Mergers'/Amalgamations and Statutory Plans of Arrangement

• Author: Christopher C. Nicholls
• Profession: Faculty of Law, University of Western Ontario
• Pages: 85-103

85

CHA PTER 4

“MERGERS”/

AMALGAMATIONS

AND STATUTORY PLANS

OF ARR ANGEMENT

A. INT RODUC TION

As discussed in Chapter 1, when parties enter into a “friendly” or ne-

gotiated transaction, they may choose a deal structure t hat best accom-

modates their respective interests. Two forms of share transaction that

may be chosen by friendly “merger” par ties in Canada (in addition

to structuring t he deal as a takeover bid, as discussed in Chapters 5

through 7) are amalgamations and plans of arrangement.1

B. AMALGAMATION

1) Legal Effect of Amalgamation

The legal concept of “amalgamation” in Canada involves the fusion of

two or more amalgamating corp orations to become a single entity—the

1 The word merger, although regula rly used by lawyers and i nvestment bankers in

Canada, i s not a term of art either in Can adian corporate or Canad ian secur-

ities law. The word is used in t he Canadian Competit ion Act but in a very broad

sense th at is not intended to connote any legally un ique form of transaction

for corporate law pur poses. See Chris topher C. Nicholls, Corporate Finance and

Canadian Law (Toronto: Carswel l, 2000) at 297.

MERGERS AND ACQUISITIONS86

“amalga mated corp oration.”2 The Supreme Court of Canada has fam-

ously described the theory underlying the Canadi an concept of cor-

porate amalgamation by draw ing the analogy of “a river formed by the

conf‌luence of two streams, or the creation of a single rope th rough the

intertwining of strands.”3

This legal effect differs from the Delaware corporate law concept of

a “merger.” In Delaware, the merger of two or more corporations essen-

tially result s in the continuation of one of the constituent corporations,

into which the other constituent corporations are merged.4 (The Delaware

corporate law trans action that appears to be closer conceptually to the

Canadian concept of amalgamation is “consolidation.”)5 Canadian amal-

gamation does not simply involve the continuation of one of the amal-

gamating corporations, even t hough the newly formed amalgamated

corporation is permitted to adopt the name of any of the amalgamating

corporat ions.6

The legal effect of a corporate amalgamation is notional ly to con-

tinue the existence of each of the predecessor (amalgamating) corpora-

tions through the new (amalgamated) corporation. Thus, all of the

property of the amalgam ating corporations becomes the property of the

amalga mated corporation.7 Equally important, all liabilities—includ-

ing any existin g causes of action—are unaffected by the am algamation.8

2 See, for example, Cana da Business Corporations Act, s . 181 [CBCA]; Alberta Busi-

ness Corporations A ct, s. 181 [ABCA]; British Columbia Bu siness Corporations

Act, s. 269 [BCBCA]; The Corporations Act (Man itoba), s. 175(1)[MCA]; New

Brunsw ick Business Corporations Act, c. B-9.1, s. 120 [NBBCA]; Newfoundland

and Labrador Corp orations Act, s. 288 [NLCA]; Nova Scotia Companies Act, s.

134 [NSCA]; Ontario Business Corporatio ns Act, s. 174 [OBCA]; Prince Edward

Island Companies A ct, s. 77(1) [PEICA]; Saskatchewan Bu siness Corporations

Act, s. 175 [SBCA]; Northwest Territor ies Business Corporations Act, s. 183

[NWBCA]; Nunavut Business Cor porations Act, s. 183 [NuBCA]; Yukon Business

Corporations Act, s. 183 [YBCA].

3 R. v. Black & Decker Manufacturing Cor p., [1975] 1 S.C.R. 411 at 421.

4 Delaware General Corporatio n Law, Delaware C ode, Title 8, Chapter 1, s. 251(a).

5 Ibid.

6 See, for example, Canada Bus iness Corporations Regulatio ns, 2001, s. 31(2).

7 CBCA, s. 186(b); ABCA, s. 186(b); BCBCA, s. 282(1)(g); MCA, s. 180(b);

NBBCA, s. 125(b); NLCA, s. 294(1)(b); NSCA, s. 134(12); OBCA, s. 179(b);

PEICA, s. 77(4); SBCA, s. 180(b); NWBC A, s. 188(b); NuBCA, s. 188(b); YBCA,

s. 188(b).

8 CBCA, ss. 186(c) & (d); ABCA, ss. 186(c) & (d); BCBCA, ss. 282(1)(h)–(j);

MCA, ss. 180(c) & (d); NBBCA, s. 125(b); NLCA, s s. 294(1)(c) & (d); NSCA, s.

134(12); OBCA, s. 179(b); PEICA, s. 77(4); SBCA, ss. 180(c) & (d); NWBCA, ss.

188(c) & (d); NuBCA, ss. 188(c) & (d); YBCA, ss. 188(c) & (d).