Section 137

Proposed transactions

Acquireco and Targetco, both of which are widely-held credit unions, wish to combine their businesses to form a single corporate entity by way of an asset sale governed by section XX of Act1. Accordingly:

1. At XX on the Effective Date: each class A and class C Share of Targetco will be exchanged for one class A and one Class D Share, respectively, of Acquireco; and each class D Share of Targetco will be redeemed for cash.
2. At XX on the Effective Date as part of its winding-up, Targetco will transfer to Acquireco all its property.
3. Upon receipt of the executed Agreement for the above share exchange and asset distribution, the Registrar will issue a Certificate of Business Acquisition pursuant to paragraph XX of Act1 showing that, on the Effective Date, Acquireco will have acquired the assets and assumed the liabilities of Targetco.
4. Targetco will be deemed to have been dissolved on the Effective Date pursuant to section XX of Act1.

Rulings

Including that s. "137(4.1) will not apply to deem an amount paid or payable by Targetco to Acquireco in respect of a share of its capital stock on the Winding-Up to have been paid by Targetco and received by Acquireco as interest." The summary states:

Acquireco will not become a member of Targetco, as...defined in subsection 137(6), at any point in time during the process leading to Targetco' dissolution.

See summary under s. 88(1).

Is a credit union that is a CCPC required to file a T2SCH53 (GRIP calculation)? CRA stated that although the credit union may have benefited from the small business deduction is not treated (in light of s. 137(7) as a private corporation (and thus a CCPC) for the purpose of the eligible dividend rules. CRA went on to note that in light of s. 137(4.1) a payment by a credit union to its members in respect of the shares of its capital stock would not normally result in dividend treatment.