Canada Business Corporations Act (R.S.C., 1985, c. C-44)

Marginal note:Gift or legacy of shares

37 A corporation may accept from any shareholder a share of the corporation surrendered to it as a gift including, in Quebec, a legacy but may not extinguish or reduce a liability in respect of an amount unpaid on any such share except in accordance with section 38.

Marginal note:Other reduction of stated capital

• 38 (1) Subject to subsection (3), a corporation may by special resolution reduce its stated capital for any purpose including, without limiting the generality of the foregoing, for the purpose of

  • (a) extinguishing or reducing a liability in respect of an amount unpaid on any share;

  • (b) distributing to the holder of an issued share of any class or series of shares an amount not exceeding the stated capital of the class or series; and

  • (c) declaring its stated capital to be reduced by an amount that is not represented by realizable assets.

• Marginal note:Contents of special resolution

  (2) A special resolution under this section shall specify the stated capital account or accounts from which the reduction of stated capital effected by the special resolution will be deducted.

• Marginal note:Limitation

  (3) A corporation shall not reduce its stated capital for any purpose other than the purpose mentioned in paragraph (1)(c) if there are reasonable grounds for believing that

  • (a) the corporation is, or would after the reduction be, unable to pay its liabilities as they become due; or

  • (b) the realizable value of the corporation’s assets would thereby be less than the aggregate of its liabilities.

• Marginal note:Recovery

  (4) A creditor of a corporation is entitled to apply to a court for an order compelling a shareholder or other recipient

  • (a) to pay to the corporation an amount equal to any liability of the shareholder that was extinguished or reduced contrary to this section; or

  • (b) to pay or deliver to the corporation any money or property that was paid or distributed to the shareholder or other recipient as a consequence of a reduction of capital made contrary to this section.

• Marginal note:Limitation

  (5) An action to enforce a liability imposed by this section may not be commenced after two years from the date of the act complained of.

• (6) [Repealed, 2001, c. 14, s. 23]

Marginal note:Adjustment of stated capital account

• 39 (1) On a purchase, redemption or other acquisition by a corporation under section 34, 35, 36, 45 or 190 or paragraph 241(3)(f), of shares or fractions thereof issued by it, the corporation shall deduct from the stated capital account maintained for the class or series of shares of which the shares purchased, redeemed or otherwise acquired form a part an amount equal to the result obtained by multiplying the stated capital of the shares of that class or series by the number of shares of that class or series or fractions thereof purchased, redeemed or otherwise acquired, divided by the number of issued shares of that class or series immediately before the purchase, redemption or other acquisition.

• Marginal note:Idem

  (2) A corporation shall deduct the amount of a payment made by the corporation to a shareholder under paragraph 241(3)(g) from the stated capital account maintained for the class or series of shares in respect of which the payment was made.

• Marginal note:Idem

  (3) A corporation shall adjust its stated capital account or accounts in accordance with any special resolution referred to in subsection 38(2).

• Marginal note:Idem

  (4) On a conversion of issued shares of a corporation into shares of another class or series or a change under section 173, 191 or 241 of issued shares of a corporation into shares of another class or series, the corporation shall

  • (a) deduct from the stated capital account maintained for the class or series of shares converted or changed an amount equal to the result obtained by multiplying the stated capital of the shares of that class or series by the number of shares of that class or series converted or changed, divided by the number of issued shares of that class or series immediately before the conversion or change; and

  • (b) add the result obtained under paragraph (a) and any additional consideration received pursuant to the conversion or change to the stated capital account maintained or to be maintained for the class or series of shares into which the shares have been converted or changed.

• Marginal note:Stated capital of interconvertible shares

  (5) For the purposes of subsection (4) and subject to its articles, where a corporation issues two classes of shares and there is attached to each such class a right to convert a share of the one class into a share of the other class, if a share of one class is converted into a share of the other class, the amount of stated capital attributable to a share in either class is the aggregate of the stated capital of both classes divided by the number of issued shares of both classes immediately before the conversion.

• Marginal note:Cancellation or restoration of shares

  (6) Shares or fractions thereof of any class or series of shares issued by a corporation and purchased, redeemed or otherwise acquired by it shall be cancelled or, if the articles limit the number of authorized shares, may be restored to the status of authorized but unissued shares of the class.

• Marginal note:Exception

  (7) For the purposes of this section, a corporation holding shares in itself as permitted by subsections 31(1) and (2) is deemed not to have purchased, redeemed or otherwise acquired such shares.

• Marginal note:Idem

  (8) For the purposes of this section, a corporation holding shares in itself as permitted by paragraph 32(1)(a) is deemed not to have purchased, redeemed or otherwise acquired the shares at the time they were acquired, but

  • (a) any of those shares that are held by the corporation at the expiration of two years, and

  • (b) any shares into which any of those shares were converted by the corporation and held under paragraph 32(1)(b) that are held by the corporation at the expiration of two years after the shares from which they were converted were acquired

  are deemed to have been acquired at the expiration of the two years.

• Marginal note:Conversion or change of shares

  (9) Shares issued by a corporation and converted into shares of another class or series or changed under section 173, 191 or 241 into shares of another class or series shall become issued shares of the class or series of shares into which the shares have been converted or changed.

• Marginal note:Effect of change of shares on number of unissued shares

  (10) Where the articles limit the number of authorized shares of a class of shares of a corporation and issued shares of that class or of a series of shares of that class have become, pursuant to subsection (9), issued shares of another class or series, the number of unissued shares of the first-mentioned class shall, unless the articles otherwise provide, be increased by the number of shares that, pursuant to subsection (9), became shares of another class or series.

• Marginal note:Repayment

  (11) Debt obligations issued, pledged, hypothecated or deposited by a corporation are not redeemed by reason only that the indebtedness evidenced by the debt obligations or in respect of which the debt obligations are issued, pledged, hypothecated or deposited is repaid.

• Marginal note:Acquisition and reissue of debt obligations

  (12) Debt obligations issued by a corporation and purchased, redeemed or otherwise acquired by it may be cancelled or, subject to any applicable trust indenture or other agreement, may be reissued, pledged or hypothecated to secure any obligation of the corporation then existing or thereafter incurred, and any such acquisition and reissue, pledge or hypothecation is not a cancellation of the debt obligations.

Marginal note:Enforcement of contract to buy shares

• 40 (1) A corporation shall fulfil its obligations under a contract to buy shares of the corporation, except if the corporation can prove that enforcement of the contract would put it in breach of any of sections 34 to 36.

• Marginal note:Status of contracting party

  (2) Until the corporation has fulfilled all its obligations under a contract referred to in subsection (1), the other party retains the status of claimant entitled to be paid as soon as the corporation is lawfully able to do so or, in a liquidation, to be ranked subordinate to the rights of creditors and to the rights of holders of any class of shares whose rights were in priority to the rights given to the holders of the class of shares being purchased, but in priority to the rights of other shareholders.

Marginal note:Commission for sale of shares

41 The directors may authorize the corporation to pay a reasonable commission to any person in consideration of the person’s purchasing or agreeing to purchase shares of the corporation from the corporation or from any other person, or procuring or agreeing to procure purchasers for any such shares.

Marginal note:Dividends

42 A corporation shall not declare or pay a dividend if there are reasonable grounds for believing that

• (a) the corporation is, or would after the payment be, unable to pay its liabilities as they become due; or

• (b) the realizable value of the corporation’s assets would thereby be less than the aggregate of its liabilities and stated capital of all classes.

Marginal note:Form of dividend

• 43 (1) A corporation may pay a dividend by issuing fully paid shares of the corporation and, subject to section 42, a corporation may pay a dividend in money or property.

• Marginal note:Adjustment of stated capital account

  (2) If shares of a corporation are issued in payment of a dividend, the declared amount of the dividend stated as an amount of money shall be added to the stated capital account maintained or to be maintained for the shares of the class or series issued in payment of the dividend.

44 [Repealed, 2001, c. 14, s. 26]

Marginal note:Shareholder immunity

• 45 (1) The shareholders of a corporation are not, as shareholders, liable for any liability, act or default of the corporation except under subsection 38(4), 118(4) or (5), 146(5) or 226(4) or (5).

• Marginal note:Lien or hypothec on shares

  (2) Subject to subsection 49(8), the articles may provide that the corporation has a lien or hypothec on a share registered in the name of a shareholder or the shareholder’s personal representative for a debt of that shareholder to the corporation, including an amount unpaid in respect of a share issued by a body corporate on the date it was continued under this Act.

• Marginal note:Enforcement of lien or hypothec

  (3) A corporation may enforce a lien or hypothec referred to in subsection (2) in accordance with its by-laws.

PART VISale of Constrained Shares

Marginal note:Sale of constrained shares by corporation

• 46 (1) A corporation that has constraints on the issue, transfer or ownership of its shares of any class or series may, for any of the purposes referred to in paragraphs (a) to (c), sell, under the conditions and after giving the notice that may be prescribed, as if it were the owner of the shares, any of those constrained shares that are owned, or that the directors determine in the manner that may be prescribed may be owned, contrary to the constraints in order to

  • (a) assist the corporation or any of its affiliates or associates to qualify under any prescribed law of Canada or a province to receive licences, permits, grants, payments or other benefits by reason of attaining or maintaining a specified level of Canadian ownership or control;

  • (b) assist the corporation to comply with any prescribed law; or

  • (c) attain or maintain a level of Canadian ownership specified in its articles.

• Marginal note:Obligations of directors in sale

  (2) Where shares are to be sold by a corporation under subsection (1), the directors of the corporation shall select the shares for sale in good faith and in a manner that is not unfairly prejudicial to, and does not unfairly disregard the interests of, the holders of the shares in the constrained class or series taken as a whole.

• Marginal note:Effect of sale

  (3) If shares are sold by a corporation under subsection (1), the owner of the shares immediately before the sale shall by that sale be divested of their interest or right in the shares, and the person who, but for the sale, would be the registered owner of the shares or a person who satisfies the corporation that, but for the sale, they could properly be treated as the registered owner or registered holder of the shares under section 51 shall, from the time of the sale, be entitled to receive only the net proceeds of the sale, together with any income earned on the proceeds from the beginning of the month next following the date of the receipt by the corporation of the proceeds of the sale, less any taxes on the proceeds and any costs of administration of a trust fund constituted under subsection 47(1) in relation to the constitution of the fund.

• Marginal note:Subsections 51(4) to (6) apply

  (4) Subsections 51(4) to (6) apply in respect of the person who is entitled under subsection (3) to receive the proceeds of a sale of shares under subsection (1) as if the proceeds were a security and the person were a registered holder or owner of the security.

Marginal note:Proceeds of sale to be trust fund

• 47 (1) The proceeds of a sale by a corporation under subsection 46(1) constitute a trust fund in the hands of the corporation for the benefit of the person entitled under subsection 46(3) to receive the proceeds of the sale, and any such trust fund may be commingled by the corporation with other such trust funds and shall be invested in such manner as may be prescribed.

• Marginal note:Costs of administration

  (2) Reasonable costs of administration of a trust fund referred to in subsection (1) may be deducted from the trust fund and any income earned thereon.

• Marginal note:Appointment of trust company

  (3) Subject to this section, a corporation may transfer any trust fund referred to in subsection (1), and the administration thereof, to a trust company in Canada registered as such under the laws of Canada or a province, and the corporation is thereupon discharged of all further liability in respect of the trust fund.

• Marginal note:Discharge of corporation and trust company

  (4) A receipt signed by a person entitled under subsection 46(3) to receive the proceeds of a sale that constitute a trust fund under subsection (1) shall be a complete discharge of the corporation and of any trust company to which a trust fund is transferred under subsection (3), in respect of the trust fund and income earned thereon paid to such person.

• Marginal note:Vesting in Crown

  (5) A trust fund described in subsection (1), together with any income earned thereon, less any taxes thereon and costs of administration, that has not been claimed by a person entitled under subsection 46(3) to receive the proceeds of a sale that constitute the trust fund for a period of ten years after the date of the sale vests in Her Majesty in right of Canada.

• Marginal note:Escheats Act applies

  (6) Sections 3 to 5 of the Escheats Act apply in respect of a trust fund that vests in Her Majesty in right of Canada under subsection (5).