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Bill C-5

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	Corporate Finance
Power to issue investment shares	135. Subject to this Act, the articles, the by-laws and any unanimous agreement, mem bership shares may only be issued to mem bers, and investment shares may be issued to any person, at any time and for money or in exchange for any thing or service that the directors may determine.
Payment for investment shares	136. (1) A cooperative may not issue an investment share until it is fully paid in money, or past service or any other thing that is not less in value than the fair equivalent of the money that the cooperative would have received if the investment share had been issued for money, but neither a promissory note nor a promise to pay made by a person to whom the investment shares are issued or a person not dealing at arm's length with that person is acceptable in payment of an investment share.
Payment for membership shares	(2) Membership shares may be paid for in money, or past service or any other thing that is not less in value than the fair equivalent of the money that the cooperative would have received if the membership share had been issued for money.
Borrowing	137. Unless the articles, the by-laws or a unanimous agreement provide otherwise, the articles of a cooperative are deemed to state that the directors may, subject to subsection 126(2), without the authorization of the mem bers or shareholders,
	(a) borrow money;
	(b) give debt obligations;
	(c) subject to section 160, give guarantees;
	(d) create security interests in its property; and
	(e) despite paragraph 108(e) and subsection 109(3), delegate any power referred to in any of paragraphs (a) to (d).
Stated capital account	138. (1) A cooperative that is authorized to issue shares must maintain a stated capital account for each class and series of shares that it issues.
Amounts	(2) A cooperative must add to the appropri ate stated capital account the full amount of any money, or the value or any thing or service, that it receives for shares it issues.
Exception for non-arm's length transactions	(3) Despite subsection (2), a cooperative 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 money, or the value of the things and services, it receives in an exchange if the cooperative issues shares
	(a) in exchange for
	(i) property of a person who immediately before the exchange did not deal with the cooperative at arm's length within the meaning of that expression in the Income Tax Act, or
	(ii) shares of, or another interest in, an entity that immediately before the ex change, or that because of the exchange, did not deal with the cooperative at arm's length within the meaning of that expres sion in the Income Tax Act; or
	(b) under an amalgamation or arrangement, or to members or shareholders of an amal gamating body corporate who receive the shares in addition to or instead of securities of the amalgamated cooperative.
Limit on addition to a stated capital account	(4) On the issue of a share, a cooperative may not add to a stated capital account in respect of the share it issues an amount greater than the amount of the money, or the value of the thing or service, it received for the share.
Constraint on addition to a stated capital account	(5) The proposed addition of an amount to a stated capital account maintained by a cooperative in respect of a class or series of shares must be approved in advance by a special resolution of the members and, if the cooperative has issued investment shares, by a separate special resolution of the sharehold ers, the class of shareholders or the holders of the series of investment shares that is affected by the special resolution, if
	(a) the amount to be added was not received by the cooperative as consideration for the issue of the shares; and
	(b) the cooperative has issued shares of more than one class or series that are outstanding.
Membership share inclusion	(6) For greater certainty, if a cooperative issues membership shares with a par value, the cooperative is deemed, for the purposes of subsection 147(2), sections 151 and 154 and paragraphs 160(1)(d) and 299(2)(d), to have a stated capital account for its membership shares that includes each amount that has been received by the cooperative for the member ship shares.
Other additions to stated capital account	139. (1) When a body corporate is contin ued under this Act, it may add to a stated capital account any money, or the value of any thing or service, received by it for a share it issued.
Transitional	(2) When a body corporate is continued under this Act, subsection 138(2) does not apply to the money, or the value of things or services, received by it before it was so continued unless the share in respect of which the money, thing or service received is issued after the body corporate is continued.
Transitional	(3) 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 is added to the stated capital account maintained for the shares of that class or series.
Continued cooperative	(4) For the purposes of subsection 147(2), sections 151 and 154 and paragraphs 160(1)(d) and 299(2)(d), when a cooperative is continued under this Act, its stated capital account is deemed to include the amount that would have been included if the cooperative had been incorporated under this Act.
Membership shares with a par value	(5) When a cooperative is continued under this Act, subsection 138(6) applies if the cooperative has membership shares with a par value.
Restriction	(6) A cooperative must not reduce its stated capital or any stated capital account except in the manner provided in this Act.
Surplus accounts	140. Subject to subsection 138(5), a cooper ative continued under this Act may at any time add to a stated capital account any amount it has credited to a retained earnings or other surplus account.
Shares not assessable	141. The shares of a cooperative are non-assessable and the members and share holders are not liable to the cooperative or to its creditors in respect of them.
Options and rights	142. (1) A cooperative may issue certifi cates, warrants or other evidence of conver sion privileges, options or rights to acquire shares or securities of the cooperative.
Conversion for members only	(2) A conversion privilege, option or right to acquire membership shares may be granted only to members, and is non-transferable.
Conditions	(3) The conditions of the conversion privi leges, options or rights must be set out in
	(a) the certificate, warrant or other evi dence; or
	(b) the certificates evidencing the securities to which the conversion privileges, options or rights are attached.
Transferabi- lity	(4) Subject to subsection (2), conversion privileges, options or rights to acquire securi ties of a cooperative may be made transferable or non-transferable, and options and rights to acquire securities of a cooperative may be made separable or inseparable from any securities to which they are attached.
Reserves	143. If the articles limit the number of authorized shares, the cooperative must re serve sufficient authorized shares to meet the exercise of any conversion privileges, or any options or rights issued or granted by the cooperative to acquire shares.
Holding own shares	144. (1) Subject to sections 145 to 149, a cooperative may not
	(a) hold any shares in itself or in its holding body corporate; or
	(b) permit any of its subsidiaries to hold shares in the cooperative, other than the minimum number of membership shares required by the by-laws of the cooperative to qualify for membership in it.
Disposal of shares	(2) A cooperative must cause any subsid iary that holds shares in the cooperative contrary to subsection (1) to dispose of those shares no later than five years after the date on which
	(a) it became a subsidiary; or
	(b) the cooperative was continued under this Act.
Exception for holding own shares	145. (1) A cooperative may, and may permit its subsidiaries to, hold, in the capacity of a legal representative, shares in itself or in its holding body corporate only if the coopera tive, holding body corporate or subsidiary does not have a beneficial interest in the shares.
Holding shares by way of security	(2) A cooperative may hold shares in itself or its holding body corporate by way of security for the purposes of a transaction entered into by it in the ordinary course of a business that includes the lending of money.
Redemption of membership shares	146. Subject to section 149, a cooperative may at any time redeem any of its membership shares, if issued on a par-value basis at par value and if issued on a no-par-value basis in accordance with the price or formula that is set out in its articles, or, if no such price or formula is set out in the articles, at a fair value.
Acquisition of investment shares	147. (1) Subject to its articles and to subsection (2), a cooperative may at any time acquire any investment share issued by it.
Limitation	(2) A cooperative may not make a payment to acquire investment shares if there are reasonable grounds to believe that
	(a) the cooperative is, or would after the payment be, unable to pay its liabilities as they become due; or
	(b) the realizable value of the cooperative's assets after the payment would be less than the total of the stated capital of all its issued shares and its liabilities.


Redemption of investment shares	(3) Subject to section 149, a cooperative may at any time redeem any of its investment shares that are redeemable, in accordance with any price or formula that may be set out in its articles or, if the articles do not so provide, at fair market value.
Alternative share acquisition	148. Despite section 146 and subsection 147(2), but subject to section 149 and to its articles, a cooperative may acquire shares issued by it
	(a) to satisfy the claim of members or shareholders who dissent under section 302;
	(b) to comply with an order under section 340;
	(c) to settle or compromise a debt or claim asserted by the cooperative;
	(d) to eliminate fractional shares; or
	(e) to fulfil the terms of a non-assignable option or obligation to purchase shares owned by a director, officer or employee.
Limitation on acquisition or redemption	149. A cooperative may not make a pay ment to acquire or redeem a share under section 146 or 148 if there are reasonable grounds to believe that
	(a) the cooperative is, or would after the payment be, unable to pay its liabilities as they become due; or
	(b) the realizable value of the cooperative's assets after the payment would be less than the total of
	(i) its liabilities, and
	(ii) the amount that would be required to pay the holders of shares that have a right to be paid, on a redemption or liquida tion, rateably with or in priority to the holders of the shares to be purchased or redeemed.
Cancellation or resurrection of shares	150. Shares of a cooperative that are redeemed or otherwise acquired by it are cancelled or, if the articles limit the number of authorized shares, restored to the status of unissued shares.
Reduction of capital	151. (1) Subject to subsection (2), a cooper ative may reduce its stated capital for any purpose, by special resolution of its members and, if an investment share is proposed to be affected by the reduction, by the holders of the investment shares.
Limitation on reductions	(2) A cooperative may not reduce its stated capital if there are reasonable grounds to believe that
	(a) the cooperative is, or would after the payment be, unable to pay its liabilities as they become due; or
	(b) the realizable value of the cooperative's assets after the reduction would be less than the total of its liabilities.
Exception	(3) Subsection (2) does not apply to a reduction of stated capital that is not repre sented by realizable assets.
If several stated capital accounts	(4) If a cooperative maintains more than one stated capital account, the special resolu tion to reduce stated capital required by subsection (1) must specify the stated capital account or accounts from which the reduction will be deducted.
Court order	(5) A creditor of a cooperative may apply to a court for an order compelling a person
	(a) to pay to the cooperative an amount equal to any liability of the person that was extinguished or reduced contrary to this section; or
	(b) to pay or deliver to the cooperative any money or property that was paid or distrib uted to the person as a consequence of a reduction of stated capital made contrary to this section.
Limitation period	(6) No action may be commenced to enforce a liability imposed by this section more than two years after the date of the act complained of.
Adjustment of stated capital account	152. (1) On a redemption or acquisition of any of its shares, a cooperative must adjust the stated capital account in relation to that share by the ratio of the stated capital for that class to that share.
If special resolution	(2) A cooperative must adjust its stated capital account in accordance with any special resolution made under subsection 151(1).
Class or series	(3) On a conversion of investment shares of a cooperative into investment shares of anoth er class or series or a change under section 289, a reorganization under section 303 or the redemption or exchange of investment shares under an order made under section 340, the cooperative must
	(a) deduct from the stated capital account maintained for the class or series of shares converted or changed, or subject to the reorganization, redemption or exchange, an amount equal to the result obtained by multiplying the stated capital of the shares of that class or series by the number of shares of that class or series converted or changed, or subject to the reorganization, redemption or exchange, divided by the number of issued shares of that class or series immediately before the conversion, change, reorganization, redemption or ex change; and
	(b) add the result obtained under paragraph (a) and any additional amount received pursuant to the conversion, change, reorga nization, redemption or exchange to the stated capital account maintained or to be maintained for the class or series of shares.
Stated capital of interconver- tible shares	(4) For the purposes of subsection (3) and subject to its articles, if a cooperative issues two classes of investment shares and there is attached to each such class a right to convert an investment share of the one class into an investment share of the other class, if an investment share of one class is converted into a share of the other class, the amount of stated capital attributable to a share in either class is the aggregate of the stated capital of both classes divided by the number of issued investment shares of both classes immediately before the conversion.
Exception	(5) For the purposes of this section, a cooperative holding shares in itself as per mitted by section 145 is deemed not to have redeemed or acquired them.
Conversion or change of investment shares	(6) Investment shares issued by a coopera tive and converted into shares of another class or series or changed under section 289, or subject to a reorganization under section 303 or the redemption or exchange of investment shares under an order made under section 340, become shares of the other class or series of shares.
Effect of change of investment shares on number of unissued shares	(7) If the articles limit the number of authorized shares of a class of investment shares of a cooperative and issued shares of that class or of a series of shares of that class have become, under subsection (6), issued investment shares of another class or series, the number of unissued shares of the first- mentioned class is, unless the articles provide otherwise, increased by the number of invest ment shares that, under subsection (6), be came investment shares of another class or series.
Form of dividend	153. (1) A cooperative may pay a dividend by issuing fully paid shares of the cooperative and, subject to section 154, a cooperative may pay a dividend in money or property, except that membership shares may only be issued to members.

Bill C-5

Corporate Finance