There are no mandatory waiting periods in Canada. The dividend is declared by the directors and paid by the corporation on the date provided for in the board resolutions. The dividend can be paid immediately following declaration or on the date specified provided that the solvency test is then met.
Subject to the corporation's articles, any existing shareholder agreement and any specific rights attaching to the class or series of applicable shares, there are generally no statutory timing restrictions on declaring dividends provided that the solvency test is met.
There are no statutory requirements for accounts to support a dividend payment. Directors of the corporation may, however, request financial information to ensure that the solvency test is met prior to approving the dividend.
Subject to a corporation’s articles, any existing shareholder agreement, the specific rights attaching to the series or class of shares on which the dividends are being declared and the solvency test being met, there are no general restrictions on the amount of dividends that can be paid.
Under most corporate statutes in Canada, dividends are subject to two statutory solvency tests that must be met.
For example, under the Ontario Business Corporations Act, the solvency test provides that a dividend cannot be declared or paid if there are reasonable grounds for believing that,
- The corporation is or, after the payment, would be unable to pay its liabilities as they become due; or
- The realizable value of the corporation's assets would thereby be less than the aggregate of,
- Its liabilities, and
- Its stated capital of all classes.
The solvency test is substantially the same in most Canadian provinces and the federal jurisdiction.
It is possible to increase the stated capital account for any given class of shares by crediting amounts from retained earnings or other surplus accounts. If a corporation has more than one class of shares issued and outstanding, the increase to stated capital must be approved by way of a special resolution of the shareholder(s) (requiring 2/3 majority approval). If only one class of shares is issued and outstanding, the increase of stated capital may be completed by way of a resolution of the board of directors.
Not from a Canadian corporate perspective.
Not from a Canadian corporate perspective.
Yes, subject to a corporation's articles, any existing shareholder agreement and the specific rights attaching to the series or class of shares on which the dividends are being declared and subject to meeting the solvency test.
Yes, subject to a corporation's articles, any existing shareholder agreement and the specific rights attaching to the series or class of shares on which the dividends are being declared, a corporation may pay a dividend in money or property or by issuing fully paid shares of the corporation.