Shares; however, they will be Term Preferred Shares, Taxable Preferred Shares and Short-Term Preferred Shares.  

201.  Each of DC ULC and TC ULC will have the financial capacity to honour, upon presentation for payment, the amount payable under the promissory note issued or assumed by it as part of the Proposed Transactions.

202.  At no time, during the course of a Series of Transactions or Events that includes the Taxable Dividends described in Ruling D, will:

(a)   XXXXXXXXXX% or more of the FMV of any one of the Foreign Spinco XXXXXXXXXX be derived, directly or indirectly, from one or more of the shares of DC ULC or TC ULC; or

(b)   XXXXXXXXXX% or more of the FMV of any one of the Foreign Pubco Spinco common shares be derived, directly or indirectly, from one or more of the shares of TC ULC.

For greater certainty, the Proposed Transactions constitute a Series of Transactions or Events that includes the Taxable Dividends described in Ruling D.

202.1      [Reserved].

202.2      Foreign Pubco, Forco 1, Newco XXXXXXXXXX, Forco 2 (XXXXXXXXXX), Forco 3, DC ULC, New DC ULC (to be formed on Amalgamation 2) and New DC ULC II (to be formed on Amalgamation 3) are, and will remain to be, Related Persons during the course of any Series of Transactions or Events that includes the Taxable Dividends described in Ruling D.

202.3      At the time of the DC ULC Redemption TC ULC will have a Substantial Interest in DC ULC.

202.4      At the time of the TC ULC Redemption, DC ULC will have a Substantial Interest in TC ULC.

202.5      The Proposed Transactions will not result in DC ULC or a person Related to DC ULC described herein being unable to pay any existing tax liabilities.

203.  No disposition of shares or XXXXXXXXXX described in the Subject Transactions or Proposed Transactions constitutes a disposition of Taxable Canadian Property.

204.  TC ULC will not have an ERDTOH or NERDTOH balance at the end of the Taxation Year in which the TC ULC Dividend is deemed to have been paid.

205.  DC ULC will not have an ERDTOH or NERDTOH balance at the end of the Taxation Year in which the DC ULC Dividend is deemed to have been paid.

206.  Foreign Pubco management is not aware of an anticipated or expected acquisition of control or takeover of Foreign Pubco Spinco, Foreign Pubco, Foreign Spinco, Forco 1, Forco 2 (before the Merger), Newco XXXXXXXXXX (after the Merger), Forco 3, DC ULC, New DC ULC (after Amalgamation 2), New DC ULC II (after Amalgamation 3), TC ULC or TC ULC GP.

207.  Pursuant to the governing partnership agreements, the general partner of each limited partnership in which DC ULC has a direct or indirect XXXXXXXXXX has the right (subject to limited restrictions relating to disposition of assets and using partnership property outside the course of the partnership business) to manage all activities of the limited partnership and to deal with all limited partnership assets. This right includes the right to exercise voting rights attached to shares of corporations owned by the limited partnership.

208.  Pursuant to the governing partnership agreements, the partners of each general partnership in which DC ULC has a direct or indirect XXXXXXXXXX appointed a managing partner. The managing partner cannot be removed except for cause (i.e., a breach of obligations) by a special resolution (i.e., XXXXXXXXXX% of the total votes). The managing partner of each such general partnership has the right (subject to limited restrictions relating to disposition of assets and using partnership property outside the course of the partnership business) to manage all activities of the general partnership and to deal with all general partnership assets. This right includes the right to exercise voting rights attached to shares of corporations owned by the general partnership.

209.  At the time of the Spin-Out:

(a)   Foreign Pubco and Foreign Pubco Spinco will be corporations resident in Country 1 and will not have ever been resident in Country 6; and

(b)   the Foreign Pubco common shares will be widely held and actively traded on the Securities Exchange, which is a Designated Stock Exchange in Country 1, and the Foreign Pubco Spinco common shares will also be listed on the Securities Exchange.

210.  XXXXXXXXXX.

211.  Foreign Pubco will comply with the requirements in paragraph 86.1(2)(e).

211.1      In the absence of subsection 15(2.11), subsection 15(2) could apply to any of the Cansub 2 Loans or the Cansub 5 Loan.

211.2 The DC ULC Common Shares will not constitute Taxable Canadian Property.  Therefore, in respect of the Forco 3 Exchange 1, Forco 3 will not: (a) apply for a clearance certificate under section 116; or (b) file a Canadian corporate income tax return to report the disposition of those shares.

211.3 The DC ULC Special Shares and the DC ULC New Common Shares will not constitute Taxable Canadian Property.  Consequently, in respect of the disposition, by Forco 3, of its DC ULC Special Shares to TC ULC on the Three-Party Share Exchange, Forco 3 will not: (a) apply for a clearance certificate under section 116; or (b) file a Canadian corporate income tax return to report the disposition of those DC ULC Special Shares.

VII.  PURPOSE OF COMPLETED TRANSACTIONS AND PROPOSED TRANSACTIONS

212.  XXXXXXXXXX

212.1 XXXXXXXXXX

212.2 XXXXXXXXXX

212.3      XXXXXXXXXX

213.  XXXXXXXXXX

214.  XXXXXXXXXX

215.  XXXXXXXXXX

216.  XXXXXXXXXX

217.  XXXXXXXXXX

217.1 XXXXXXXXXX

217.2      XXXXXXXXXX

217.3 XXXXXXXXXX

217.4      XXXXXXXXXX

217.5 XXXXXXXXXX

217.6 XXXXXXXXXX

217.7 XXXXXXXXXX

217.8      XXXXXXXXXX

217.9 XXXXXXXXXX

218.  XXXXXXXXXX

219.  [Reserved].

219.1 [Reserved].

220.  [Reserved].

221.  [Reserved].

222.  XXXXXXXXXX

223.  XXXXXXXXXX

223.1.     [Reserved].

224.  [Reserved].

225.  [Reserved].

226.  XXXXXXXXXX

227.  XXXXXXXXXX

228.  XXXXXXXXXX

229.  XXXXXXXXXX

230.  XXXXXXXXXX

231.  XXXXXXXXXX

232.  [Reserved].

233.  [Reserved].

234.  XXXXXXXXXX

235.  [Reserved].

236.  [Reserved].

237.  XXXXXXXXXX

238.  XXXXXXXXXX

239.  XXXXXXXXXX

240.  XXXXXXXXXX

241.  XXXXXXXXXX

242.  XXXXXXXXXX

243.  XXXXXXXXXX

243.1 XXXXXXXXXX

244.  XXXXXXXXXX

VIII. RULINGS

Provided that the preceding statements constitute a complete and accurate disclosure of all of the relevant facts, proposed transactions, Additional Information and the purposes of the Subject Transactions and the Proposed Transactions, and provided that the Proposed Transactions are completed in the manner described above, our Rulings are set forth below:

A.    On the exchange of the DC ULC Common Shares by Forco 3 on the Forco 3 Exchange 1, as described in Paragraph 161, the provisions of subsection 86(1) will apply, and the provisions of subsection 86(2) and (2.1) will not apply, to the disposition, by Forco 3, of the DC ULC Common Shares for the DC ULC New Shares.

B.    As a result of the Three-Party Share Exchange:

(a)   the provisions of subparagraph 212.1(1.1)(a)(ii) will not apply to deem a dividend to have been paid by TC ULC, or to have been received by Forco 3, on the Three-Party Share Exchange;

(b)   the provisions of paragraph 212.1(1.1)(b) will not apply to reduce the aggregate PUC of the TC ULC Common Shares that TC ULC issues to Foreign Spinco, as described in Paragraph 168(a); and

(c)   the aggregate cost to TC ULC of the DC ULC Special Shares that TC ULC acquires from Forco 3 on the Three-Party Share Exchange will be equal to their aggregate FMV at the time of their acquisition.  

C.    Subject to the application of subsection 69(11), the provisions of subsection 85(1) will apply to the DC ULC Transfer such that the Agreed Amount in respect of each transfer of each Eligible Property will be deemed to be the transferor’s Proceeds of Disposition and the transferee’s cost thereof by virtue of paragraph 85(1)(a).

For greater certainty, the provisions of paragraph 85(1)(e.2) will not apply to the DC ULC Transfer.

D.    Subsection 84(3) will apply to:

(a)   the TC ULC Redemption, to deem TC ULC to have paid, and DC ULC to have received; and

(b)   the DC ULC Redemption, to deem DC ULC to have paid, and TC ULC to have received,

     a dividend that is a Taxable Dividend, on the TC ULC Preferred Shares and the DC ULC Special Shares, respectively, equal to the amount, if any, by which the aggregate amount paid upon such redemption exceeds the aggregate PUC in respect of such shares immediately before such redemption and such dividend:

(c)   will be included, pursuant to subsection 82(1) and paragraph 12(1)(j), in computing the income of the recipient corporation;

(d)   will be deductible, pursuant to subsection 112(1), by the recipient corporation;

(e)   will not be a dividend to which any of subsections 112(2.1), (2.2), (2.3) and (2.4) apply;

(f)   will be excluded, pursuant to paragraph (j) of the definition of Proceeds of Disposition, in determining the Proceeds of Disposition to the recipient corporation of the shares which are redeemed;

(g)   will not be subject to tax under Part IV, except as provided in paragraph 186(1)(b);

(h)   will not be subject to tax under Part IV.1 or Part VI.1; and

(i)   will, by virtue of subsection 112(3), reduce any loss that would otherwise be determined for the particular recipient corporation as a result of the TC ULC Redemption or the DC ULC Redemption, as the case may be. 

E.    By virtue of the provisions of paragraph 55(3)(b), subsection 55(2) will not apply to the Taxable Dividends referred to in Ruling D, provided that:

(a)   XXXXXXXXXX% or more of the FMV of any one of the Foreign Spinco XXXXXXXXXX, is not, at any time during the course of a Series of Transactions or Events that includes the Taxable Dividends described in Ruling D, derived, directly or indirectly, from one or more of the shares of TC ULC or DC ULC;

(b)   XXXXXXXXXX% or more of the FMV of any one of the Foreign Pubco Spinco common shares, is not, at any time during the course of a Series of Transactions or Events that includes the Taxable Dividends described in Ruling D, derived, directly or indirectly, from one or more of the shares of TC ULC; or

(c)   as part of a Series of Transactions or Events that includes the Taxable Dividends referred to in Ruling D, there is not:

(i)   an acquisition of property in the circumstances described in paragraph 55(3.1)(a);

(ii)  a disposition of property in the circumstances described in subparagraph 55(3.1)(b)(i);

(iii) an acquisition of control in the circumstances described in subparagraph 55(3.1)(b)(ii); or

(iv)  an acquisition of shares in the capital stock of DC ULC in the circumstances described in subparagraph 55(3.1)(b)(iii),

that has not been described herein and, for greater certainty, subsection 55(3.1) will not apply to deny the exemption under paragraph 55(3)(b).

F.    The set-off and cancellation of the TC ULC Redemption Note owned by DC ULC and the DC ULC Redemption Note owned by TC ULC, as described in Paragraph 187, will not give rise to a Forgiven Amount, and neither DC ULC nor TC ULC will realize any gain or incur any loss therefrom.

G.    Provided that:

(a)   all of the conditions of paragraph 86.1(2)(e) are met by Foreign Pubco; and

(b)   all of the conditions of paragraph 86.1(2)(f) are met by a particular shareholder of Foreign Pubco receiving the Foreign Pubco Spinco common shares, as described in Paragraph 192(i),

pursuant to subsection 86.1(2), the Spin-Out will be an Eligible Distribution for the particular shareholder of Foreign Pubco for the purposes of section 86.1.

H.    The provisions of subsections 15(1), 56(2), 69(4) and 246(1) will not, in and of themselves, be applied, as a result of any of the Proposed Transactions.

I.    The provisions of subsection 245(2) will not be applied, as a result of the Proposed Transactions, in and of themselves, to redetermine the tax consequences confirmed in the Rulings.

The Rulings are given subject to the limitations and qualifications set out in Information Circular 70-6R9 issued by the CRA on April 23, 2019, and are binding on the CRA provided that the Proposed Transactions are completed on or before XXXXXXXXXX.

The Rulings are based on the Act in its present form and do not take into account any proposed amendments to the Act which, if enacted, could have an effect on the Rulings provided herein.

COMMENTS

Unless otherwise confirmed, nothing in the Rulings should be construed as implying that the CRA has confirmed, reviewed, made any determination, or accepted any method for the determination in respect of:

(a)   the Stated Capital or PUC of any share, or the ACB or FMV of any property, referred to herein;

(b)   any other tax account of any corporation referred to herein;

(c)   the characterization of any property described herein to the holder thereof; or

(d)   any other tax consequence relating to the facts, Proposed Transactions or any transaction or event taking place either prior to the Proposed Transactions or subsequent to the Proposed Transactions, whether described in this letter or not, other than those specifically described in the Rulings, including whether any of the Proposed Transactions would also be included in a Series of Transactions or Events that includes other transactions or events that are not described in this letter. 

In particular, we make no comment:

(i)   in respect of any tax consequences relating to:

(A)   the Forco 2 Loan and the Forco 3-DC ULC FSA (in the case of CanParent, the Forco 2 Loan and the Forco 3-CanParent FSA), as to whether they, in each case, collectively constitute an equity investment made by Forco 2 in DC ULC (or made by Forco 2 in CanParent) and not a debt instrument, as described in Paragraphs 16-19; 

(B)   the accrued interest, paid by CanParent to Forco 2, owing on the Forco 2 Loan, as described in Paragraphs 120.8 to 120.10; or

(C)   the repayment of the Newco XXXXXXXXXX Retained Loan, as described in Paragraphs 191.4 to 191.7, or the TC ULC reduction of share capital, as described in Paragraphs 191.71 to 191.8; or 

(ii)  as to whether any of the properties described in this letter including the DC ULC Common Shares, the DC ULC New Common Shares, or the DC ULC Special Shares, would or would not constitute Taxable Canadian Property.

 

Yours truly,

 

XXXXXXXXXX
Section Manager
for Division Director
Reorganizations Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch

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