Question
Are there any restrictions on a corporation paying dividends to its shareholders? 1. As per s. 42 of the CBCA, a corporation may not pay
Are there any restrictions on a corporation paying dividends to its shareholders?
1. | As per s. 42 of the CBCA, a corporation may not pay a dividend if (1) there are reasonable grounds for believing that the corporation is, or would after the payment be, unable to pay its liabilities as they become due; and (2) if the realizable value of the corporation's assets would thereby be less than the aggregate of its liabilities plus its stated capital of all classes. | |
2. | The only restriction is what shareholders decide. | |
3. | The only restriction is what a corporation decides. | |
4. | There are no restrictions on a corporation paying dividends because a corporation exists to make a profit for shareholders and therefore restricting sharing the profits is anathema to a corporation's reason for existing. | |
5. | As per s. 42 of the CBCA, a corporation may still pay a dividend to shareholders even if (1) there are reasonable grounds for believing that the corporation is, or would after the payment be, unable to pay its liabilities as they become due; and (2) if the realizable value of the corporation's assets would thereby be less than the aggregate of its liabilities plus its stated capital of all classes. |
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