§§Corporate Structure

Schedule A —
Ownership.

Filed for the avoidance of doubt. It has not avoided doubt.

The Asking Companythe Parent
owns 100% of ↓
↑ owns 100% of
Asking Companythe Subsidiary
Schedule AOwnership & ControlExecution copy
  1. The Parent owns the Subsidiary. The Asking Company ("the Parent") is the sole legal and beneficial owner of one hundred percent (100%) of the issued shares of Asking Company ("the Subsidiary").
  2. The Subsidiary owns the Parent. Asking Company ("the Subsidiary") is the sole legal and beneficial owner of one hundred percent (100%) of the issued shares of The Asking Company ("the Parent").
  3. Acknowledgement. The parties acknowledge and agree that clauses 1 and 2 are both true, are true simultaneously, and are to be read together. No party has raised an objection. The period for raising objections has closed.
  4. Consolidated accounts. As each entity wholly owns the other, the consolidated value of the group is equal to itself. Management has reviewed this result and interprets it favourably.
  5. Governance. The board of the Parent is appointed by the Subsidiary. The board of the Subsidiary is appointed by the Parent. Both boards consist of the same person. He was not consulted in either case and learned of both appointments here.
  6. Liability. In the event the Parent is unable to meet an obligation, that obligation passes to the Subsidiary, which shall discharge it using funds advanced to it by the Parent. Where the Parent has no funds, the Subsidiary shall advance them.
  7. Distinguishing the entities. The two entities are distinguished from one another by the word "The". Counsel has advised that this is sufficient for all purposes. Counsel is also the same person and was also not consulted.
  8. Dissolution. Neither entity may be wound up without the prior written consent of the other. In each case that consent is given by the same person, who has withheld it indefinitely for reasons he has declined to put in writing.
  9. Precedent. This structure is not unusual. Substantially identical arrangements appear throughout the technology industry, where capital is advanced by one party to a second party which returns it to the first as revenue, and the value of both is revised upward on the strength of the transaction. In that setting the arrangement is referred to as a flywheel. We have adopted the term.
  10. Statutory impediment. Counsel notes that section 30(1) of the Canada Business Corporations Act provides that a corporation shall not hold shares in itself or in its holding body corporate, and that clauses 1 and 2 are therefore not merely impossible but expressly prohibited. Counsel raised this after execution. The period for raising objections had closed (see clause 3).
  11. Ultimate beneficial ownership. Notwithstanding clauses 1 through 10, the applicable legislation requires this company to maintain a register of every individual who owns or controls twenty-five percent (25%) or more of its voting rights or twenty-five percent (25%) or more of the fair market value of its shares, and further requires the naming of any individual holding influence which, if exercised, would result in control in fact of the corporation, irrespective of the structure through which that influence is held. The register has been completed. It contains one name. The structure set out above had no effect on the outcome. He has read this Schedule and has no comment.
For The Asking CompanySole director
For Asking CompanySole director
Witnessed byThe same person

Executed as a deed on a Tuesday. The witness confirms he was present at his own signing and had no notes.

AddendumOpinion of US CounselObtained after execution
  1. It can be done there. Following the impediment identified at clause 10, an opinion was sought as to whether the structure could be effected in the State of Delaware. It can. Section 160(c) of the Delaware General Corporation Law does not prohibit a corporation from holding shares in a corporation that holds it. It provides instead that such shares "shall neither be entitled to vote nor be counted for quorum purposes."
  2. Resulting position. The structure therefore survives in Delaware in the following form: both entities exist, both are wholly owned, and none of the shares may vote. The company would be complete, solvent, properly constituted, and permanently unable to decide anything.
  3. Management response. Management regards this as an improvement. Under clause 5 the boards were appointed without consultation. Under the Delaware arrangement no appointment is possible at all and the question does not arise.
  4. As to the register. The United States required equivalent disclosure under the Corporate Transparency Act until March 2025, when an interim final rule redefined "reporting company" to mean entities formed under the law of a foreign country, thereby exempting domestic companies and approximately ninety-nine percent (99%) of the entities previously obliged to report. That rule has not been finalized. Accordingly the name appearing on the register at clause 11 appears nowhere.
  5. Instruction sought. Counsel was asked whether this was the intended result of the legislation. Counsel replied that the question fell outside the scope of the retainer.

This addendum is not incorporated into the deed. The period for incorporating addenda had closed (see clause 3).

In Closing

One dollar. That's it.