Subco declared a dividend payable to its parent (Parentco) which, in turn, declared a corresponding dividend to its individual shareholder (Mr. A), with a s. 83(2) election being made in both cases. After finding that such dividends were not paid since there were only accounting entries to accomplish the payments, the Directorate noted that there nonetheless was Part III tax payable because valid s. 83(2) elections had been made. The Directorate then stated:
A declared dividend cannot be revoked primarily because general principles of corporate dividend law provide that a corporation or its shareholders cannot validly reduce or revoke (cancel) a declared dividend, and the declaration of a dividend by a corporation is a matter of administration and within the power of the board of directors, unless there is a by-law adopted by the shareholders limiting that power. On the other hand, it appears that the recipient of an unpaid dividend may waive it.