Minimum Share Capital for Opening a Company in Canada

Updated on Tuesday 26th February 2019

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The registration of a company in Canada implies making a few preparations, among which reserving a trade name and preparing various documents. Another important aspect is to consider the share capital requirements of a Canadian company, in accordance with the provisions of the Company Law and the regulations of each province.

It is important to know that the Canadian legislation does not impose a minimum share capital when registering a business. However, there can be cases, such as those of setting up financial companies for which a minimum amount of money must be deposited as a reserve for business’ operations.

Below, our company formation specialists explain the share capital requirements when setting up a company in Canada. You can rely on us for tailored company registration services in Canada.
 

Types of Canadian companies and their share capital


There are several types of companies which can be established in Canada and for each one of them, a minimum share capital must be ensured. Even if the amount of money to be allocated as a share capital is not provided by the law, local and foreign businesspersons should pay attention to the following aspects:
 
  •           for sole proprietorships the minimum share capital must not be a very large amount of money;
  •           in the case of partnerships, the minimum share capital must be determined by the partners and each of them must participate with a specific amount of money;
  •           in the case of corporations, these can have a paid-up share capital and a stated share capital account;
  •           in the case of entities set up by foreign companies, the latter must decide on the amount of money necessary for the operations.

Our company registration agents in Canada can guide foreign entrepreneurs with respect to the minimum share capital requirements when starting businesses here.
 

The paid-up capital and the stated share capital account in Canada


The Canadian corporation, or the limited liability company as it is known in Europe, is the most employed business form across every territory of this country. Those who want to open such a company in Canada must know that it must have two types of share capitals: a paid-up capital and a stated capital account.

The paid-up share capital of a Canadian company represents the amount of money deposited by the members (shareholders) of the company, while the stated capital account is represented by the amount of money paid in exchange for the shares issued by the company. The stated capital account will hold the paid-up share capital of the company.

It should be noted that upon the incorporation of a company in Canada, the paid-up share capital is defined according to the Income Tax. An important rule about these two types of share capital is that the paid-up capital can be lower than the stated capital. Also, the paid-up share capital will also be established after the stated capital has been determined.

Our company formation advisors in Canada can explain the differences between the paid-up share capital and the stated capital account.
 

Shares issued by Canadian companies


The minimum share capital of companies in Canada is divided into shares. These will represent the amount of money owned by the founders of the company and can be divided into various classes.

An important aspect to consider about the share capital of a Canadian company is that there are no restrictions related to the types of shares it can issue, however, when only a single type of shares is issued, these must have the following rights attached to them:
 
  •           they must grant a voting right to those holding them;
  •           they must grant the right of obtaining dividend payments;
  •           they must grant the right to the division of assets in case the company is dissolved.

The share structure and the share capital structure of a company can be modified by amending the company’s Articles of Association.

Our company registration representatives in Canada can explain how the share capital of a company can be modified.
 

Altering the share capital of a company in Canada


There are two ways of modifying the share capital of a company: by increasing or by decreasing it. It should be noted that only the stated capital can be increased or decreased, however, when decreased it cannot be lower than the paid-up capital.

The paid-up capital of a company can only be distributed among the shareholders.

No matter the transactions involving the share capital of a company, these can be used as tax minimization solutions in Canada.

If you need more information about the minimum share capital requirements of a company in Canada, please contact us. We can also assist if you plan to set up a company in Canada.