Solvency Test????Copy/Pasted Link https://ca.practicallaw.thomsonreuters.com/3-562. Does the Share Price really have anything to do with the payout of Div? Glossary Solvency Tests Two solvency tests are applied under the CBCA to protect creditors (and certain higher-ranking or equal-ranking shareholders) from the detrimental economic effects of paying out corporate assets to lower-ranking or equal-ranking shareholders. The solvency tests apply to the declaration and payment of dividends (including cash and in specie dividends, but excluding stock dividends), the redemption of shares, the purchase by the corporation of shares of its own issue and a reduction of stated capital). Under the CBCA, a corporation cannot declare and pay cash or in specie dividends if, before or after the payment: Liquidity or Cash-flow Test. The corporation is (or would be) unable to pay its liabilities as they become due. Net Assets Test. The net realizable value of the assets does not exceed the liabilities of the corporation and the stated capital of all classes. Both tests must be met before the corporation can implement any of the corporate transactions described above. While the same cash-flow test applies to all transactions, the net assets test varies depending on the nature of the underlying transaction. For example, if subordinate-ranking shares (S2) are being redeemed or purchased, then the realizable value of the remaining assets must exceed liabilities and redemption amount of all shares ranking in priority (S1 shares) to or equally with the S2 shares being redeemed or acquired by the corporation.