Qualifying Transaction

A qualifying transaction is a transaction that meets the requirements of the Income Tax Act (Canada) for the purpose of exchanging shares of a corporation for shares of another corporation. The transaction must be approved by the Minister of Finance and must not be a reverse takeover.

There are two types of qualifying transactions: amalgamations and mergers. An amalgamation is a transaction where two or more corporations are combined into a single corporation. A merger is a transaction where one corporation acquires another corporation.

The requirements for a qualifying transaction are as follows:

* The transaction must be approved by the Minister of Finance.
* The transaction must not be a reverse takeover.
* The transaction must not result in a change of control of the acquiring corporation.
* The transaction must not result in a change of control of the acquired corporation.
* The transaction must not result in a change of control of any corporation that is a party to the transaction.
* The transaction must not result in a change of control of any corporation that is a subsidiary of a party to the transaction.
* The transaction must not result in a change of control of any corporation that is a parent of a party to the transaction.

If a qualifying transaction is completed, the shareholders of the acquired corporation will receive shares of the acquiring corporation in exchange for their shares of the acquired corporation. The shareholders of the acquiring corporation will not receive any shares of the acquired corporation.

The tax consequences of a qualifying transaction depend on the type of transaction. In an amalgamation, the shareholders of the acquired corporation will generally not have to pay any tax on the exchange of their shares for shares of the acquiring corporation. In a merger, the shareholders of the acquired corporation will generally have to pay capital gains tax on the exchange of their shares for shares of the acquiring corporation.