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

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• (6) [Repealed, 2001, c. 14, s. 23]