Our Response To The CRA's Position On Creditor-Proofing Reorganizations – Part 2 (A Case Study)

In this post, we build upon our Response to the CRA's Position on Creditor-Proofing Reorganizations blog by presenting a specific example of a creditor-proofing reorganization. 

Assume that Mr. A owns all of the outstanding shares of a holding corporation ("H-1") which, in turn, owns all of the outstanding shares of an operating corporation ("Opco") which, in addition to operating assets, also has considerable cash exceeding the amount required for use in its business and investments in marketable securities.  Importantly, none of Mr. A, Opco or H-1 has any plan to sell to any unrelated person, in the foreseeable future, any shares in the capital of either Opco or the new holding subsidiary to be incorporated by H-1 that will be called "H-2", or to permit any unrelated person to subscribe for or otherwise acquire any shares of any of H-1, Opco or H-2.