Chapter 24 - Corporate Changes

Question 1

What are corporate changes under the OBCA/CBCA?

Answer 1

Formal alterations to a corporation’s structure requiring compliance with statutory processes. These include:

Changes to articles (amendments, continuances, reorganizations).

Changes to name, share capital, or corporate form.

Arrangements, amalgamations, and dissolutions.

Question 2

How are articles amended?

Answer 2

Requires special resolution (2/3 majority) of shareholders.

Common amendments: name change, share capital changes, restrictions on share transfers, business restrictions, number of directors.

File Articles of Amendment with the Director under the Act.

Question 3

What is continuance?

Answer 3

A corporation moves its jurisdiction of incorporation:

Into Ontario/Canada (import) → File Articles of Continuance.

Out of Ontario/Canada (export) → Needs shareholder special resolution and approval of new jurisdiction.

Effect: Corporation keeps its legal identity but becomes governed by new corporate statute.

Question 4

What is amalgamation?

Answer 4

Combination of two or more corporations into one.
Types:

Short-form vertical – parent and wholly owned subsidiary.

Short-form horizontal – sister corps wholly owned by same parent.

Long-form – requires shareholder approval and agreement setting terms.

New entity assumes assets, liabilities, rights, and obligations of predecessors

Question 5

What is an arrangement?

Answer 5

A court-approved restructuring used when another process is impractical (e.g., complex reorganizations).

Requires court approval + shareholder approval.

Examples: exchange of shares, debt reorganization, spin-offs.

Question 6

What is a reorganization?

Answer 6

Change in share structure or corporate organization under a court order. Examples:

Amending rights of shareholders.

Exchanging shares.

Varying class rights.

Court can make ancillary orders to protect stakeholders.

Question 7

How can a corporation be dissolved?

Answer 7

Voluntary: by special resolution + Articles of Dissolution.

Administrative: for failure to comply (e.g., annual returns).

Court-ordered: for abuse, fraud, or oppression.

After dissolution → corporation ceases except for limited winding up.

Question 8

How can a dissolved corporation be revived?

Answer 8

File Articles of Revival + shareholder/creditor approval (if applicable).

Restores legal status retroactively as if never dissolved.

Question 9

What protections exist for shareholders in corporate changes?

Answer 9

Voting rights: special resolution needed for fundamental changes.

Class votes: if rights of a class are affected, separate approval required.

Dissent rights: right to be paid fair value for shares if they object to certain changes (e.g., amalgamation, continuance).

Question 10

How do dissent rights work?

Answer 10

Shareholder sends written objection before/at meeting.

If resolution passes, they demand payment.

Corporation must pay fair value; if disputed, court determines.

Protects minority shareholders in major changes.

Question 11

What special corporate change situations require attention?

Answer 11

Change of corporate name – must not be confusing, prohibited, or misleading.

Changing share capital – must comply with solvency test and shareholder approval.

Court involvement – required for arrangements and reorganizations.

Question 12

What remedies are available to shareholders?

Answer 12

Oppression remedy if changes unfairly prejudice them.

Derivative action for wrongs against corporation.

Dissent and appraisal rights for exit.

Court intervention in reorganizations/arrangements.

Question 13

Going-Private Transactions / Squeeze-Outs

Answer 13

What it is: When a majority shareholder (often >90%) forces minority shareholders to sell.

Methods:

Arrangement (court-approved).

Long-form amalgamation (minorities get cash instead of shares).

Share consolidation (reverse split): reduce minority holdings to fractions, then pay out.

Protections:

Minority votes (special resolution, sometimes class vote).

Court oversight (fairness review).

Dissent rights (fair value buyout).

Question 14

Section 85 Rollover (Asset Transfer to Corp)

Answer 14

What it is: A tax deferral mechanism when transferring assets to a corporation.

Requirements:

Eligible assets (shares, capital property, certain resource property).

Consideration must include at least one share of the transferee corp.

Election must be filed with CRA (jointly by transferor + corp).

Effect:

Transferor chooses an “elected amount” (within tax limits).

Prevents immediate capital gain; tax deferred until shares sold.

Question 15

Termination / Dissolution

Answer 15

Voluntary dissolution:

By special resolution + filing Articles of Dissolution.

Administrative dissolution:

Registrar can dissolve for non-compliance (e.g., failing to file returns).

Court-ordered dissolution:

For fraud, abuse, or oppression.

After dissolution: Corp ceases, except for limited winding up.

Question 16

Revival of Corporation

Answer 16

Dissolved corporation can be restored by filing Articles of Revival.

Effect: corporation is deemed to have never been dissolved (retroactive continuity).

May require approval from shareholders/creditors.

Question 17

Forfeiture of Shares

Answer 17

Definition: When shares are canceled because a shareholder failed to pay the agreed consideration (common in older systems or private corps).

Today: Rare; most modern statutes prohibit “unpaid shares.”

Instead: corp can rescind issuance or sue for unpaid amounts.