Section 26 — Canada Business Corporations Act: Stated capital account

A corporation shall maintain a separate stated capital account for each class and series of shares it issues. A corporation shall add to the appropriate stated capital account the full amount of any consideration it receives for any shares it issues. 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 in exchange for 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 , 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 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 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. 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. 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 the amount to be added was not received by the corporation as consideration for the issue of shares, and 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). 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. 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. 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. 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. A corporation shall not reduce its stated capital or any stated capital account except in the manner provided in this Act. Subsections (1) to (10) and any other provisions of this Act relating to stated capital do not apply to an open-end mutual fund. 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.