Acts and Regulations

C-13 - Companies Act

Section 38
Disposition versions

Full text
Loans to shareholders
38(1)A company shall not make a loan to any of its shareholders or directors or give whether directly or indirectly, and whether by means of a loan, guarantee, the provision of security or otherwise, any financial assistance for the purpose of, or in connection with, a purchase made or to be made by any person of any shares in the company; but nothing in this section shall be taken to prohibit
(a) the lending of money by the company to its shareholders, other than directors, in the ordinary course of its business where the lending of money is part of the ordinary business of the company,
(b) the making by a company of loans to persons, other than directors, bona fide in the employment of the company with a view to enabling or assisting those persons to purchase or erect dwelling houses for their own occupation; and the company may take, from such employees, mortgages or other securities for the repayment of such loans,
(c) the provision by a company, in accordance with any scheme for the time being in force, of money for the purchase by trustees of fully paid shares in the capital stock of the company, to be held by or for the benefit of employees of the company, including any director holding a salaried employment or office in the company,
(d) the making by a company of loans to persons, other than directors, bona fide in the employment of the company with a view to enabling those persons to purchase fully paid shares in the capital stock of the company, to be held by themselves by way of beneficial ownership, or
(e) the making by a private company of a loan to a shareholder or director, with a view to enabling him to purchase shares in the capital stock of the company held by an existing shareholder or by a person entitled thereto by reason of the death or bankruptcy of a shareholder.
38(2)For the purpose of this section “private company” means a company as to which by letters patent or supplementary letters patent
(a) the right to transfer its shares is restricted,
(b) the number of its shareholders is limited to fifty, not including persons who are in the employment of the company and persons who, having been formerly in the employment of the company, were, while in that employment, and have continued after the determination of that employment to be shareholders of the company, two or more persons holding one or more shares jointly being counted as a single shareholder, and
(c) any invitation to the public to subscribe for any shares, bonds or debentures of the company is prohibited.
38(3)The powers under paragraphs (1)(c), (d), and (e) may be exercised by by-law.
R.S., c.33, s.37; 1983, c.19, s.4
Loans to shareholders
38(1)A company shall not make a loan to any of its shareholders or directors or give whether directly or indirectly, and whether by means of a loan, guarantee, the provision of security or otherwise, any financial assistance for the purpose of, or in connection with, a purchase made or to be made by any person of any shares in the company; but nothing in this section shall be taken to prohibit
(a) the lending of money by the company to its shareholders, other than directors, in the ordinary course of its business where the lending of money is part of the ordinary business of the company,
(b) the making by a company of loans to persons, other than directors, bona fide in the employment of the company with a view to enabling or assisting those persons to purchase or erect dwelling houses for their own occupation; and the company may take, from such employees, mortgages or other securities for the repayment of such loans,
(c) the provision by a company, in accordance with any scheme for the time being in force, of money for the purchase by trustees of fully paid shares in the capital stock of the company, to be held by or for the benefit of employees of the company, including any director holding a salaried employment or office in the company,
(d) the making by a company of loans to persons, other than directors, bona fide in the employment of the company with a view to enabling those persons to purchase fully paid shares in the capital stock of the company, to be held by themselves by way of beneficial ownership, or
(e) the making by a private company of a loan to a shareholder or director, with a view to enabling him to purchase shares in the capital stock of the company held by an existing shareholder or by a person entitled thereto by reason of the death or bankruptcy of a shareholder.
38(2)For the purpose of this section “private company” means a company as to which by letters patent or supplementary letters patent
(a) the right to transfer its shares is restricted,
(b) the number of its shareholders is limited to fifty, not including persons who are in the employment of the company and persons who, having been formerly in the employment of the company, were, while in that employment, and have continued after the determination of that employment to be shareholders of the company, two or more persons holding one or more shares jointly being counted as a single shareholder, and
(c) any invitation to the public to subscribe for any shares, bonds or debentures of the company is prohibited.
38(3)The powers under paragraphs (1)(c), (d), and (e) may be exercised by by-law.
R.S., c.33, s.37; 1983, c.19, s.4