This agreement involves both a share purchase and rollover. In order to defer the tax implications related to the transfer of property in exchange for shares, the parties may elect to have subsection 85(1) of the Canada Income Tax Act and section 518 of the Quebec Taxation Act apply to the transaction. This type of transaction is particularly useful when forming a holding company for a taxpayer.

This transaction allows one to transfer admissible property (in this case, shares) in consideration of at least one share in the corporation and to benefit from a deferral of all or part of the tax implications. This transfer may trigger a taxable capital gain when the proceeds from disposing of the shares is higher than the cost of acquiring them. The taxation of such a gain can be problematic if the consideration received for the sale of such shares does not cover payment of the related tax bill.

A rollover allows the vendor and purchaser to determine an agreed amount for the purchased shares. This amount represents the proceeds from the sale of the property for the vendor, who is therefore able to set the sale price and determine the revenue it will generate. If the fixed amount is equal to the cost of acquiring the share, the full amount of the gain will be rolled over.

We recommend using this share purchase and rollover template to transfer shares between a taxpayer and a corporation that the latter controls, and when the proceeds from the sale of such shares is greater than the book value. By using a rollover agreement, the parties hope that the vendor will avoid being penalized for reorganizing its internal structure. As such, subject to certain conditions, the law allows you to defer payment of any such tax that is payable.

TABLE OF CONTENTS

0.00 INTERPRETATION
0.01 Terminology
0.01.01 Agreement
0.01.02 CBCA
0.01.03 Corporation
0.01.04 ITA
0.01.05 QTA
0.01.06 Shares
0.02 Entire Agreement
0.03 Applicable Law
0.04 Non-Compliance
0.04.01 Severability
0.04.02 Substitute Provision
0.05 Miscellaneous
0.05.01 Cumulative Rights
0.05.02 No Waiver
0.05.03 Time and Days
a) Time of the Essence
b) Computation of Time
c) Delays
0.05.04 Financial References
0.05.05 Cross-References
0.05.06 Gender and Number
0.05.07 Headings
0.05.08 Presumptions
0.05.09 Knowledge
0.05.10 Approval
0.05.11 Accounting Standards
1.00 PURPOSE
2.00 CONSIDERATION
3.00 TERMS OF PAYMENT
3.01 Payment Allocation
3.02 Promissory Note
3.03 Issue of Shares
3.03.01 Quantity
3.03.02 Description
4.00 SECURITY
5.00 MUTUAL REPRESENTATIONS AND WARRANTIES
6.00 REPRESENTATIONS AND WARRANTIES OF VENDOR
6.01 Status
6.01.01 Corporation
6.01.02 Authority
6.02 Shares
6.02.01 Issue and Payment
6.02.02 Ownership
6.02.03 Transferability of Shares
6.02.04 Fair Market Value
6.02.05 Dividends
6.03 Civil Status and Matrimonial Regime
7.00 REPRESENTATIONS AND WARRANTIES OF PURCHASER
7.01 Corporate Status
7.02 Authority
7.03 Legal Advice
7.04 Disclosure
8.00 MUTUAL DUTIES AND OBLIGATIONS
8.01 Representations and Warranties
8.02 Indemnification
8.02.01 Scope
8.02.02 Threshold
8.02.03 Procedure
8.03 Disclosure of Existence of Agreement
8.03.01 Undertaking
8.03.02 Public Announcement
8.03.03 Exception
8.03.04 Default
9.00 DUTIES AND OBLIGATIONS OF VENDOR
10.00 DUTIES AND OBLIGATIONS OF PURCHASER
11.00 SPECIAL PROVISIONS
11.01 Agreed Value of Shares
11.02 Rollover
11.02.01 Election
11.02.02 Adjustment
a) Undertaking
b) Procedure
i) Articles
ii) Higher Value
iii) Lower Value
c) Disputing Assessment
d) Divergence Between Assessments
11.02.03 Additional Formalities
11.03 Assignment
11.03.01 Prohibition
11.03.02 Effect of Breach
11.04 Encumbrance
11.04.01 Prohibition
11.04.02 Effect of Breach
11.05 Further Assurances
11.06 Remedies
11.06.01 Choice
11.06.02 No Limitations
12.00 GENERAL PROVISIONS
12.01 Notice
12.02 Dispute Resolution
12.02.01 Written Notice
12.02.02 Mediation
12.02.03 Arbitration
12.03 Election
12.04 Counterparts
12.05 Amendment
12.06 No Waiver
12.07 Language
13.00 TERMINATION
14.00 EFFECTIVE DATE
15.00 DURATION
15.01 Survival
15.02 Transfer of Ownership
16.00 SCOPE


LIST OF SCHEDULES

SCHEDULE A – EXCERPT OF A RESOLUTION
SCHEDULE 3.01 – SUMMARY OF TERMS OF PAYMENT
SCHEDULE 3.02 – PROMISSORY NOTE
SCHEDULE 6.02.03 – RESOLUTION AUTHORIZING THE TRANSFER
SCHEDULE 6.03 – INTERVENTION BY A SPOUSE