An amalgamation is a type of merger where two corporate entities merge to form a new corporation.
This blog post focuses on short-form amalgamation, as opposed to long-form amalgamations, which is the process when neither of the merging companies are subsidiaries of a parent company or are related companies. Please note, we use the word “company” and “corporation” interchangeably in this article.
An amalgamation of a corporation with its subsidiary is called a Short-Form Vertical Amalgamation, while an amalgamation of two subsidiaries owned by the same holding company is called a Short-Form Horizontal Amalgamation.
Amalgamations are a tricky process to navigate, and even a simple thing like choosing a name for the amalgamated company can raise unexpected questions.
Here are a few tips that may come in handy the next time you find yourself in the middle of a Short-Form Amalgamation.
How to Choose a Business Name for Your Newly Amalgamated Company
In both Short-Form Vertical Amalgamations and Short-Form Horizontal Amalgamations, the name of the amalgamated corporation can be any of the names of the amalgamating corporations. You may also use a new name.
However, this rule applies only to companies that have word names, as it is not possible to carry forward the numbered company name to the amalgamated corporation.
In other words, if the name of your company is 1234567 Ontario Inc. and it amalgamates, the new name of the amalgamated corporation cannot be 1234567 Ontario Inc. For this reason, when incorporating a company, a word name is more advantageous than a numbered name.
Carrying Over Share Attributes in an Amalgamation
In Short-Form Vertical Amalgamations, the shares of each amalgamating subsidiary corporation are cancelled without any repayment of capital. Except as may be prescribed, the articles of amalgamation will be the same as the articles of the amalgamating holding corporation. Therefore, unless explicit changes are made to the articles, the share attributes of the newly amalgamated company will be that of the amalgamating holding corporation.
In a Short-Form Horizontal Amalgamation, the shares of all but one of the amalgamating subsidiary corporations will be cancelled without repayment of capital. Except as may be prescribed, the articles of amalgamation must be the same as the articles of the amalgamating subsidiary corporation whose shares are not being cancelled.
Therefore, because the amalgamating corporations are all subsidiaries, it’s recommended that you choose which one remains and ensure its share attributes are appropriate, as its share attributes will become those of the newly amalgamated company.
Watch for our next blog which will focus on an explanation of the use of Long-Form Amalgamations.
For more information on corporate amalgamations or other business law matters, contact a member of SV Law’s Business Law Practice Group here.
Written and edited by Yinan Li and Diane Squires
The content of this article is intended to provide a general guide to the subject matter and is not legal advice. Specialist advice should be sought regarding your specific circumstance.