SKIP TO
CONTENT
Corporate Reorganizations
Corporate reorganizations are strategic legal and financial transactions that involve changing the structure, ownership, or operations of a business without necessarily affecting its day-to-day activities. In Ontario, corporate reorganizations are used for a wide range of purposes — including tax planning, succession planning, asset protection, business growth, or compliance with legal or regulatory requirements.
These reorganizations may involve transferring assets or shares between related entities, introducing a holding company, converting debt to equity, freezing the value of shares for estate planning purposes, or amalgamating multiple corporations. Common types of corporate reorganizations include estate freezes, share rollovers under section 85 of the Income Tax Act, incorporations of holding companies, butterfly transactions, amalgamations, continuances, and wind-ups. When structured properly, these reorganizations allow businesses and their owners to operate more efficiently, reduce tax exposure, and prepare for future transactions such as a sale, investment, or intergenerational transfer.
Our Corporate Reorganization Services
Issuing New Shares
We assist businesses in issuing new shares to bring in new investors, adjust ownership proportions, or comply with shareholder agreements. This process involves careful drafting and review to ensure compliance with the Ontario Business Corporations Act (OBCA) or the Canada Business Corporations Act (CBCA).
Transferring Assets or Shares Between Related Entities:
One common form of corporate reorganization involves transferring assets or shares between related corporations, typically for tax planning, liability management, or operational efficiency. These transactions are often completed on a tax-deferred basis under section 85 of the Income Tax Act, which allows a shareholder or corporation to transfer eligible property to another corporation in exchange for shares without triggering immediate capital gains tax. For example, an operating company may transfer assets to a newly incorporated holding company, or a professional may roll over shares of an existing corporation into a family trust.
These types of reorganizations must be carefully planned and properly documented through legal agreements, resolutions, and filings to ensure compliance with both corporate and tax law. The goal is often to centralize ownership, prepare for an eventual sale or freeze, separate business lines, or limit risk exposure while preserving continuity in operations.
Butterfly Transactions
A butterfly transaction is a complex type of corporate reorganization used to divide the assets of a corporation between shareholders, often in the context of a corporate split, business succession, or the separation of family or partner-owned business interests. It allows a corporation to transfer assets to one or more other corporations on a tax-deferred basis, typically under subsection 55(3) of the Income Tax Act, provided strict conditions are met. There are two main types of butterfly transactions: related-party butterflies, which are generally more flexible, and divisional (or unrelated-party) butterflies, which involve additional restrictions and are often scrutinized more closely by the Canada Revenue Agency.
The purpose of a butterfly is usually to allow shareholders to go their separate ways or to isolate different lines of business under separate ownership while avoiding immediate tax consequences. Due to their technical complexity and the risk of adverse tax outcomes if improperly structured, butterfly reorganizations must be carefully planned with input from tax advisors and legal counsel, and implemented through a combination of rollover agreements, share redemptions, and corporate resolutions.
Restructuring Share Attributes
Whether you need to adjust voting rights, dividend entitlements, or liquidation preferences, our team can help restructure share classes to meet your objectives. Share restructuring is often a critical component of shareholder negotiations or investment agreements.
Estate Freezes
An estate freeze is a powerful corporate reorganization strategy used to lock in the current value of a shareholder’s interest in a corporation, allowing future growth to accrue to other beneficiaries—typically the next generation or a family trust. In Ontario, estate freezes are commonly used as part of succession planning to facilitate the smooth transition of a family business while minimizing future capital gains tax liability. The process usually involves the current owner exchanging their common shares (which carry growth potential) for fixed-value preferred shares, effectively “freezing” the value of their interest at today’s fair market value.
New common shares are then issued to the intended successors—either directly or through a discretionary family trust—so that any future growth in the value of the business accrues to them. Estate freezes often rely on section 85 rollover provisions of the Income Tax Act to avoid triggering immediate tax consequences, and may be paired with a shareholder agreement, trust structure, or secondary freeze in the future. These reorganizations must be carefully structured to comply with tax rules, valuation principles, and corporate law requirements, and are typically used by business owners who want to retain control while beginning to transfer wealth in a tax-efficient manner.
Fore more information about estate freezes, please read our article on the topic by clicking here.
Tax-Free Share Exchanges (Section 86 of the Income Tax Act)
We facilitate tax-free share exchanges under Section 86 of the Income Tax Act, enabling you to reorganize ownership structures without triggering immediate tax liabilities. This is particularly useful during succession planning, mergers, or acquisitions.
Transferring Shares to or from a Holding Company
A holding company is a corporation created primarily to own shares or assets of other companies rather than to carry on an active business. In Ontario, holding companies are often used as part of a tax or corporate reorganization to facilitate income splitting, asset protection, or long-term estate planning. For example, a business owner may transfer shares of an operating company to a newly formed holding company on a tax-deferred basis using a section 85 rollover, thereby removing surplus cash or retained earnings from the operating company via intercorporate dividends.
Holding companies can also centralize ownership of multiple businesses, protect operating companies from financial risk, or serve as a repository for investment income. While relatively simple to incorporate, a holding company’s effectiveness depends on how it is structured, how it interacts with related entities, and how its activities are managed from a tax and legal standpoint. When implemented correctly, it is a powerful tool for long-term planning, risk management, and wealth preservation.
Amalgamations
An amalgamation is a legal process where two or more corporations merge into a single entity, combining their assets, liabilities, and corporate identities. In Ontario, amalgamations are governed by the Business Corporations Act (OBCA) or the Canada Business Corporations Act (CBCA), depending on the jurisdiction of incorporation. Amalgamations are used for a variety of reasons, including simplifying a corporate group structure, merging affiliated companies, acquiring another corporation, or streamlining operations.
There are two main types: long-form amalgamations, which require shareholder approval and formal agreements, and short-form amalgamations, which may be completed without shareholder approval if certain conditions are met (such as where one corporation is wholly owned by the other). Following the amalgamation, the newly formed corporation assumes all the rights and obligations of its predecessors, and the predecessor corporations cease to exist. Proper planning, documentation, and due diligence are essential to ensure the amalgamation is legally effective and tax efficient.
Continuances
A continuance, also known as a corporate migration, involves transferring a corporation from one jurisdiction to another while maintaining its legal existence. In Ontario, a corporation may continue into or out of the province under the OBCA or CBCA, subject to compliance with applicable requirements. Continuances are often used when a corporation wants to change its governing corporate law—for instance, moving a federal corporation to Ontario to reduce filing obligations, or continuing an Ontario corporation into another province or country for regulatory, tax, or operational reasons.
The process involves obtaining shareholder approval, satisfying regulatory filings in both jurisdictions, and confirming that the corporation’s rights and obligations remain uninterrupted. Continuances are frequently used in cross-border reorganizations, mergers, or restructurings, and must be carefully reviewed to ensure that contractual obligations, tax residency, and regulatory licenses remain intact after the move.
Wind-Ups
A corporate wind-up involves dissolving a corporation and distributing its assets to shareholders, either voluntarily or as part of a broader reorganization. Wind-ups may occur when a corporation is no longer active, has completed its business purpose, or is being absorbed by a parent or related entity. In the context of corporate reorganizations, a vertical wind-up typically involves winding up a wholly owned subsidiary into its parent corporation. This allows for the consolidation of assets, elimination of redundant entities, and potential tax deferral if done properly under section 88 of the Income Tax Act. The process requires formal resolutions, clearance of liabilities, and appropriate filings with the Ministry of Public and Business Service Delivery. Wind-ups must be carefully managed to address creditor claims, contractual obligations, and tax consequences, especially where assets are being distributed in-kind.
Section 85 Rollovers
We help clients execute Section 85 rollovers under the Income Tax Act, allowing for the tax-deferred transfer of assets, such as shares or real estate, into a corporation. This strategy is ideal for incorporating sole proprietorships or partnerships.
Shareholder Buyouts and Divestitures
Whether you’re buying out a shareholder or selling part of your business, our team can handle the legal and tax complexities involved. These reorganizations often include drafting agreements, ensuring regulatory compliance, and minimizing tax impacts.
Collaboration with Your Accountant
Corporate reorganizations often have significant tax implications. That’s why we collaborate closely with your accountant to ensure the reorganization aligns with your financial and tax goals. We can also assist in obtaining tax memos to guide the process and minimize potential liabilities.
Why Choose Jahanshahi Business Law Firm?
At Jahanshahi Law Firm, we advise business owners, professionals, and private corporations on all aspects of corporate reorganizations, from initial planning to legal implementation. We take a strategic, detail-oriented approach to ensure that every reorganization is tailored to the client’s objectives—whether that involves tax planning, succession, asset protection, simplification of corporate structure, or preparing for a sale or investment.
We regularly work alongside accountants, tax advisors, and financial planners to design and execute reorganizations such as estate freezes, holding company structures, section 85 rollovers, butterfly transactions, amalgamations, wind-ups, and continuances. Our role includes drafting and reviewing all required legal documents—such as share transfer agreements, articles of amendment or amalgamation, resolutions, tax election forms, and trust deeds—while ensuring compliance with both corporate law and tax legislation.
Reorganizations must be handled with precision. Improperly structured transactions can result in unintended tax consequences, regulatory issues, or disputes among shareholders or beneficiaries. Our firm ensures that your structure is not only legally sound, but also aligned with your broader business and personal goals.
Whether you are a family-owned business planning for intergenerational transition, a professional looking to restructure for tax efficiency, or an owner preparing to exit your company, we provide the legal insight and execution needed to get it done properly, efficiently, and with your long-term interests in mind.
Contact Us
If you are considering a corporate reorganization, reach out to Jahanshahi Business Law Firm today. Our team will guide you through the process and help you achieve your business objectives efficiently and effectively.