Cross-Border Transactions

Exchangeable Shares

Cross-border acquisitions of Canadian companies by U.S., U.K. and many other foreign buyers has expanded greatly over the last 20 years. Much of this cross-border investment has been by way of cash acquisitions. However, in times of economic uncertainty, buyers are often loath to part with their hard earned money and lenders may be more restrictive in what they will finance.

In such situations, buyers should consider structuring their cross-border acquisitions as exchangeable share transactions which will enable them to invest in Canadian companies using share rather than cash consideration. While direct cross-border share for share exchanges are not tax effective for Canadian sellers, exchangeable share structures are flexible enough to accommodate almost any buyer and seller arrangement while providing tax benefits to both parties.

A more detailed discussion of why the use of exchangeable shares has become popular, the basic structure of an exchangeable share transaction and the principal corporate, tax and securities issues which arise in connection with this type of transaction, can be found at "U.S.-Canada Cross-Border Transactions Using Exchangeable Shares" and "Special Issues with Canadian Exchangeable Share Structures in Cross-Border Transactions". Additional information is also available at the Cross-Border and International Transactions page of our website.