| May 4, 1990 | |
| Vancouver District Office | Specialty Rulings |
| Chief, Audit Division | Directorate |
| D. Yuen | |
| (613) 957-2111 | |
| Attention: J.C. Fitz-Clarke | |
| Audit Review Section 148-13 | File No. 900411 |
Subject: Technical Questions
We are writing in response to your memo of April 11, 1990 wherein you requested our comments on the conversion of contributed surplus ("CS") to paid-up capital ("PUC") under paragraph 84(1)(c.3) of the Income Tax Act (Canada) (the "Act"). You have posed the following questions:
1. What procedures must a corporation undertake to convert CS to PUC?
2. Would a director's resolution declaring the conversion of CS to PUC be sufficient for the purposes of paragraph 84(1)(c.3) of the Act?
3. If the corporation's incorporating statute is silent on the procedures for converting CS to PUC, what steps must be undertaken to effect the conversion?
Comments
The procedures to be followed are those provided under corporate law. It is our understanding that under the British Columbia Company Act, the conversion of CS to PUC should be supported by a special resolution and a director's resolution.
Please note that our reply to one of the questions is attached. The remaining reply will be forwarded shortly.
for DirectorReorganizations and Non-Resident DivisionSpecialty Rulings DirectorateLegislative and Intergovernmental Affairs Branch