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

Marginal note:Issue of shares

• 25 (1) Subject to the articles, the by-laws and any unanimous shareholder agreement and to section 28, shares may be issued at such times and to such persons and for such consideration as the directors may determine.

• Marginal note:Shares non-assessable

  (2) Shares issued by a corporation are non-assessable and the holders are not liable to the corporation or to its creditors in respect thereof.

• Marginal note:Consideration

  (3) A share shall not be issued until the consideration for the share is fully paid in money or in property or past services that are not less in value than the fair equivalent of the money that the corporation would have received if the share had been issued for money.

• Marginal note:Consideration other than money

  (4) In determining whether property or past services are the fair equivalent of a money consideration, the directors may take into account reasonable charges and expenses of organization and reorganization and payments for property and past services reasonably expected to benefit the corporation.

• Marginal note:Definition of property

  (5) For the purposes of this section, property does not include a promissory note, or a promise to pay, that is made by a person to whom a share is issued, or a person who does not deal at arm’s length, within the meaning of that expression in the Income Tax Act, with a person to whom a share is issued.

Marginal note:Stated capital account

• 26 (1) A corporation shall maintain a separate stated capital account for each class and series of shares it issues.

• Marginal note:Entries in stated capital account

  (2) A corporation shall add to the appropriate stated capital account the full amount of any consideration it receives for any shares it issues.

• Marginal note:Exception for non-arm’s length transactions

  (3) Despite subsection (2), a corporation may, subject to subsection (4), add to the stated capital accounts maintained for the shares of classes or series the whole or any part of the amount of the consideration that it receives in an exchange if the corporation issues shares

  • (a) in exchange for

    • (i) property of a person who immediately before the exchange did not deal with the corporation at arm’s length within the meaning of that expression in the Income Tax Act,

    • (ii) shares of, or another interest or right in, a body corporate that immediately before the exchange, or that because of the exchange, did not deal with the corporation at arm’s length within the meaning of that expression in the Income Tax Act, or

    • (iii) property of a person who, immediately before the exchange, dealt with the corporation at arm’s length within the meaning of that expression in the Income Tax Act, if the person, the corporation and all the holders of shares in the class or series of shares so issued consent to the exchange; or

  • (b) pursuant to an agreement referred to in subsection 182(1) or an arrangement referred to in paragraph 192(1)(b) or (c) or to shareholders of an amalgamating body corporate who receive the shares in addition to or instead of securities of the amalgamated body corporate.

• Marginal note:Limit on addition to a stated capital account

  (4) On the issue of a share a corporation shall not add to a stated capital account in respect of the share it issues an amount greater than the amount of the consideration it received for the share.

• Marginal note:Constraint on addition to a stated capital account

  (5) Where a corporation proposes to add any amount to a stated capital account it maintains in respect of a class or series of shares, if

  • (a) the amount to be added was not received by the corporation as consideration for the issue of shares, and

  • (b) the corporation has issued any outstanding shares of more than one class or series,

  the addition to the stated capital account must be approved by special resolution unless all the issued and outstanding shares are shares of not more than two classes of convertible shares referred to in subsection 39(5).

• Marginal note:Other additions to stated capital

  (6) When a body corporate is continued under this Act, it may add to a stated capital account any consideration received by it for a share it issued and a corporation at any time may, subject to subsection (5), add to a stated capital account any amount it credited to a retained earnings or other surplus account.

• Marginal note:Transitional

  (7) When a body corporate is continued under this Act, subsection (2) does not apply to the consideration received by it before it was so continued unless the share in respect of which the consideration is received is issued after the corporation is so continued.

• Marginal note:Idem

  (8) When a body corporate is continued under this Act, any amount unpaid in respect of a share issued by the body corporate before it was so continued and paid after it was so continued shall be added to the stated capital account maintained for the shares of that class or series.

• Marginal note:Transitional

  (9) For the purposes of subsection 34(2), sections 38 and 42, and paragraph 185(2)(a), when a body corporate is continued under this Act its stated capital is deemed to include the amount that would have been included in stated capital if the body corporate had been incorporated under this Act.

• Marginal note:Restriction

  (10) A corporation shall not reduce its stated capital or any stated capital account except in the manner provided in this Act.

• Marginal note:Exception for an open-end mutual fund

  (11) Subsections (1) to (10) and any other provisions of this Act relating to stated capital do not apply to an open-end mutual fund.

• Marginal note:Definition of open-end mutual fund

  (12) For the purposes of this section, open-end mutual fund means a distributing corporation that carries on only the business of investing the consideration it receives for the shares it issues, and all or substantially all of those shares are redeemable on the demand of a shareholder.

Marginal note:Shares in series

• 27 (1) The articles may authorize, subject to any limitations set out in them, the issue of any class of shares in one or more series and may do either or both of the following:

  • (a) fix the number of shares in, and determine the designation, rights, privileges, restrictions and conditions attaching to the shares of, each series; or

  • (b) authorize the directors to fix the number of shares in, and determine the designation, rights, privileges, restrictions and conditions attaching to the shares of, each series.

• Marginal note:Series participation

  (2) If any cumulative dividends or amounts payable on return of capital in respect of a series of shares are not paid in full, the shares of all series of the same class participate rateably in respect of accumulated dividends and return of capital.

• Marginal note:Restrictions on series

  (3) No rights, privileges, restrictions or conditions attached to a series of shares authorized under this section shall confer on a series a priority in respect of dividends or return of capital over any other series of shares of the same class that are then outstanding.

• Marginal note:Amendment of articles

  (4) If the directors exercise their authority under paragraph (1)(b), they shall, before the issue of shares of the series, send, in the form that the Director fixes, articles of amendment to the Director to designate a series of shares.

• Marginal note:Certificate of amendment

  (5) On receipt of articles of amendment designating a series of shares, the Director shall issue a certificate of amendment in accordance with section 262.

• Marginal note:Effect of certificate

  (6) The articles of the corporation are amended accordingly on the date shown in the certificate of amendment.

Marginal note:Pre-emptive right

• 28 (1) If the articles so provide, no shares of a class shall be issued unless the shares have first been offered to the shareholders holding shares of that class, and those shareholders have a pre-emptive right to acquire the offered shares in proportion to their holdings of the shares of that class, at such price and on such terms as those shares are to be offered to others.

• Marginal note:Exception

  (2) Notwithstanding that the articles provide the pre-emptive right referred to in subsection (1), shareholders have no pre-emptive right in respect of shares to be issued

  • (a) for a consideration other than money;

  • (b) as a share dividend; or

  • (c) pursuant to the exercise of conversion privileges, options or rights previously granted by the corporation.

Marginal note:Options and rights

• 29 (1) A corporation may issue certificates, warrants or other evidences of conversion privileges, options or rights to acquire securities of the corporation, and shall set out the conditions thereof

  • (a) in the certificates, warrants or other evidences; or

  • (b) in certificates evidencing the securities to which the conversion privileges, options or rights are attached.

• Marginal note:Transferable rights

  (2) Conversion privileges, options and rights to acquire securities of a corporation may be made transferable or non-transferable, and options and rights to acquire may be made separable or inseparable from any securities to which they are attached.

• Marginal note:Reserved shares

  (3) Where a corporation has granted privileges to convert any securities issued by the corporation into shares, or into shares of another class or series, or has issued or granted options or rights to acquire shares, if the articles limit the number of authorized shares, the corporation shall reserve and continue to reserve sufficient authorized shares to meet the exercise of such conversion privileges, options and rights.

Marginal note:Restriction regarding bearer shares

• 29.1 (1) Despite section 29, a corporation shall not issue, in bearer form, a certificate, warrant or other evidence of a conversion privilege, option or right to acquire a share of the corporation.

• Marginal note:Replacement

  (2) A corporation shall, on the request of a holder of a certificate, warrant or other evidence of a conversion privilege, option or right to acquire a share of the corporation that is in bearer form and that was issued before the coming into force of this section, issue in exchange to that holder, in registered form, a certificate, warrant or other evidence, as the case may be.

Marginal note:Corporation holding its own shares

• 30 (1) Subject to subsection (2) and sections 31 to 36, a corporation

  • (a) shall not hold shares in itself or in its holding body corporate; and

  • (b) shall not permit any of its subsidiary bodies corporate to acquire shares of the corporation.

• Marginal note:Subsidiary holding shares of its parent

  (2) Subject to section 31, a corporation shall cause a subsidiary body corporate of the corporation that holds shares of the corporation to sell or otherwise dispose of those shares within five years from the date

  • (a) the body corporate became a subsidiary of the corporation; or

  • (b) the corporation was continued under this Act.

Marginal note:Exception

• 31 (1) A corporation may in the capacity of a personal representative hold shares in itself or in its holding body corporate unless it or the holding body corporate or a subsidiary of either of them has a beneficial interest in the shares.

• Marginal note:Idem

  (2) A corporation may hold shares in itself or in its holding body corporate by way of security for the purposes of a transaction entered into by it in the ordinary course of a business that includes the lending of money.

• Marginal note:Exception — subsidiary acquiring shares

  (3) A corporation may permit any of its subsidiary bodies corporate to acquire shares of the corporation

  • (a) in the subsidiary’s capacity as a personal representative, unless the subsidiary would have a beneficial interest in the shares; or

  • (b) by way of security for the purposes of a transaction entered into by the subsidiary in the ordinary course of a business that includes the lending of money.

• Marginal note:Exception — conditions precedent

  (4) A corporation may permit any of its subsidiary bodies corporate to acquire shares of the corporation through the issuance of those shares by the corporation to the subsidiary body corporate if, before the acquisition takes place, the conditions prescribed for the purposes of this subsection are met.

• Marginal note:Conditions subsequent

  (5) After an acquisition has taken place under the purported authority of subsection (4), the conditions prescribed for the purposes of this subsection must be met.

• Marginal note:Non-compliance with conditions

  (6) If

  • (a) a corporation permits a subsidiary body corporate to acquire shares of the corporation under the purported authority of subsection (4), and

  • (b) either

    • (i) one or more of the conditions prescribed for the purposes of subsection (4) were not met, or

    • (ii) one or more of the conditions prescribed for the purposes of subsection (5) are not met or cease to be met,

  then, notwithstanding subsections 16(3) and 26(2), the prescribed consequences apply in respect of the acquisition of the shares and their issuance.

Marginal note:Exception relating to Canadian ownership

• 32 (1) Subject to subsection 39(8), a corporation may, for the purpose of assisting 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, hold shares in itself that

  • (a) are not constrained for the purpose of assisting the corporation or any of its affiliates or associates to so qualify; or

  • (b) are shares into which shares held under paragraph (a) were converted by the corporation that are constrained for the purpose of assisting the corporation to so qualify and that were not previously held by the corporation.

• Marginal note:Prohibited transfers

  (2) A corporation shall not transfer shares held under subsection (1) to any person unless the corporation is satisfied, on reasonable grounds, that the ownership of the shares as a result of the transfer would assist the corporation or any of its affiliates or associates to achieve the purpose set out in subsection (1).

• Marginal note:Offence

  (3) A corporation that, without reasonable cause, fails to comply with subsection (2) is guilty of an offence and liable on summary conviction to a fine not exceeding five thousand dollars.

• Marginal note:Directors of corporation

  (4) Where a corporation commits an offence under subsection (3), any director of the corporation who knowingly authorized, permitted or acquiesced in the commission of the offence is a party to and guilty of the offence and is liable on summary conviction to a fine not exceeding five thousand dollars or to imprisonment for a term not exceeding six months or to both, whether or not the corporation has been prosecuted or convicted.

• Marginal note:Where shares are transferred

  (5) Where shares held under subsection (1) are transferred by a corporation, subsections 25(1), (3), (4) and (5), paragraph 115(3)(c) and subsection 118(1) apply, with such modifications as the circumstances require, in respect of the transfer as if the transfer were an issue.

• Marginal note:Transfer not void, voidable or null

  (6) No transfer of shares by a corporation shall be void, voidable or, in Quebec, null solely because the transfer is in contravention of subsection (2).