Marginal note:Deemed dividend
84 (1) Where a corporation resident in Canada has at any time after 1971 increased the paid-up capital in respect of the shares of any particular class of its capital stock, otherwise than by
(a) payment of a stock dividend,
(b) a transaction by which
(i) the value of its assets less its liabilities has been increased, or
(ii) its liabilities less the value of its assets have been decreased,
by an amount not less than the amount of the increase in the paid-up capital in respect of the shares of the particular class,
(c) a transaction by which the paid-up capital in respect of the shares of all other classes of its capital stock has been reduced by an amount not less than the amount of the increase in the paid-up capital in respect of the shares of the particular class,
(c.1) where the corporation is an insurance corporation, any action by which it converts contributed surplus related to its insurance business into paid-up capital in respect of the shares of its capital stock,
(c.2) where the corporation is a bank, any action by which it converts any of its contributed surplus that arose on the issuance of shares of its capital stock into paid-up capital in respect of shares of its capital stock, or
(c.3) where the corporation is neither an insurance corporation nor a bank, any action by which it converts into paid-up capital in respect of a class of shares of its capital stock any of its contributed surplus that arose after March 31, 1977
(i) on the issuance of shares of that class or shares of another class for which the shares of that class were substituted (other than an issuance to which section 51, 66.3, 84.1, 85, 85.1, 86 or 87, subsection 192(4.1) or 194(4.1) or section 212.1 applied),
(ii) on the acquisition of property by the corporation from a person who at the time of the acquisition held any of the issued shares of that class or shares of another class for which shares of that class were substituted for no consideration or for consideration that did not include shares of the capital stock of the corporation, or
(iii) as a result of any action by which the paid-up capital in respect of that class of shares or in respect of shares of another class for which shares of that class were substituted was reduced by the corporation, to the extent of the reduction in paid-up capital that resulted from the action,
the corporation shall be deemed to have paid at that time a dividend on the issued shares of the particular class equal to the amount, if any, by which the amount of the increase in the paid-up capital exceeds the total of
(d) the amount, if any, of the increase referred to in subparagraph 84(1)(b)(i) or the decrease referred to in subparagraph 84(1)(b)(ii), as the case may be,
(e) the amount, if any, of the reduction referred to in paragraph 84(1)(c), and
(f) the amount, if any, of the increase in the paid-up capital that resulted from a conversion referred to in paragraph 84(1)(c.1), (c.2) or (c.3),
and a dividend shall be deemed to have been received at that time by each person who held any of the issued shares of the particular class immediately after that time equal to that proportion of the dividend so deemed to have been paid by the corporation that the number of the shares of the particular class held by the person immediately after that time is of the number of the issued shares of that class outstanding immediately after that time.
Marginal note:Distribution on winding-up, etc.
(2) Where funds or property of a corporation resident in Canada have at any time after March 31, 1977 been distributed or otherwise appropriated in any manner whatever to or for the benefit of the shareholders of any class of shares in its capital stock, on the winding-up, discontinuance or reorganization of its business, the corporation shall be deemed to have paid at that time a dividend on the shares of that class equal to the amount, if any, by which
(a) the amount or value of the funds or property distributed or appropriated, as the case may be,
exceeds
(b) the amount, if any, by which the paid-up capital in respect of the shares of that class is reduced on the distribution or appropriation, as the case may be,
and a dividend shall be deemed to have been received at that time by each person who held any of the issued shares at that time equal to that proportion of the amount of the excess that the number of the shares of that class held by the person immediately before that time is of the number of the issued shares of that class outstanding immediately before that time.
Marginal note:Redemption, etc.
(3) Where at any time after December 31, 1977 a corporation resident in Canada has redeemed, acquired or cancelled in any manner whatever (otherwise than by way of a transaction described in subsection 84(2)) any of the shares of any class of its capital stock,
(a) the corporation shall be deemed to have paid at that time a dividend on a separate class of shares comprising the shares so redeemed, acquired or cancelled equal to the amount, if any, by which the amount paid by the corporation on the redemption, acquisition or cancellation, as the case may be, of those shares exceeds the paid-up capital in respect of those shares immediately before that time; and
(b) a dividend shall be deemed to have been received at that time by each person who held any of the shares of that separate class at that time equal to that portion of the amount of the excess determined under paragraph 84(3)(a) that the number of those shares held by the person immediately before that time is of the total number of shares of that separate class that the corporation has redeemed, acquired or cancelled, at that time.
Marginal note:Reduction of paid-up capital
(4) Where at any time after March 31, 1977 a corporation resident in Canada has reduced the paid-up capital in respect of any class of shares of its capital stock otherwise than by way of a redemption, acquisition or cancellation of any shares of that class or a transaction described in subsection 84(2) or (4.1),
(a) the corporation shall be deemed to have paid at that time a dividend on shares of that class equal to the amount, if any, by which the amount paid by it on the reduction of the paid-up capital, exceeds the amount by which the paid-up capital in respect of that class of shares of the corporation has been so reduced; and
(b) a dividend shall be deemed to have been received at that time by each person who held any of the issued shares at that time equal to that proportion of the amount of the excess referred to in paragraph 84(4)(a) that the number of the shares of that class held by the person immediately before that time is of the number of the issued shares of that class outstanding immediately before that time.
Marginal note:Deemed dividend on reduction of paid-up capital
(4.1) Where at any time after April 10, 1978, a public corporation has reduced the paid-up capital in respect of any class of shares of its capital stock otherwise than by way of a redemption, acquisition or cancellation of any shares of that class or a transaction described in subsection 84(2) or section 86, any amount paid by it on the reduction of the paid-up capital shall be deemed to have been paid by the corporation and received by the person to whom it was paid, as a dividend.
Marginal note:Deemed dividend on term preferred share
(4.2) Where, at any time after November 16, 1978, the paid-up capital in respect of a term preferred share owned by a shareholder that is
(a) a specified financial institution, or
(b) a partnership or trust of which a specified financial institution or a person related to such an institution was a member or a beneficiary,
was reduced otherwise than by way of a redemption, acquisition or cancellation of the share or of a transaction described in subsection 84(2) or (4.1), the amount received by the shareholder on the reduction of the paid-up capital in respect of the share shall be deemed to be a dividend received by the shareholder at that time unless the share was not acquired in the ordinary course of the business carried on by the shareholder.
Marginal note:Deemed dividend on guaranteed share
(4.3) Where at any time after 1987 the paid-up capital in respect of a share of the capital stock of a particular corporation owned
(a) by a shareholder that is another corporation to which subsection 112(2.2) or (2.4) would, if the particular corporation were a taxable Canadian corporation, apply to deny the deduction under subsection 112(1) or (2) or 138(6) of a dividend received on the share, or
(b) by a partnership or trust of which the other corporation is a member or beneficiary, as the case may be,
was reduced otherwise than by way of a redemption, acquisition or cancellation of the share or of a transaction described in subsection 84(2) or (4.1), the amount received by the shareholder on the reduction of the paid-up capital in respect of the share shall be deemed to be a dividend received by the shareholder at that time.
Marginal note:Amount distributed or paid where a share
(5) Where
(a) the amount of property distributed by a corporation or otherwise appropriated to or for the benefit of its shareholders as described in paragraph 84(2)(a), or
(b) the amount paid by a corporation as described in paragraph 84(3)(a) or (4)(a),
includes a share of the capital stock of the corporation, for the purposes of subsections 84(2) to (4) the following rules apply:
(c) in computing the amount referred to in paragraph 84(5)(a) at any time, the share shall be valued at an amount equal to its paid-up capital at that time, and
(d) in computing the amount referred to in paragraph 84(5)(b) at any time, the share shall be valued at an amount equal to the amount by which the paid-up capital in respect of the class of shares to which it belongs has increased by virtue of its issue.
Marginal note:Where s. (2) or (3) does not apply
(6) Subsection 84(2) or (3), as the case may be, is not applicable
(a) in respect of any transaction or event, to the extent that subsection 84(1) is applicable in respect of that transaction or event; and
(b) in respect of any purchase by a corporation of any of its shares in the open market, if the corporation acquired those shares in the manner in which shares would normally be purchased by any member of the public in the open market.
Marginal note:When dividend payable
(7) A dividend that is deemed by this subsection or section 84.1, 128.1 or 212.1 to have been paid at a particular time is deemed, for the purposes of this subdivision and sections 131 and 133, to have become payable at that time.
Marginal note:Where s. (3) does not apply
(8) Subsection 84(3) does not apply to deem a dividend to have been received by a shareholder of a public corporation where the shareholder is an individual resident in Canada who deals at arm’s length with the corporation and the shares redeemed, acquired or cancelled are prescribed shares of the capital stock of the corporation.
Marginal note:Shares disposed of on redemptions, etc.
(9) For greater certainty it is declared that where a shareholder of a corporation has disposed of a share of the capital stock of the corporation as a result of the redemption, acquisition or cancellation of the share by the corporation, the shareholder shall, for the purposes of this Act, be deemed to have disposed of the share to the corporation.
Marginal note:Reduction of contributed surplus
(10) For the purpose of paragraph 84(1)(c.3), there shall be deducted in determining at any time a corporation’s contributed surplus that arose after March 31, 1977 in any manner described in that paragraph the lesser of
(a) the amount, if any, by which the amount of a dividend paid by the corporation at or before that time and after March 31, 1977 and when it was a public corporation exceeded its retained earnings immediately before the payment of the dividend, and
(b) the amount of its contributed surplus immediately before the payment of the dividend referred to in paragraph 84(10)(a) that arose after March 31, 1977.
Marginal note:Computation of contributed surplus
(11) For the purpose of subparagraph 84(1)(c.3)(ii), where the property acquired by the corporation (in this subsection referred to as the “acquiring corporation”) consists of shares (in this subsection referred to as the “subject shares”) of any class of the capital stock of another corporation resident in Canada (in this subsection referred to as the “subject corporation”) and, immediately after the acquisition of the subject shares, the subject corporation would be connected (within the meaning that would be assigned by subsection 186(4) if the references in that subsection to “payer corporation” and “particular corporation” were read as “subject corporation” and “acquiring corporation”, respectively) with the acquiring corporation, the contributed surplus of the acquiring corporation that arose on the acquisition of the subject shares shall be deemed to be the lesser of
(a) the amount added to the contributed surplus of the acquiring corporation on the acquisition of the subject shares, and
(b) the amount, if any, by which the paid-up capital in respect of the subject shares at the time of the acquisition exceeded the fair market value of any consideration given by the acquiring corporation for the subject shares.
- [NOTE: Application provisions are not included in the consolidated text
- see relevant amending Acts and regulations.]
- R.S., 1985, c. 1 (5th Supp.), s. 84
- 1994, c. 7, Sch. II, s. 62, c. 21, s. 35
- 1999, c. 22, s. 23, c. 31, s. 135(F)
- Date modified: