Section 38 — Canada Business Corporations Act: Other reduction of stated capital

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 extinguishing or reducing a liability in respect of an amount unpaid on any share; 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 declaring its stated capital to be reduced by an amount that is not represented by realizable assets. 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. 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 the corporation is, or would after the reduction 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. A creditor of a corporation is entitled to apply to a court for an order compelling a shareholder or other recipient to pay to the corporation an amount equal to any liability of the shareholder that was extinguished or reduced contrary to this section; or 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. 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. [Repealed, 2001, c. 14, s. 23]