2022-0941371R3 Post-mortem tax planning

Principal Issues: 1) Whether subsection 84(2) applies to the proposed post-mortem pipeline transactions; 2) Whether dividends paid on the redemption of taxable preferred shares are subject to Part VI.1 tax.

Position: 1) No; 2) No.

Reasons: 1) In accordance with the Act and consistent with CRA's published positions; 2) the dividends are excluded dividends pursuant to subsection 191(4).

Author: XXXXXXXXXX
Section: 84(2), 191(4), 245

XXXXXXXXXX                                                                   2022-094137

XXXXXXXXXX, 2022

Dear XXXXXXXXXX:

Subject: Advance Income Tax Ruling
              XXXXXXXXXX

This is in reply to your letter dated XXXXXXXXXX, in which you requested an advance income tax ruling on behalf of the above-noted Taxpayers.

This letter is based solely on the facts, proposed transactions, purposes of the proposed transactions and the additional information described below. Any documentation submitted in respect of your request does not form part of the facts, proposed transactions or additional information unless specifically reproduced therein and any references thereto are provided solely for the convenience of the reader.

We understand that, to the best of your knowledge and that of the Taxpayers, none of the proposed transactions and/or issues involved in this ruling are the same as, or substantially similar to, transactions and/or issues that are:

a. in a previously filed tax return of the Taxpayers or person related to the Taxpayers;

b. being considered by the CRA in connection with a previously filed tax return of the Taxpayers or a person related to the Taxpayers;

c. under objection by the Taxpayers or a person related to the Taxpayers;

d. before the courts or, if a judgment has been issued, the time limit for appeal to a higher court has expired; or

e. the subject of an advance income tax ruling previously issued by the Income Tax Rulings Directorate of the CRA in connection with the Taxpayers or a person related to the Taxpayers.

The tax account numbers, Tax Services Offices and the Tax Centres and addresses of the Taxpayers involved are as follows:

XXXXXXXXXX

Unless otherwise stated:

a. Each references herein to a part, section, subsection, paragraph or subparagraph is a reference to the relevant provision of the Income Tax Act, R.S.C. 1985 c. 1 (5th Supp.)(the “Act”), as amended to the date of this letter;

b. All terms and conditions used in this letter that are defined in the Act have the meaning given in such definition;

c. All references to monetary amounts are in Canadian dollars; and

d. The singular should be read as plural and vice versa where the circumstances so require.

DEFINITIONS

The following abbreviations, terms and expressions have the meanings specified below:

“ACB” means “adjusted cost base” as that term is defined in section 54;

“Act” means the Income Tax Act, R.S.C. 1985, c. 1 (5th Supp.), as amended to the date of this letter;

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

“Amalco” means a corporation to be formed by way of an amalgamation of Holdco and Newco as described in Paragraph 45;

“arm’s length” has the meaning assigned by subsection 251(1);

“Beneficiaries” means Child 1, Child 2 and Spouse;

“Business” has the meaning ascribed thereto in Paragraph 1;

“capital dividend” has the meaning assigned by subsection 83(2);

“capital gain” has the meaning assigned by paragraph 39(1)(a);

“capital property” has the meaning assigned by section 54;

“CBCA” means the Canada Business Corporations Act, as amended to the date of this letter;

“CCPC” means “Canadian-controlled private corporation” as defined in subsection 125(7);

“CDA” means “capital dividend account” as defined in subsection 89(1);

“Child 1” means XXXXXXXXXX, a child of the Deceased;

“Child 2” means XXXXXXXXXX, a child of the Deceased;

“Childco” means XXXXXXXXXX, a corporation incorporated under the CBCA;

“Childco Non-voting Common Shares” means the Non-voting Common Shares in the capital stock of Childco which have the attributes described in Schedule “A” hereto;

“Childco Preference Shares” means the Preference Shares in the capital stock of Childco which have the attributes described in Schedule “A” hereto;

“Childco Voting Common Shares” means the Voting Common Shares in the capital stock of Childco which have the attributes described in Schedule “A” hereto;

“Completed Transactions” means the transactions described in Paragraph 24;

“CRA” means the Canada Revenue Agency;

“Deceased” means the late XXXXXXXXXX;

“Deceased Childco Shares” has the meaning ascribed thereto in Paragraph 12;

“Deceased Holdco Shares” has the meaning ascribed thereto in Paragraph 11;

“ERDTOH” means “eligible refundable dividend tax on hand” as that term is defined in subsection 129(4);

“eligible dividend” has the meaning assigned by subsection 89(1);

“Estate” means the estate of the Deceased which is governed by the Deceased’s Wills;

“Executors” means Child 1 and XXXXXXXXXX, who are appointed as executors of the Estate pursuant to the Wills;

“FMV” means “fair market value,” which refers to the amount, expressed in money terms, that is the highest price available in an open and unrestricted market between informed and prudent parties dealing at arm’s length and under no compulsion to act;

“GRE” means a “graduated rate estate” of an individual as defined in subsection 248(1);

“GRIP” means “general rate income pool” as defined in subsection 89(1);

“Holdco” means XXXXXXXXXX, a corporation incorporated under the CBCA;

“Holdco Common Shares” means the Holdco Non-voting Common Shares and Holdco Voting Common Shares;

“Holdco Debt” means a non-interest bearing obligation payable on demand owing from Holdco to the Deceased at the time of his death (and thereafter owing from Holdco to the Estate), in the amount owing of approximately $XXXXXXXXXX as at the date of the Deceased’s death and at the date of this letter $XXXXXXXXXX;

“Holdco Non-voting Common Shares” means the Non-voting Common Shares in the capital stock of Holdco which have the attributes described in Schedule “A” hereto;

“Holdco Voting Common Shares” means the Voting Common Shares in the capital stock of Holdco which have the attributes described in Schedule “A” hereto;

“Holdco Shares” means collectively the shares in the capital stock of Holdco;

“Holdco X Redemption Value” has the meaning ascribed thereto in Paragraph 35;

“Legacies” has the meaning ascribed thereto in Paragraph 23;

“NERDTOH” means “non-eligible refundable dividend tax on hand” as defined in subsection 129(4);

“Newco” means a corporation to be incorporated under the CBCA as described in the Proposed Transactions;

“Newco Note” means a non-interest bearing note, payable on demand, to be issued by Newco to the Estate as described in Paragraph 43;

“Opco” means XXXXXXXXXX, a corporation incorporated under the CBCA;

“Opco CDA Increase Value” has the meaning ascribed thereto in Paragraph 36;

“Opco Class A Preference Shares” means the Class A Preference Shares in the capital stock of Opco which have the attributes described in Schedule “A” hereto;

“Opco Common Shares” means the Common Shares in the capital stock of Opco which have the attributes described in Schedule “A” hereto;

“Opco Deceased Debt” means a non-interest bearing obligation payable on demand owing from Opco to the Deceased at the time of his death (and thereafter owing from Opco to the Estate), with the amount owing of approximately $XXXXXXXXXX as at the date of the Deceased’s death and $XXXXXXXXXX at the date of this letter;

“Opco Holdco Debt” means a non-interest bearing obligation payable on demand owing from Opco to Holdco, with the amount owing of approximately $XXXXXXXXXX as at the date of the Deceased’s death and at the date of this letter $XXXXXXXXXX;

“Opco Note” means a non-interest bearing note, payable on demand by Opco to Holdco as described in Paragraph 37;

“Opco X Redemption Value” has the meaning ascribed thereto in Paragraph 33;

“Paragraph” means a numbered paragraph in this letter;

“principal amount of the Newco Note” means the amount owing under the terms of the Newco Note at the date of its issue, as described in Paragraph 43;

“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 Paragraphs 25 to 46;

“PUC” means “paid-up capital” as defined in subsection 89(1);

“related” means, in relation to a particular person, another person who is related to the particular person by virtue of subsection 251(2);

“resident in Canada” means resident in Canada for purposes of the Act;

“short-term preferred shares” has the meaning assigned by subsection 248(1);

“specified amount” means the specified amount in respect of a share for purposes of subsection 191(4);

“Spouse” means XXXXXXXXXX, the spouse of the Deceased at the time of his death;

“taxable Canadian corporation” has the meaning assigned by subsection 89(1);

“taxable preferred shares” has the meaning assigned by subsection 248(1);

“taxation year” has the meaning assigned by subsection 249(1);

“V-Day basis” has the meaning determined under paragraph 84.1(2)(a.1) for the purposes of element “B” in paragraph 84.1(1)(a); and

“Wills” means the last will and testament with respect to public assets and the last will and testament with respect to private assets, both executed by the Deceased on XXXXXXXXXX.

FACTS

1. Opco is a CCPC and a taxable Canadian corporation with a taxation year end of XXXXXXXXXX. Opco carries on an XXXXXXXXXX (the “Business”).

2. Opco is authorized to issue an unlimited number of shares of various classes, all of which are described on Schedule “A” hereto.

3. Holdco is a CCPC and a taxable Canadian corporation with a taxation year end of XXXXXXXXXX. Holdco’s only assets consist of shares of Opco, the Opco Holdco Debt and cash.

4. Holdco is authorized to issue an unlimited number of shares of various classes, all of which are described on Schedule “A” hereto.

5. Childco is a CCPC and a taxable Canadian corporation with a taxation year end of XXXXXXXXXX.

6. Childco is authorized to issue an unlimited number of shares of various classes, all of which are described on Schedule “A” hereto.

7. The Deceased passed away on XXXXXXXXXX. Immediately prior to death, the Deceased was resident in the Province of XXXXXXXXXX. The Deceased died testate.

8. Immediately before the Deceased’s death, the Deceased owned all of the issued and outstanding shares in the capital stock of Holdco, being XXXXXXXXXX Non-Voting Common Shares and XXXXXXXXXX Voting Common Share. The FMV, ACB and PUC of those shares immediately before the Deceased’s death are set forth below:

Number & Class of Shares of Holdco	FMV	ACB	PUC
XXXXX Holdco Non-voting Common Shares	XXXXX	XXXXX	XXXXX
XXXXX Holdco Voting Common Share	XXXXX	XXXXX	XXXXX

9. Immediately before the Deceased’s death, there were XXXXXXXXXX Childco Non-voting Common Shares, XXXXXXXXXX Childco Voting Common Share and XXXXXXXXXX Childco Preference Shares issued and outstanding. The Childco Non-voting Common Shares and Childco Voting Common Shares are owned XXXXXXXXXX by Child 1 and Child 2, and the Deceased owned XXXXXXXXXX Childco Preference Shares immediately before death. The Childco Preference Shares have PUC, ACB and FMV of $XXXXXXXXXX per share (equal to the redemption amount per Childco Preference Share) and carry XXXXXXXXXX vote per share.

10. Immediately before the Deceased’s death, there were XXXXXXXXXX Opco Common Shares and XXXXXXXXXX Opco Class A Preference Shares issued and outstanding, which were owned, and which had an ACB, FMV and PUC, as set forth below:

Shareholder	Number & Class of Shares of Opco	FMV	ACB	PUC
Holdco	XXXXX Opco Class A Preference Shares	XXXXX	XXXXX	XXXXX
Holdco	XXXXX Opco Common Shares	XXXXX	XXXXX	XXXXX
Childco	XXXXX Opco Common Shares	XXXXX	XXXXX	XXXXX

11. The Holdco Non-voting Common Shares and Holdco Voting Common Shares owned by the Deceased (collectively, the “Deceased Holdco Shares”) were held by the Deceased as capital property. The Holdco Voting Common Shares gave the Deceased voting (de jure) control of Holdco. There are no shareholder agreements or any other agreements in respect of the Deceased Holdco Shares.

12. The Childco Preference Shares owned by the Deceased (the “Deceased Childco Shares”) were held by the Deceased as capital property. The Childco Preference Shares gave the Deceased voting (de jure) control of Childco.

13. Immediately before his death the Deceased was deemed, pursuant to subsection 70(5), to have disposed of all of the Deceased Holdco Shares and Deceased Childco Shares and the Estate was deemed to have acquired such shares at their FMV, as set forth below:

Number and class of shares owned by the Deceased	FMV immediately before the Deceased’s death
XXXXX Holdco Non-voting Common Shares	XXXXX
XXXXX Holdco Voting Common Share	XXXXX
Total (Holdco Shares)	XXXXX
XXXXX Childco Preference Shares	XXXXX

14. In the Deceased’s XXXXXXXXXX final T1 income tax return filed on XXXXXXXXXX, capital gains were reported in respect of the deemed disposition of the Deceased Holdco Common Shares and Deceased Childco Preference Shares as follows:

a. $XXXXXXXXXX capital gain for all of the issued and outstanding Holdco Common Shares; and

b. $XXXXXXXXXX capital gain for all of the issued and outstanding Childco Preference Shares.

15. The Executors are resident in Canada and the Estate is resident in Canada. The Estate will be designated as a GRE when the executors file the T3 Trust Income Tax and Information Return for the Estate’s first taxation year (which will end no later than XXXXXXXXXX).

16. The residual beneficiaries of the Estate are Child 1, as to XXXXXXXXXX percent (XXXXXXXXXX%) of the residue, Child 2, as to XXXXXXXXXX percent (XXXXXXXXXX%) of the residue, and Spouse, as to XXXXXXXXXX percent (XXXXXXXXXX%) of the residue. Spouse is not related to either Child 1 or Child 2. Each of the residual beneficiaries is resident in Canada.

17. The Executors are the only directors of each of Opco, Holdco and Childco.

18. As at the date of the Deceased’s death, Opco’s significant assets consisted of cash, representing less than 5% of the total FMV of Opco’s assets, investments, and other assets.

19. As at the date of the Deceased’s death, Opco’s liabilities included the Opco Deceased Debt.

20. As at the date of the Deceased’s death, Holdco’s liabilities included the Holdco Deceased Debt.

21. Opco had the following tax attributes as at XXXXXXXXXX:

ERDTOH of $XXXXXXXXXX
NERDTOH of $XXXXXXXXXX
GRIP of $XXXXXXXXXX
CDA of $XXXXXXXXXX

22. Holdco had the following tax attributes as at XXXXXXXXXX:

ERDTOH of $XXXXXXXXXX
NERDTOH of $XXXXXXXXXX
GRIP of $XXXXXXXXXX
CDA of $XXXXXXXXXX

23. Under the terms of the Wills, the beneficiaries of the Estate, other than Child 1, Child 2 and Spouse, are entitled to receive, in the aggregate, a total fixed amount of $XXXXXXXXXX (the “Legacies”). Each of the beneficiaries entitled to receive a Legacy is resident in Canada.

Completed Transactions

24. After the death of the Deceased and prior to the Proposed Transactions:

a. the Opco Deceased Debt was fully repaid to the Estate;

b. $XXXXXXXXXX of the Opco Holdco Debt was repaid to Holdco; and

c. $XXXXXXXXXX of the Holdco Debt was repaid to the Estate.

The amounts repaid to the Estate were used by the Estate to fund a large portion of the Deceased’s terminal tax liability. The sale of certain securities owned by Opco to fund these payments were within the investment guidelines under which Opco carries on its Business.

PROPOSED TRANSACTIONS

The Proposed Transactions will occur in the order presented with the exception of the filing of elections forms which will be filed within the applicable due dates following the completion of the Proposed Transactions.

Opco - Articles of Amendment

25. Opco will amend its articles of incorporation to provide that any reduction in stated capital of the Opco Class A Preference Shares will reduce the redemption amount of such shares by an equivalent amount per share.

Stated Capital Reductions

26. Opco will reduce the stated capital of the Opco Common Shares by $XXXXXXXXXX, such that the stated capital and PUC of the Opco Common Shares will be $XXXXXXXXXX, and will reduce the stated capital of the Opco Class A Preference Shares by $XXXXXXXXXX, such that the stated capital and PUC of the Opco Class A Preference Shares will be $XXXXXXXXXX. The redemption value of the Opco Class A Preference Shares will be reduced by $XXXXXXXXXX.

27. Opco will pay $XXXXXXXXXX to Holdco and $XXXXXXXXXX to Childco.

28. Holdco will reduce the stated capital of the Holdco Common Shares by $XXXXXXXXXX, such that the stated capital and PUC of each of the Holdco Non-voting Common Shares and Holdco Voting Common Shares will be $XXXXXXXXXX.

29. Holdco will pay $XXXXXXXXXX to the Estate.

Subsection 164(6) Transactions

30. Opco will amend its articles of incorporation to authorize the issuance of an unlimited number of Opco Class A Common Shares with the following attributes:

a. entitle the holder to XXXXXXXXXX vote per share;

b. entitle the holder to non-cumulative dividends as and when declared by the board of directors of Opco to the exclusion of any other class of shares. No dividend can be declared or paid on the Opco Class A Common Shares nor purchase for cancellation any of the Class A Common Shares, if such dividend or purchase would result in Opco having insufficient net assets to redeem any issued and outstanding Opco Class A, Class B or Class C Preference Shares, or to pay the redemption amount on the Opco Class A, Class B or Class C Preference Shares in part or in full in the event of a wind-up, liquidation or dissolution of Opco;

c. entitle the holders of not less than XXXXXXXXXX percent (XXXXXXXXXX%) of Opco Class A Common Shares to requisition a meeting of shareholders; and

d. entitle the holder to participate pro rata with the other holders of Opco Class A Common Shares and Opco Common Shares in the event of a winding-up, liquidation or dissolution of Opco.

31. Opco will also amend the terms of the Opco Common Shares to add a conversion feature enabling each Opco Common Share to convert to an Opco Class A Common Share.

32. Childco will convert all of its XXXXXXXXXX Opco Common Shares into XXXXXXXXXX Opco Class A Common Shares pursuant to subsection 51(1). The Opco Class A Common Shares owned by Childco will have an aggregate ACB and PUC of $XXXXXXXXXX.

33. Opco will amend its articles of incorporation to:

a. authorize the issuance of:

i. an unlimited number of Opco Class B Common Shares with the following attributes:

A. entitle the holder to XXXXXXXXXX vote per share;

B. entitle the holder to non-cumulative dividends as and when declared by the board of directors of Opco to the exclusion of any other class of shares. No dividend can be declared or paid on the Opco Class B Common Shares nor purchase for cancellation any of the Opco Class B Common Shares, if such dividend or purchase would result in Opco having insufficient net assets to redeem any issued and outstanding Opco Class A, Class B, Class C, Class X or Class Y Preference Shares, or to pay the redemption amount on the Opco Class A, Class B, Class C, Class X or Class Y Preference Shares in part or in full in the event of a wind-up, liquidation or dissolution of Opco;

C. entitle the holders of not less than XXXXXXXXXX percent (XXXXXXXXXX%) of Opco Class B Common Shares to requisition a meeting of shareholders; and

D. entitle the holder to participate pro rata with the other holders of Opco Class A Common Shares, Opco Class B Common Shares and Opco Common Shares in the event of a winding-up, liquidation or dissolution of Opco;

ii. an unlimited number of Opco Class X Preference Shares with the following attributes:

A. do not entitle the holder to vote;

B. redeemable and retractable at a price equal to $XXXXXXXXXX per share;

C. entitle the holder to non-cumulative dividends at a rate that is not more than XXXXXXXXXX% of the redemption price, as and when declared by the board of directors of Opco to the exclusion of any other class of shares; and

D. entitle the holder to the declared and unpaid dividends and the redemption price, in priority to any participation by the holders of the Opco Common Shares, Opco Class A Common Shares and Opco Class B Common Shares but equally with the holders of the Opco Class A, Class B, Class C and Class Y Preference Shares in the event of a winding-up, liquidation or dissolution of Opco; and

iii. an unlimited number of Opco Class Y Preference Shares with the following attributes:

A. do not entitle the holder to vote;

B. redeemable and retractable at a price equal to $XXXXXXXXXX per share;

C. entitle the holder to non-cumulative dividends at a rate that is not more than XXXXXXXXXX% of the redemption price, as and when declared by the board of directors of Opco, to the exclusion of any other class of shares; and

D. entitle the holder to the declared and unpaid dividends and the redemption price, in priority to any participation by the holders of the Opco Common Shares, Opco Class A Common Shares and Opco Class B Common Shares but equally with the holders of the Opco Class A, Class B, Class C and Class X Preference Shares in the event of a winding-up, liquidation or dissolution of Opco;

b. amend the attributes of the Opco Common Shares, Opco Class A Common Shares, Opco Class A Preference Shares, Opco Class B Preference Shares and Opco Class C Preference Shares as follows:

i. in the event of a winding-up, liquidation or dissolution of Opco, the holders of Opco Class A Preference Shares will be entitled to declared and unpaid dividends and the redemption price, in priority to any participation by the holders of the Opco Common Shares, Opco Class A Common Shares and Opco Class B Common Shares but equally with the holders of the Opco Class B, Class C, Class X and Class Y Preference Shares;

ii. in the event of a winding-up, liquidation or dissolution of Opco, the holders of Opco Class B Preference Shares will be entitled to declared and unpaid dividends and the redemption price, in priority to any participation by the holders of the Opco Common Shares, Opco Class A Common Shares and Opco Class B Common Shares but equally with the holders of the Opco Class A, Class C, Class X and Class Y Preference Shares;

iii. in the event of a winding-up, liquidation or dissolution of Opco, the holders of Opco Class C Preference Shares will be entitled to declared and unpaid dividends and the redemption price, in priority to any participation by the holders of the Opco Common Shares, Opco Class A Common Shares and Opco Class B Common Shares but equally with the holders of the Opco Class A, Class C, Class X and Class Y Preference Shares;

iv. in the event of a winding-up, liquidation or dissolution of Opco, the holders of Opco Common Shares and Opco Class A Common Shares will be entitled to participate pro rata with the other holders of Opco Class A Common Shares, Opco Class B Common Shares and Opco Common Shares;

c. exchange, in the course of a reorganization of capital to which subsection 86(1) applies, all the issued and outstanding Opco Common Shares and Opco Class A Preference Shares owned by Holdco into the following two classes of shares which will, immediately after the exchange, have an aggregate FMV equal to the aggregate FMV of the Opco Common Shares and Opco Class A Preference Shares owned by Holdco immediately before the exchange:

i. Opco Class X Preference Shares with PUC and ACB equal to $XXXXXXXXXX – the aggregate number and aggregate redemption value (the “Opco X Redemption Value”) of such shares to be determined immediately before the exchange; and

ii. XXXXXXXXXX Opco Class B Common Shares with a PUC and ACB equal to $XXXXXXXXXX.

d. exchange, in the course of a reorganization of capital to which subsection 86(1) applies, all the XXXXXXXXXX issued and outstanding Opco Class A Common Shares owned by Childco into the following two classes of shares which will, immediately after the exchange, have an aggregate FMV equal to the FMV of the Opco Common Shares owned by Childco immediately before the exchange:

i. Opco Class Y Preference Shares with an ACB and PUC equal to $XXXXXXXXXX– the aggregate number and aggregate redemption value of such shares to be determined immediately before the exchange; and

ii. XXXXXXXXXX Opco Class B Common Shares with an ACB and PUC equal to $XXXXXXXXXX.

34. Holdco will amend its articles of incorporation to:

a. authorize the issuance of:

i. an unlimited number of Holdco Class A Common Shares with the following attributes:

A. entitle the holder to XXXXXXXXXX vote per share;

B. entitle the holder to non-cumulative dividends as and when declared by the board of directors of Holdco to the exclusion of any other class of shares. No dividend can be declared or paid on the Holdco Class A Common Shares nor purchase for cancellation any of the Holdco Class A Common Shares, if such dividend or purchase would result in Holdco having insufficient net assets to redeem any issued and outstanding Holdco Class A, Class B, Class C or Class D Shares, or Holdco Class X or Class Y Preference Shares, or to pay the redemption amount on the Holdco Class A, Class B, Class C or Class D Shares, or Holdco Class X Preference Shares in part or in full in the event of a wind-up, liquidation or dissolution of Holdco;

C. entitle the holders of not less than XXXXXXXXXX percent (XXXXXXXXXX%) of Holdco Class A Common Shares to requisition a meeting of shareholders; and

D. entitle the holder to participate pro rata with the other holders of Holdco Voting Common Shares, Holdco Non-voting Common Shares and Holdco Class A Common Shares in the event of a winding-up, liquidation or dissolution of Holdco; and

ii. an unlimited number of Holdco Class X Preference Shares with the following attributes:

A. do not entitle the holder to vote;

B. redeemable and retractable at a price equal to $XXXXXXXXXX per share;

C. the amount of $XXXXXXXXXX shall constitute the specified amount at the time of issuance for each of the Holdco Class X Preference Shares;

D. entitle the holder to non-cumulative dividends at a rate that is not more than XXXXXXXXXX% of the redemption price, as and when declared by the board of directors of Holdco to the exclusion of any other class of shares; and

E. entitle the holder to the declared and unpaid dividends and the redemption price, in priority to any participation by the holders of the Holdco Non-voting Common Shares, Holdco Voting Common Shares, Holdco Class A Common Shares and Holdco Class D Shares but equally with the holders of the Holdco Class A, Class B and Class C Shares in the event of a winding-up, liquidation or dissolution of Holdco;

b. amend the attributes of the Holdco Voting Common Shares, Holdco Non-voting Common Shares, Holdco Class A Shares, Holdco Class B Shares, Holdco Class C Shares and Holdco Class D Shares as follows:

i. in the event of a winding-up, liquidation or dissolution of Holdco, the holders of Holdco Class A Shares will be entitled to declared and unpaid dividends and the redemption price, in priority to any participation by the holders of the Holdco Voting Common Shares, Holdco Non-voting Common Shares, Holdco Class A Common Shares and Holdco Class D Shares but equally with the holders of the Holdco Class A, Class B and Class C Shares and Holdco Class X Preference Shares;

ii. in the event of a winding-up, liquidation or dissolution of Holdco, the holders of Holdco Class B Shares will be entitled to declared and unpaid dividends and the redemption price, in priority to any participation by the holders of the Holdco Voting Common Shares, Holdco Non-voting Common Shares, Holdco Class A Common Shares and Holdco Class D Shares but equally with the holders of the Holdco Class A, Class B and Class C Shares and Holdco Class X Preference Shares;

iii. in the event of a winding-up, liquidation or dissolution of Holdco, the holders of Holdco Class C Shares will be entitled to declared and unpaid dividends and the redemption price, in priority to any participation by the holders of the Holdco Voting Common Shares, Holdco Non-voting Common Shares, Holdco Class A Common Shares and Holdco Class D Shares but equally with the holders of the Holdco Class A, Class B and Class C Shares and Holdco Class X Preference Shares;

iv. in the event of a winding-up, liquidation or dissolution of Holdco, the holders of Holdco Class D Shares will be entitled to declared and unpaid dividends and the redemption price, after the entitlement of the holders of the Holdco Class A, Class B and Class C Shares and Holdco Class X Preference Shares, but in priority to any participation by the holders of the Holdco Voting Common Shares, Holdco Non-voting Common Shares, and Holdco Class A Common Shares; and

v. in the event of a winding-up, liquidation or dissolution of Holdco, the holders of Holdco Non-voting Common Shares and Holdco Voting Common Shares will be entitled to participate pro rata with the other holders of Holdco Non-voting Common Shares, Holdco Voting Common Shares and Holdco Class A Common Shares.

35. In the course of a reorganization of capital to which subsection 86(1) applies, the Estate will sell to Holdco and Holdco will purchase for cancellation from the Estate all of the Holdco Common Shares owned by the Estate. As consideration for the Holdco Common Shares, Holdco will issue the following shares in its capital stock to the Estate:

a. Holdco Class X Preference Shares with an aggregate redemption value equal to the Opco X Redemption Value (the “Holdco X Redemption Value”) and PUC equal to $XXXXXXXXXX; and

b. XXXXXXXXXX Holdco Class A Common Shares with a PUC equal to $XXXXXXXXXX.

The ACB of the Holdco Class X Preference Shares and the Holdco Class A Common Shares will be determined in accordance with section 86.

For purposes of subsection 191(4), each Holdco Class X Preference Share will not be issued for consideration that includes a taxable preferred share, and each such share will, at the time of issue, have an amount specified in respect thereof and the amount so specified in respect of each share will:

i. be expressed as a dollar amount;

ii. not be determined by a formula; and

iii. not exceed the FMV of the consideration for which the share is issued.

36. Opco will increase the stated capital of the Opco Class X Preference Shares (the “Opco CDA Increase Value”) by an amount equal to one-half of the Opco X Redemption Value. Opco will elect in respect of the full amount of the deemed dividend arising under subsection 84(1) as a capital dividend in the prescribed manner and prescribed form provided in subsection 83(2).

For greater certainty, the amount of the increase in stated capital of the Opco Class X Preference Shares will not exceed the CDA of Opco at the time immediately prior to such increase. As a result, the aggregate PUC and ACB of the Opco Class X Preference Shares will increase by an amount equal to the Opco CDA Increase Value.

37. Opco will redeem all of the issued and outstanding Opco Class X Preference Shares for the Opco X Redemption Value. As sole consideration for the redemption, Opco will issue the Opco Note to Holdco having a principal amount and FMV equal to the Opco X Redemption Value. Pursuant to subsection 89(14), Opco will designate all or a portion of the deemed dividend arising under subsection 84(3) to be an eligible dividend in an amount that will not exceed the lessor of its GRIP balance as at XXXXXXXXXX and the quotient of its ERDTOH as at XXXXXXXXXX divided by 38 1/3%. A notice will be given by Opco to Holdco of the eligible dividend status on the day the Opco Class X Preference Shares are redeemed.

38. Holdco will increase the stated capital of the Holdco Class X Preference Shares by an amount equal to the Opco CDA Increase Value. Holdco will elect in respect of the full amount of the deemed dividend arising under subsection 84(1) as a capital dividend in the prescribed manner and prescribed form provided in subsection 83(2).

For greater certainty, the amount of the increase in stated capital of the Holdco Class X Preference Shares will not exceed the CDA of Holdco determined immediately before such increase. As a result, the aggregate PUC and ACB of the Holdco Class X Preference Shares will increase by an amount equal to the Opco CDA Increase Value.

39. Holdco will redeem all of the issued and outstanding Holdco Class X Preference Shares for the Holdco X Redemption Value. As sole consideration for the redemption, Holdco will endorse the Opco Note in favour of the Estate. Pursuant to subsection 89(14), Holdco will designate all or a portion of the deemed dividend arising under subsection 84(3) to be an eligible dividend in an amount that will not exceed the lessor of its GRIP balance as at XXXXXXXXXX and the quotient of its ERDTOH as at XXXXXXXXXX dividend by 38 1/3%.

The Estate will report on its T3 Trust Income Tax Information Return for its first taxation year:

a. aggregate eligible and non-eligible taxable dividends equal to the difference between the Holdco X Redemption Value and the Holdco CDA; and

b. a capital loss computed in accordance with the Act.

The Executors will elect in prescribed manner, and within the prescribed time under subsection 164(6) to carry back the capital loss of the Estate to reduce the capital gain arising from the deemed disposition of the Holdco Common Shares as reported in the Deceased’s final T1 income tax return.

40. Opco will repay the Opco Note to the Estate (endorsed by Holdco to the Estate in Paragraph 39). Opco will obtain the funds required to pay the Opco Note by using some of its cash and liquidating some of its investments. The liquidation of some of its investments will remain within the investment guidelines with respect to Opco as at the date of death of the Deceased and will not result in the winding-up, discontinuance or reorganization of Opco’s business.

41. The funds paid to the Estate by Opco on account of repayment of the Opco Note will be used to pay the Estate’s expenses, the Estate’s income tax liability on the deemed dividend described in Paragraph 39, the Legacies, and distributions to the Beneficiaries.

Pipeline Transactions

42. The Estate will incorporate Newco under the CBCA. Newco will be a CCPC and a taxable Canadian corporation. Newco will be authorized to issue an unlimited number of Newco Common Shares with the following attributes:

a. entitle the holder to XXXXXXXXXX vote per share;

b. entitle the holder to non-cumulative dividends as and when declared by the board of directors of Newco to the exclusion of any other class of shares; and

c. participate in the remaining assets of Newco in the event of a wind-up, liquidation or dissolution of Newco.

On incorporation, the Estate will subscribe for XXXXXXXXXX Newco Common Share for $XXXXXXXXXX. The Estate will control Newco.

43. The Estate will transfer its XXXXXXXXXX Holdco Class A Common Shares to Newco. In consideration for the transfer Newco will issue to the Estate:

a. the Newco Note with a principal amount and FMV equal to the amount by which

i. lesser of the ACB of the XXXXXXXXXX Class A Holdco Common Shares to the Estate and their FMV at the time of the transfer, exceeds

ii. $XXXXXXXXXX, and

b. XXXXXXXXXX Newco Common Shares with a stated capital equal to $XXXXXXXXXX.

Newco and the Estate will jointly elect, in prescribed form and within the time referred to in subsection 85(6), to have the provisions of subsection 85(1) apply to the transfer of the Holdco Class A Common Shares held by the Estate to Newco. The agreed amount will be equal to the lower of the ACB of the Holdco Class A Common Shares to the Estate and the FMV of the Holdco Class A Common Shares at the time of the transfer.

For greater certainty, the agreed amount will not be more than the amount described in paragraph 85(1)(c), will not be less than the lesser of the two amounts specified in paragraph 85(1)(c.1) and will not be less than the amount described in paragraph 85(1)(b).

The amount added to the stated capital of the Newco Common Shares will be subject to an adjustment under paragraph 84.1(1)(a) in computing the PUC of such shares to the extent that subparagraph 84.1(2)(a.1)(ii) applies, for the purposes of section 84.1, to reduce the ACB of those shares. However, any adjustment under paragraph 84.1(1)(a) will be less than the amount added to the stated capital of the Newco Common Shares.

In the event that the FMV of the XXXXXXXXXX Holdco Class A Common Shares as at the date of the transfer to Newco is lower than the ACB of such shares to the Estate, the Estate will report on its T3 Trust Income Tax Information Return for its first taxation year a capital loss being an amount equal to the difference between those two amounts. In that event, the Executors will elect in prescribed manner, and within the prescribed time under subsection 164(6), to carry back the Estate’s capital loss to reduce the capital gain arising from the deemed disposition of the Holdco Common Shares as reported in the Deceased’s final T1 income tax return.

44. Opco will continue to carry on the Business for at least one year following the sale of the XXXXXXXXXX Holdco Class A Common Shares to Newco as described in Paragraph 43. During the one year period, Opco will not discontinue or reorganize the Business, there will be no repayment of the Newco Note nor a purchase for cancellation of any Newco Common Shares or Holdco Class A Common Shares.

45. After a period of at least one year has elapsed from the time of the transfer described in Paragraph 43, Holdco will amalgamate with Newco to form Amalco. The amalgamation will qualify as an amalgamation within the meaning assigned by subsection 87(1).

Amalco will be authorized to issue an unlimited number of Amalco Common Shares with the following attributes:

a. entitle the holder to XXXXXXXXXX vote per share;

b. entitle the holder to non-cumulative dividends as and when declared by the board of directors of Amalco; and

c. participate in the remaining assets of Amalco in the event of a wind-up, liquidation or dissolution of Amalco; and

On the amalgamation, the Estate will receive XXXXXXXXXX Amalco Common Shares having identical terms to those of the XXXXXXXXXX Newco Common Shares it held immediately before that time as consideration for its XXXXXXXXXX Amalco Common Shares. The PUC and ACB of the newly issued Amalco Common Shares will be equal to the Newco Common Shares.

46. Subsequent to the amalgamation, Amalco will begin to make payments on the Newco Note. Amalco will pay down no more than 25% of the principal amount of the Newco Note by 3 months following the amalgamation of Holdco and Newco to form Amalco, no more than 50% of the principal amount of the Newco Note by 6 months following the amalgamation, and no more than 75% of the principal amount of the Newco Note by 9 months following the amalgamation.

Additional Information

47. All of the preference shares issued in the Proposed Transactions will be taxable preferred shares, but not short-term preferred shares.

48. None of the common shares issued in the Proposed Transactions will be taxable preferred shares or short-term preferred shares.

49. The attributes of the various classes of common shares in the capital stock of Opco and Holdco, in particular the entitlement of a certain percentage of holders of a particular class to requisition a meeting of shareholders, are designed to distinguish those share classes of the same corporation from each other.

50. In XXXXXXXXXX, the Deceased claimed a deduction of $XXXXXXXXXX under section 110.6 in respect of shares of Holdco for which the Holdco Common Shares were substituted, within the meaning of subsection 248(5).

51. For greater certainty, there is no V-day basis included in the ACB of any class of Holdco Shares.

52. The Estate represents that in its first taxation year, the Estate will not realize a capital gain which would reduce the capital losses described in Paragraph 39 or Paragraph 43 (if applicable).

53. Subsection 40(3.6) will not apply to the Estate to reduce the capital losses referred to in Paragraphs 39 or 43 by reason of the application of subsection 40(3.61).

54. The Proposed Transactions in Paragraphs 25 to 39 are to be implemented before the end of the first taxation year of the Estate, specifically sometime between XXXXXXXXXX and XXXXXXXXXX. The Proposed Transactions in Paragraphs 40 to 46 are to be implemented following the completion of the Proposed Transactions in Paragraphs 25 to 39. In the event that there will be a capital loss realized by the Estate on the Proposed Transaction described in Paragraph 43, that step will be implemented prior to XXXXXXXXXX.

PURPOSES OF THE PROPOSED TRANSACTIONS

55. The purposes of the Proposed Transactions are: (i) to reduce the capital gain reported on the Deceased’s terminal tax return, and (ii) to return to the Estate an amount, subject to certain potential adjustments, equal to the FMV, immediately before the Deceased’s death, of the Holdco Common Shares while minimizing the inherent double tax exposure that can result from the application of subsections 70(5), 84(2) and 84(3).

56. The purpose of the Proposed Transactions described in Paragraphs 26 to 39 is to integrate the tax on the economic value of the underlying assets owned by Opco and the Holdco Common Shares owned by the Deceased at the time of his death through the payment of capital dividends and taxable dividends and to trigger a capital loss on certain of the Holdco Shares owned by the Estate which will reduce the tax payable by the Estate on the death of the Deceased, pursuant to subsection 164(6).

57. The purpose of the Proposed Transactions described in Paragraphs 42 to 46 is to create a “pipeline” in order to allow for the distribution of funds from Holdco to the Estate, without triggering additional taxes on the value of the Estate’s interest in Holdco for which the taxes were already paid or payable as a result of death of the Deceased, in a manner which satisfies the administrative requirements established by the CRA.

RULINGS GIVEN

Provided the foregoing statements constitute a complete and accurate disclosure of all the relevant facts, Completed Transactions, additional information, Proposed Transactions and purpose of the Proposed Transactions, and provided that the Proposed Transactions are completed in the manner described above, we confirm the following:

A. Subsection 84(2) will not apply as a result of the Proposed Transactions, in and by themselves, to deem the Estate or its Beneficiaries to have received a dividend on the issuance of the Newco Note or on any repayment of the Newco Note.

B. Part VI.1 tax will not apply to the dividend that is deemed to be paid by Holdco on the redemption of the Holdco Class X Preference Shares, as described in Paragraph 39.

C. The provisions of subsection 245(2) will not apply as a result of the Proposed Transactions, in and by themselves, to re-determine the tax consequences stated in the Rulings given above.

The above rulings are given subject to the limitations and qualifications set out in Information Circular 70-6R12 dated April 1, 2022 and are binding on the CRA provided that the Proposed Transactions are completed within the time frame described in this letter.

The above rulings are based on the law as it presently reads and do not take into account any proposed amendments to the Act and the Regulations which, if enacted, could have an effect on the rulings provided therein.

Other Comments

Unless otherwise confirmed in the above rulings, nothing in this letter should be construed as implying that the CRA has confirmed, reviewed or has made any determination in respect of:

a. the PUC, ACB or FMV of any share referred to herein;

b. the balance of the NERDTOH, ERDTOH, CDA, GRIP, or any other tax account for any corporation described herein or whether any dividend paid or deemed to be paid is an eligible dividend or a capital dividend;

c. the capacity of the executors of the Estate to complete the Proposed Transactions under the terms of the Wills;

d. that any person or individuals described therein deal, or do not deal, with any other person or individuals at arm’s length; and

e. any other tax consequence relating to the facts, additional information, 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, including, but not limited to the tax consequences associated with:

i. the application of subsection 84.1 as a consequence of the transfer of the Holdco Class A Shares to Newco, as described in Paragraph 43;

ii. the amendments to the attributes of any shares of the capital stock of Holdco or Opco, as described in Paragraphs 25, 31, 33 and 34; and

iii. the redemption of the Holdco Class X Preference Shares and whether subsection 112(3.2) applies to reduce any capital loss (as described in Paragraph 39) realized on such redemption.

Nothing in this letter should be construed as confirmation, express or implied, that, for the purposes of any of the rulings given above, any adjustment to the FMV of the properties transferred or the redemption amount of the shares issued as consideration, whether pursuant to a price adjustment clause or otherwise, will be effective retroactively to the time of the transfer and issuance of shares. In addition, none of the rulings given in this letter are intended to apply to or in the event of the operation of a price adjustment clause. The general position of the CRA with respect to price adjustment clauses is stated in Income Tax Folio S4-F3-C1, Price Adjustment Clauses.

An invoice for our fees in connection with this ruling request will be forwarded to you under separate cover.

Yours truly,

Manager, Reorganizations Section II
For Division Director
Reorganizations Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch

SCHEDULE A

Opco, Holdco and Childco Authorized Capital
(Prior to the Proposed Transactions)
Opco

(a) Opco Common Shares:

(i) entitle the holder to XXXXXXXXXX vote per share;

(ii) entitle the holder to non-cumulative dividends as and when declared by the board of directors of Opco to the exclusion of any other class of shares. No dividend can be declared or paid on the Opco Common Shares nor purchase for cancellation any of the Newco Common Shares, if such dividend or purchase would result in Opco having insufficient net assets to redeem any issued and outstanding Opco Class A, Class B or Class C Preference Shares, or to pay the redemption amount on the Opco Class A, Class B or Class C Preference Shares in part or in full in the event of a wind-up, dissolution or liquidation of Opco; and

(iii) participate in the remaining assets of Opco in the event of a wind-up, liquidation or dissolution of Opco;

(b) Opco Class A Preference Shares:

(i) entitle the holder to XXXXXXXXXX vote per share;

(ii) redeemable and retractable at a price equal to $XXXXXXXXXX per share;

(iii) entitle the holder to non-cumulative dividends at a rate that is not less than XXXXXXXXXX% and not more than XXXXXXXXXX% of the redemption price, as and when declared by the board of directors of Opco to the exclusion of any other class of shares; and

(iv) entitle the holder to the declared and unpaid dividends and the redemption price, in priority to any participation by the holders of the Opco Class C Preference Shares and Opco Common Shares but after payment is made to the holders of the Opco Class B Preference Shares of their entitlement, in the event of a winding-up, liquidation or dissolution of Opco;

(c) Opco Class B Preference Shares:

(i) do not entitle the holder to vote;

(ii) redeemable and retractable at a price equal to $XXXXXXXXXX per share;

(iii) entitle the holder to non-cumulative dividends at a rate that is not less than XXXXXXXXXX% and not more than XXXXXXXXXX% of the redemption price, as and when declared by the board of directors of Opco to the exclusion of any other class of shares; and

(iv) entitle the holder to the declared and unpaid dividends and the redemption price, in priority to any participation by the holders of the Opco Class A Preference Shares, Opco Class C Preference Shares and Opco Common Shares, in the event of a winding-up, liquidation or dissolution of Opco;

(d) Opco Class C Preference Shares:

(i) entitle the holder to XXXXXXXXXX vote per share;

(ii) redeemable and retractable at a price equal to $XXXXXXXXXX per share;

(iii) entitle the holder to non-cumulative dividends at a rate that is not less than XXXXXXXXXX% and not more than XXXXXXXXXX% of the redemption price, as and when declared by the board of directors of Opco to the exclusion of any other class of shares; and

(iv) entitle the holder to the declared and unpaid dividends and the redemption price, in priority to any participation by the holders of the Opco Common Shares and equally with the holders of the Opco Class A Preference Shares, but after payment is made to the holders of the Opco Class B Preference Shares of their entitlement, in the event of a winding-up, liquidation or dissolution of Opco.

Holdco

(a) Holdco Voting Common Shares:

(i) entitle the holder to XXXXXXXXXX vote per share;

(ii) entitle the holder to non-cumulative dividends as and when declared by the board of directors of Holdco provided that the same amount of dividend must be declared on each Holdco Voting Common Share and Holdco Non-voting Common Share. No dividend can be declared or paid on the Holdco Voting Common Shares nor purchase for cancellation any of the Newco Voting Common Shares, if such dividend or purchase would result in Holdco having insufficient net assets to redeem any issued and outstanding Holdco Class A, Class B, Class C or Class D Shares, or to pay the redemption amount on the Holdco Class A, Class B, Class C and Class D Shares in part or in full in the event of a wind-up, dissolution or liquidation of Holdco; and

(iii) entitle the holder to participate pro rata with the other holders of Holdco Voting Common Shares and Holdco Non-voting Common Shares in the event of a winding-up, liquidation or dissolution of Holdco;

(b) Holdco Non-voting Common Shares:

(i) do not entitle the holder to vote;

(ii) entitle the holder to non-cumulative dividends as and when declared by the board of directors of Holdco provided that the same amount of dividend must be declared on each Holdco Voting Common Share and Holdco Non-voting Common Share. No dividend can be declared or paid on the Holdco Non-voting Common Shares nor purchase for cancellation any of the Newco Non-voting Common Shares, if such dividend or purchase would result in Holdco having insufficient net assets to redeem any issued and outstanding Holdco Class A, Class B, Class C or Class D Shares, or to pay the redemption amount on the Holdco Class A, Class B, Class C and Class D Shares in part or in full in the event of a wind-up, dissolution or liquidation of Holdco; and

(iii) entitle the holder to participate pro rata with the other holders of Holdco Voting Common Shares and Holdco Non-voting Common Shares in the event of a winding-up, liquidation or dissolution of Holdco;

(c) Holdco Class A Shares:

(i) entitle the holder to XXXXXXXXXX vote per share;

(ii) redeemable and retractable at a price equal to the quotient obtained when (A) the difference between (x) the fair market value of the consideration received from Holdco from the first holder of Holdco Class A Shares at the time of the first issuance of Holdco Class A Shares by the Corporation and (y) the fair market value of the consideration, if any, received by such first holder at such time from Holdco that is not Holdco Class A Shares (including any assumption of debt by Holdco) is divided by (B) the number of Holdco Class A Shares issued at such time, subject to a price adjustment clause;

(iii) entitle the holder to non-cumulative dividends at a rate that is not more than XXXXXXXXXX% of the redemption price, as and when declared by the board of directors of Holdco to the exclusion of any other class of shares; and

(iv) entitle the holder to the declared and unpaid dividends and the redemption price, in priority to any participation by the holders of the Holdco Class D Shares, Holdco Voting Common Shares and Holdco Non-voting Common Shares but equally with the holders of the Holdco Class B and Class C Shares, in the event of a winding-up, liquidation or dissolution of Holdco;

(d) Holdco Class B Shares:

(v) do not entitle the holder to vote;

(vi) redeemable and retractable at a price equal to the quotient obtained when (A) the difference between (x) the fair market value of the consideration received from Holdco from the first holder of Holdco Class B Shares at the time of the first issuance of Holdco Class B Shares by the Corporation and (y) the fair market value of the consideration, if any, received by such first holder at such time from Holdco that is not Holdco Class B Shares (including any assumption of debt by Holdco) is divided by (B) the number of Holdco Class B Shares issued at such time, subject to a price adjustment clause;

(vii) entitle the holder to non-cumulative dividends at a rate that is not more than XXXXXXXXXX% of the redemption price, as and when declared by the board of directors of Holdco to the exclusion of any other class of shares; and

(viii) entitle the holder to the declared and unpaid dividends and the redemption price, in priority to any participation by the holders of the Holdco Class D Shares, Holdco Voting Common Shares and Holdco Non-voting Common Shares but equally with the holders of the Holdco Class A and Class C Shares, in the event of a winding-up, liquidation or dissolution of Holdco;

(e) Holdco Class C Shares:

(i) do not entitle the holder to vote;

(ii) redeemable and retractable at a price equal to the quotient obtained when (A) the difference between (x) the fair market value of the consideration received from Holdco from the first holder of Holdco Class C Shares at the time of the first issuance of Holdco Class C Shares by the Corporation and (y) the fair market value of the consideration, if any, received by such first holder at such time from Holdco that is not Holdco Class C Shares (including any assumption of debt by Holdco) is divided by (B) the number of Holdco Class C Shares issued at such time, subject to a price adjustment clause;

(iii) entitle the holder to non-cumulative dividends at a rate that is not more than XXXXXXXXXX% of the redemption price, as and when declared by the board of directors of Holdco to the exclusion of any other class of shares; and

(iv) entitle the holder to the declared and unpaid dividends and the redemption price, in priority to any participation by the holders of the Holdco Class D Shares, Holdco Voting Common Shares and Holdco Non-voting Common Shares but equally with the holders of the Holdco Class A and Class B Shares, in the event of a winding-up, liquidation or dissolution of Holdco;

(f) Holdco Class D Shares:

(i) entitle the holder to XXXXXXXXXX vote per share;

(ii) redeemable at a price equal to $XXXXXXXXXX per share;

(iii) entitle the holder to non-cumulative dividends at a rate that is not more than XXXXXXXXXX% of the redemption price, as and when declared by the board of directors of Holdco to the exclusion of any other class of shares; and

(iv) entitle the holder to the declared and unpaid dividends and the redemption price, in priority to any participation by the holders of the Holdco Voting Common Shares and Holdco Non-voting Common Shares, but after payment is made to the holders of the Holdco Class A, Class B and Class C Shares of their entitlement, in the event of a winding-up, liquidation or dissolution of Holdco.

Childco

(a) Childco Voting Common Shares:

(i) entitle the holder to XXXXXXXXXX vote per share;

(ii) entitle the holder to non-cumulative dividends as and when declared by the board of directors of Childco;

(iii) entitle the holder to participate pro rata with the other holders of Childco Voting Common Shares and Childco Non-voting Common Shares in the event of a winding-up, liquidation or dissolution of Childco;

(b) Childco Non-voting Common Shares:

(i) do not entitle the holder to vote;

(ii) entitle the holder to non-cumulative dividends as and when declared by the board of directors of Childco; and

(iii) entitle the holder to participate pro rata with the other holders of Childco Voting Common Shares and Childco Non-voting Common Shares in the event of a winding-up, liquidation or dissolution of Childco;

(c) Childco Preference Shares:

(i) entitle the holder to XXXXXXXXXX vote per share;

(ii) redeemable and retractable at a price equal to the amount held in the stated capital account for such shares;

(iii) entitle the holder to non-cumulative dividends at a rate that is not less than XXXXXXXXXX% and not more than XXXXXXXXXX% of the redemption price, as and when declared by the board of directors of Childco to the exclusion of any other class of shares; and

entitle the holder to the declared and unpaid dividends and the redemption price, in priority to any participation by the holders of the Childco Voting Common Shares and Childco Non-voting Common Shares, in the event of a winding-up, liquidation or dissolution of Childco.

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