If a Canadian corporation is declaring a dividend to its shareholders, some thought needs to be given to the type of dividend that is being declared and the type of resolution that should be signed to document the declaration. Dividends are payments out of the corporation paid to shareholders. When properly declared, they can be paid out as cash, shares, warrants or property.
We frequently are asked to prepare the necessary director’s resolution and advise on how to administer the dividend payment. There are differing requirements with respect to each form of dividend being declared.
Depending on corporate status, an eligible dividend may be declared. For eligible dividends, a corporation must notify shareholders that an eligible dividend is being paid. Corporations must designate each eligible dividend that is paid, before or at the time the dividends are paid, and notify shareholders in writing that the dividend is eligible, as required under subsection 89(14) of the Income Tax Act.
If the decision is made by the board of directors to declare an eligible dividend, it is important to ensure the appropriate director’s resolution is prepared to notify the shareholders.
If you’d like to talk about dividend declarations or any other form of corporate resolution, feel free to contact J.P. McAvoy of ConductLaw at our Ottawa office.
ConductLaw is an Ottawa based business law firm with locations in Ottawa, Barrhaven and Kanata. Our professionals are experienced business lawyers who can help implement tax structures that manage tax obligations, whether as a corporation, partnership, family trust, testamentary trust, or any other type of legal entity.
ConductLaw is an Ottawa based business law firm with three locations in the Ottawa area to serve clients. Feel free to call or write one of our professionals at firstname.lastname@example.org or 613.440.4888 for all of your business, commercial, real estate and estate planning needs.