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Mergers and Acquisitions in Canada

When two companies amalgamate, all assets and liabilities of the two amalgamated companies will continue in the amalgamated company (“Amalco”). However, the pension plans of the two merging entities do not automatically merge just because the two companies themselves have merged. Each of the plans will continue to exist separate and apart from the other unless Amalco takes steps to merge the plans. As a result, Amalco may end up with more than one pension plan and all employees of the two amalgamated entities (both current and new) may end up being entitled to participate in one or more of Amalco’s plans because they may meet the definition of “employee” or “member” in more than one Amalco pension plan. For this reason, it is important for Amalco to take steps to amend its pension and other benefit plans prior to, or on, the amalgamation date to clarify which Amalco employees should participate in which plans (i.e. depending on their location, job description, division, etc.). Amendments should also be made to all of Amalco’s plans no later than the date of the amalgamation.

If Amalco wishes to merge the pension plans of the two merging entities, regulatory approval will be required. As noted above, such approval may be difficult to obtain. Before merging pension plans, the pre-merger plan and funding documents (both historical and current) must be reviewed in order to determine if a merger is legally permitted. Accordingly, a legal opinion should be sought before any steps are taken to merge two pension plans.

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