'Mergers'/Amalgamations and Statutory Plans of Arrangement

• Author: Christopher Nicholls
• Pages: 95-118

95

CHA PTER 4

“MERGERS”/

AMALGAMATIONS

AND STATUTORY PLANS

OF ARR ANGEMENT

A. INTRODUC TION

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

tiated transaction, they may choose a deal str ucture that best accom-

modates their respective interests. Two forms of share transaction that

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

to structuring t he deal as a take-over bid, as discussed in chapters 5

through 7) are amalgamat ions 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 cor porations to become a single entity — the

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

1 The word merger, a lthough regularly used by l awyers and investment ba nkers in

Canada, i s not a term of art either in Cana dian corporate or Canad ian securities

law. As discus sed in Chapter 2, the word is use d in the Canadian Competition

Act but in a very broad se nse that is not intended to connote a ny legally unique

form of trans action for corporate law purpos es.

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

ness Corporations A ct, s 181 [ABCA]; British Columbia Bus iness Corporations Act,

MERGERS AND ACQUISITIONS96

famously described the theory underlying the Canadian concept of

corporate amalgamation by drawing the analogy of “a river formed by

the confluence of two streams, or the creation of a single rope through

the intertwi ning 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 Dela-

ware corporate law tran saction that appears to be closer conceptua lly to

the Canadian concept of amalgamation is “consolidation.”5) Canadian

amalgamation does not simply involve the continuation of one of the

amalgamating corporations, even though the newly formed amalgam-

ated corporation is permitted to adopt the name of any of the amalgam-

ating cor porations.6

The legal effect of a corporate amalgamation is notiona lly to continue

the existence of each of the predeces sor (amalgamating) corporations

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

of the amalgamating corporations becomes the property of the amal-

gamated corporation .7 Equally important, all liabilities — including

any existing causes of action — a re unaffected by the amalgamation.8

Accordingly, convictions or judgments against any of the amalgam ating

corporations may be enforced again st the amalgamated corporation.9

s 269 [BCBCA]; The Corporations Act (Manit oba), s 175(1)[MCA]; New Brunswick

Business Corporations A ct, c B-9.1, s 120 [NBBCA]; Newfoundland and L abra-

dor Corporations Act, s 28 8 [NLCA]; Nova Scotia Companies Act, s 13 4 [NSCA];

Ontario Bu siness Corporations Act, s 174 [OBCA]; Prince Edwar d Island Busi-

ness Corporations A ct, s 150 [PEBCA]; Quebec Business Corp orations Act, s 276

[QBC A]; The Business Corp orations Act (Saskatchewan), s 175 [SBCA]; Northwest

Territories Business Corporation s Act, s 183 [NWBC A]; Nunavut Business Corp or-

ations Act, s 183 [NuBCA]; Yukon Business Corporations Act, s 183 [YBC A].

3 R v Black & Decker Manufactur ing Corp, [1975] 1 SCR 411 at 421.

4 General Corporation L aw (Dela wa re), Del aware Code, 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 2 82(1)(g); MCA, s 180(b); NBBCA,

s 125(b); NLCA, s 294(2)(b); NSCA, s 134(12); OBCA, s 179(b); PEBCA, s 155(b);

QBCA, s 286; 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, ss 294(2)(c) & (d); NSCA, s 134(12);

OBCA, s 179(b), (e); PEBCA, s 155(c), (d), & (e); QBCA, s 286; SBCA, ss 180(c) &

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

9 CBCA, ss 186(e) & (f); ABCA, ss 186(e) & (f); BCBCA, s 282(1)(k); MCA, s 180(f);

NBBCA, s 125(c); NLCA, ss 294(2)(e) & (f); OBCA, s 179(c); PEBCA, s 155(f);

QBCA, s 286; SBCA, s s 180(e) & (f); NWBCA, s s 188(e) & (f); NuBCA, ss 188(e)

& (f); YBCA, ss 188(e) & (f).