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January 10th, 1940
The Hon. Marriner S. Eccles,
Chairman of the Board of Governors,
Federal Reserve System,
Washington*
Dear Sir,
I am enclosing herewith, for your infer•nation, a copy of The Canada Gazette of January 8th containing further Regulations (Nos. 44 to 51 inclusive) in
connection with our Foreign Exchange Control Order of
September 15th last.
I am,
Dear Sir,
Yours faithfully,
Deputy Governor
Enclosure
EXTRA
THE CANADA GAZETTE
LA GAZETTE DU CANADA
OTTAWA, MONDAY, JANUARY 8, 1940
GOVERNMENT NOTICE
REGULATIONS OF THE FOREIGN
EXCHANGE CONTROL BOARD
CERTIFIED EXTRACT from the Minutes of a Meeting
of the Foreign Exchange Control Board held in
Ottawa, on the 5th day of January, 1940.
N motion duly made and seconded the following
Regulations numbered 44 to 51 inclusive, were
passed and enacted:
Payment of Interest on Government Securities and
on Publicly Issued Corporate Securities
44. No permit shall be required for the payment
to a non-resident in Canadian currency of any interest on securities issued or guaranteed by any
Canadian Government, municipal or other authority,
or on securities issued and offered for public subscription by any society, company or corporation
whose head office is in Canada whether such securities were acquired by such non-resident before or
after the coming into force of the Foreign Exchange
Control Order. Any Authorized Dealer may, without the issue of any permit, sell foreign exchange to
such a non-resident to the extent of the Canadian
currency so payable provided that for the purpose
of such sale of foreign exchange the Authorized
Dealer is satisfied, by inspection of the relative interest cheque or by proof of ownership submitted
by or on behalf of such non-resident, that the securities in question were owned by such non-resident.
Payment of Dividends
45. (a) A resident company wishing to pay a
dividend in Canadian currency on any class of its
capital stock, any shares of which are owned by
one or more non-residents, must apply to the Board
for peirmission thirty days in advance of the proposed
date of payment. The application must be made on
Form DIV, and approval of such application will be
sufficient authority for payment of the dividend m
question to all non-resident shareholders without the
obtaining of separate permits on Form G.
(b) A resident company applying under para
graph (a) may simultaneously request that its non
resident shareholders be enabled to convert the
Canadian-currency value of their dividends into
foreign exchange through an Authorized Dealer at
the official selling rates prescribed by the Board. If
more than 10 per cent of the shares on which the
dividend is being paid are held by non-residents, this
request must be accompanied by evidence that the
dividend is to be paid from undistributed current
earnings as denned in Regulation 47, or any accumulation thereof. Upon approval of such request, the
company may mark each dividend cheque payable
to a non-resident shareholder, "F.E.C.B.-DIV....,"
followed by the serial number of the permit for
the payment of the dividend to non-residents. Upon
presentation of a dividend cheque so marked an
Authorized Dealer may, if satisfied that the payee
is a non-resident, sell to such non-resident foreign
exchange to the equivalent of the Canadian-currency value of the dividend payment.
(c) A company having a substantial number of
non-resident shareholders may apply to have special
arrangements mad«e, through the company's bankers
or paying agents, to facilitate conversion by nonresident shareholders, at their option, of the amount
of the dividend into foreign exchange at the official
selling rates prescribed by the Board and in force
on a specified date. Application may also be made
for special arrangements where dividend payments
are to be made otherwise than by cheque.
(d) A resident company having special reason to
pay a dividend in foreign exchange may apply to
the Board for permission thirty days in advance of
the proposed date of payment. The application
shall be made by letter accompanied by Form DIV.
(e) An (application may be made for the payment
of dividends out of current earnings for the financial
year then current, in advance of the final determination of such current earnings. Each such application must be made on or accompanied by Form DIV,
supported by evidence that the current earnings for
the full financial year are likely to exceed the
amount of the dividends to be paid.
48. Regulations 44 to 47 inclusive shall apply to
Payment of Interest by a Resident Company to a
all instruments of payment in favour of non-residents
Non-Resident Parent Company
payable subsequent to February 3, 1940, in respect
46. A resident company or branch desiring to
of interest or dividends; Regulations 11 and 31
make a payment of interest to a non-resident parent
respecting payment of interest and dividends to
company or head office, or to a subsidiary of its nonnon-residents are repealed except with respect to
resident parent company, on moneys owing on open
instruments of payment payable on or before
account or on notes or other obligations of the resiFebruary 3, 1940.
dent company or branch held by such non-resident
parent company or head office or subsidiary of such
49. Paragraphs (d) and (e) of Regulation 19 are
non-resident parent company, shall, unless Regula- repealed and the following substituted therefor:
tion 44 applies to such payment, apply to the Board
(d) Each such company will continue to use Form
for permission thirty days in advance of the proB in connection with exports of goods from
posed date of payment. The application shall be
Canada, and shall write or stamp the BD permade on Form DIV, if payment is to be made in
mit number thereon above the title of the
Canadian currency. If the payment is to be made
form as follows: " BD Permit No
"
in foreign exchange, or if the non-resident recipient
If the exports are to be paid for in foreign
desires -to convert the Canadian-currency value of
exchange which is to be deposited in the
such payment into foreign exchange through an
authorized foreign-currency account, Form B
Authorized Dealer, the application shall be by letter
shall also contain in the body of the Form
accompanied by Form DIV, supported by evidence
the statement "Settlement through authorthat the payment is to be made out of undistributed
ized foreign-currency account." Form D
current earnings as defined in Regulation 47, or any
shall not be used in connection with any
accumulation thereof.
export.
(e) Each such company will continue to use Form
Definition of Current Earnings
E in connection with imports of goods into
47. (a) The term " current earnings" whenever
Canada, and shall write or stamp the BD perused in these Regulations shall mean the net income
mit number thereon above the title of the
or profit of the financial year ending June 30, 1939,
form as follows: "BD Permit No
"
or on any date subsequent thereto as shown by <the
If such imports are to be paid for out of the
company's annual financial statements, reported upon
authorized foreign-currency account, Form E
by its auditors, if any, or certified to by a responsible
shall also contain in the body of the Form the
official of the company after:
statement " Settlement through authorized
foreign-currency account."
(i) The deduction of the aggregate of all income,
profits or excess profits taxes paid or esti50. Paragraphs (d) and (e) of Regulation 21 are
mated to be payable to any government or
municipality in respect of such net income repealed and the following substituted therefor:
{d) Each such company will continue to use Form
or profits.
B in connection with exports of goods from
(ii) The deduction of the losses, or proper proCanada, and shall write or stamp the BD
portion of losses of any subsidiary or conpermit number thereon above the title of the
n
trolled company or if more than one, the
form as follows: " BD Permit No
aggregate of such losses less profits to the
If the exports are to be settled for through
extent not provided for in such statement.
the authorized inter-company account, Form B
(iii) Any other diminution of such income or
shall also contain in the body of the Form
profits made or to be made for the purpose
the statement " Settlement through authorized
of determining the taxable income for such
inter-company account." Form D shall not
period under the Income War Tax Act of
be used in connection with any export.
the Dominion of Canada other than in
(e) Each such company will continue to use Form
respect of:
E in connection with imports of goods into
(1) Dividends received from any resident
Canada, and shall write or stamp the BD peror non-resident company;
mit number thereon above the title of the
(2) The amount of any depletion allowform as follows: "BD Permit No
"
ances permitted as a deduction in deIf such imports are to be settled for through
termining the taxable income under
the authorized inter-company account, Form E
the Income War Tax Act in excess of
shall also contain in the body of the Form
any provision made in the company's
the statement " Settlement through authorized
annual financial statements;
inter-company account."
(3)' Any other diminution which in the
51. Paragraph (g) of Regulation 1 is amended by
opinion of the Board should not be
striking out the words " One Hundred Dollars or the
taken into account.
(iv) Any other adjustments which in the opinion equivalent thereof" and substituting therefor the
of the Board should be properly made in words " One Hundred Dollars in United States currency or the equivalent thereof."
determining the amount of current earnings
Certified to be a true copy, and in accordance with
for the purposes of Regulations 45 and 46.
the Minutes of the Board.
(b) The same general principles will apply in determining the current earnings of a partnership or
D. GORDON,
unincorporated business.
Chairman (Alternate).
OTTAWA: Printed by Joseph Oscar Patenaude, I.S.O., Printer to the King's Most Excellent Majesty.
