SERVICES
Corporate Restructuring: Expert Legal and Tax Guidance for Private and Family-Owned Businesses
Corporate restructuring is a legal mechanism that permits an alteration of a company's ownership structure, capitalization, or operational structure as its goals change. Restructuring could involve a tax-deferred transfer of assets under Section 85 of the Income Tax Act (ITA) Canada, a share-for-share exchange under Section 86 of ITA, an amalgamation under Section 87, or winding up or asset bump up under Section 88 of ITA, or other reasons, such as an estate freeze of the existing operating company. All corporate restructuring steps necessitate an appropriate legal, equity, and tax coordination and compliance assessment, potentially exposing participants to unforeseen liabilities otherwise. Spear and Shield Law provides an array of strategic legal support throughout the restructuring process, from planning and document preparation to working with accountants on whole/partial elections, valuations, and compliance with agreements.
The service offers benefits to privately held corporations, professional corporations, family-owned businesses, and groups of businesses with multiple entities. In most instances, a client approaches our services for reorganization to facilitate succession, improve tax efficiency, separate business divisions, or create an opportunity for investment or financing. The legal formation of a corporation is an important step in maintaining tax attributes for the corporation, such as carrying forward non-capital losses and capital dividend accounts, as well as clarifying rights of ownership and responsibilities for operations. If a corporation does not engage legal advice, it could inadvertently trigger a taxable event or create governance problems that may complicate future transactions. The Spear and Shield Law ensures all its services will be completed in accordance with the requirements of corporate and tax law.
A common issue arises when business owners fail to recognize the complexity of a reorganization process. It is not merely administrative; it means preparing and reviewing shareholders' agreements, decisions (resolutions), property (asset) transfer documents, amendments to articles, and bylaws. Often, there is confusion that every reorganization will benefit from tax savings and/or improved business operations. Generally, however, without adequate documentation and filings done promptly, corporations could miss out on deferral opportunities and/or could face fines related to compliance. Another misunderstanding is that reorganization of corporate structure is a one-time process; periodic updates in minute books, share registers, and governance records are necessary. Spear and Shield Law continues to support clients by implementing and sustaining a compliant corporate structure aligned with long-term strategic goals.
