A business structure that worked in the past will not necessarily continue to be the best option for your business going forward. Being amenable to change and grow with the needs of your business is the key to success. Maybe you are considering running your sole proprietorship as a corporation. Perhaps you are considering purchasing or merging with another corporation for growth purposes or because you have encountered financial hardship.
Whatever your needs, our Edmonton corporate lawyers can ensure that you have all the information you need to navigate corporate rollovers and reorganizations in Alberta.
What is a corporate rollover?
A corporate rollover is a mechanism by which it is possible to transfer assets to a corporation and defer paying the tax on the transfer until such time as the asset is sold. Specific provisions of the Income Tax Act permit a taxpayer to elect a value of the transferred asset that is less than the fair market value of the asset, with various limitations. The consideration that the taxpayer receives for the transfer of assets must include at least one share of the corporation to which the asset is transferred.
Rollover provisions can also be used to transfer assets from a partnership to a corporation.
When can a rollover be used?
A rollover can be used to transfer a variety of assets including:
- shares
- real property
- depreciable property
- inventory
- intangible property such as goodwill.
These provisions are often used in simple transactions such as when a taxpayer who has been running a sole proprietorship decides to continue the business as a corporation. A rollover permits the sole proprietor to transfer the assets of the business to the corporation without triggering tax for the sole proprietor on the sale.
A rollover is also frequently used in more complex mergers and acquisition as it can be used to transfer assets between corporations while deferring tax liability. In this context a rollover would be one tool used to effect the desired result without triggering an undesirable tax consequence.
The rules respecting corporate rollovers are complicated and mistakes can result in unexpected tax bills. Our corporate lawyers will make sure that your rollover is carried out as seamlessly as possible.
What is corporate reorganization?
A corporation can undergo reorganization pursuant to a court order. Court orders for reorganization are generally issued when:
- an oppression remedy is obtained by shareholders, or
- a proposal is made under bankruptcy proceedings.
With a reorganization order, the court can:
- require the corporation to amend its articles
- appoint additional or replacement directors, affecting the governance of the corporation
- authorize the issuance of debt obligations.
You may also need to make changes to your corporate structure for any number of reasons including expanding or changing the location of your business or accommodating general changes to your industry.
Schedule a Consultation With Our Edmonton Corporate Lawyers
Specific requirements for amalgamation, amendments, or continuance in another province may be different depending on whether your corporation is incorporated federally or provincially, so contact one of our Edmonton corporate lawyers to find out how to navigate your corporate rollover or reorganization in Alberta. Book a consultation today!
*Disclaimer: Please note the content in this article is not intended to act as legal advice. For specific legal advice please consult with a corporate or business lawyer.
