Paid-up capital (PUC)

You meet paid-up capital when a corporation redeems, acquires or cancels its own shares, or reduces the capital of a share class. For any time after March 31, 1977, the Act defines it by class and computes it without reference to the Act’s own provisions, other than those it lists, which include section 84.1. Because it is measured for the class rather than for one holder, it is not the same thing as the price a shareholder paid or the adjusted cost base.

Where it is used

• When a corporation resident in Canada redeems, acquires or cancels its shares, subsection 84(3) deems a dividend equal to any amount paid in excess of their paid-up capital, subject to subsection 84(6)
• The CRA’s guidance on deemed dividends says to deduct the paid-up capital of redeemed, acquired or cancelled shares, and to account for any reduction in it
• In section 84.1, the greater of paid-up capital and adjusted cost base feeds the formula

What to ask

Ask for the paid-up capital of each share class and how it was worked out, including any past reductions or reorganizations. The share sale guide shows where this figure turns up, and the section 84.1 entry shows how it can change after a transfer.