VICTORIA, BC, CANADA In connection with the previously announced going private transaction, Carmanah Technologies Corporation (TSX: CMH) (the “Company” or “Carmanah”) requested an advance tax ruling from the Canada Revenue Agency (the “CRA”) to determine whether the cash sale proceeds to be received by shareholders in connection with the going private transaction will be treated entirely as “proceeds of disposition” for the purposes of a capital gain (or loss) calculation, or whether they will instead be treated in part as a deemed dividend.
Carmanah has now been informed by the CRA that it will rule that part of the proceeds received by shareholders in connection with the transaction will be a deemed dividend. The amount of the dividend received by each shareholder will be equal to the amount by which the proceeds of the shares sold (which will be C$7.35 per share) exceeds the paid up capital of the shares sold. The paid up capital is currently approximately C$4.32 per share and, as such, the deemed dividend will be approximately C$3.03 per share.
In light of the CRA’s position, the Company will report all deemed dividends as required and withhold and remit on all deemed dividends paid to non-residents of Canada as required. The tax consequences of receiving a deemed dividend are set out in detail in the information circular prepared by Carmanah in connection with the special shareholder meeting scheduled for August 13, 2019 to consider and approve the going private transaction. The information circular is currently being mailed to shareholders and copies are available on the Company’s website at www.carmanah.com and on the SEDAR website at www.sedar.com.
Although the ruling is not binding on shareholders, those who wish to report the sale proceeds entirely as “proceeds of disposition” should consult their own tax advisors before doing so. Shareholders should also be aware that deemed dividend treatment is subject to completion of the proposed going private transaction and should apply only to shares held at the time the going private transaction closes, which is expected to be in mid-August 2019. Proceeds received by shareholders for shares sold prior to closing through the facilities of the Toronto Stock Exchange should still be treated entirely as “proceeds of disposition”. In addition, shareholders who are tax exempt (including registered retirement savings plans) may be indifferent to the tax consequences of the going private transaction.
Shareholders are encouraged to speak to their own tax or financial advisers to ensure they fully understand the implications, in their particular circumstances, of receiving proceeds from the going private transaction which are treated as deemed dividends. Nothing in this press release is intended to constitute tax advice to any individual shareholder.
About Carmanah Technologies Corporation
Carmanah designs, develops and distributes a portfolio of products focused on energy optimized LED solutions for infrastructure. Since 1996, we have earned a global reputation for delivering durable, dependable, efficient and cost-effective solutions for industrial applications that perform in some of the world’s harshest environments. We manage our business within three reportable segments: Signals, Illumination and Offshore. The Signals segment provides traffic beacons and sign solutions for the transportation industry. The Illumination segment provides solar powered LED outdoor street lights for municipal and commercial customers, while the Offshore segment specializes in the provision of comprehensive safety and marking systems for offshore wind farms.
This release may contain “forward-looking information” and “forward-looking statements” within the meaning of applicable Canadian securities legislation. All information contained herein that is not historical in nature may constitute forward-looking information. Often, but not always, forward-looking statements can be identified by the use of words such as “will” and “expected” or variations of such words and phrases. Forward-looking statements herein include, but are not limited to, statements regarding the anticipated tax treatment of proceeds received by shareholders in connection with the previously announced going private transaction and the expected timing for the closing of that transaction. Such statements are based on management’s current expectations and assumptions. Those expectations and assumptions are currently considered reasonable by management but are inherently subject to business, market and economic risks, uncertainties, and contingencies which may cause the actual results, performance, or achievements of Carmanah to be materially different from any future results, performance, or achievements expressed or implied by the forward-looking statements.
These forward-looking statements are based on management’s current expectations and beliefs but given the uncertainties, assumptions and risks, readers are cautioned not to place undue reliance on such forward-looking statements or information. Carmanah disclaims any obligation to update, or to publicly announce, any such statements, events or developments except as required by law. Risk factors include, among others: the risk that the transaction may not close on a timely basis, the risk that the agreement governing the transaction may be terminated, the risk that all conditions precedent to the closing of the transaction may not be satisfied and the risk that Carmanah will incur costs and may have to make a termination or expense payment.
For additional information on these risks and uncertainties, see Carmanah’s most recently filed Annual Information Form (“AIF”) and Annual MD&A (“MD&A”), which are available on SEDAR at www.sedar.com and on the Company’s website at www.carmanah.com. The risk factors identified in the AIF and MD&A are not intended to represent a complete list of factors that could affect Carmanah. Accordingly, readers should not place undue reliance on forward-looking statements. Carmanah does not assume any obligation to update the forward-looking information contained in this press release, unless required by law.