Analysis of the Changes to the Canada Business Corporations Act

Part 12 Shareholders (clauses 55-59)

The provisions applicable to shareholders' meetings would be amended to allow persons entitled to attend such meetings to participate in the meeting by electronic means, provided the corporation makes available such means of communication. An amendment would also be introduced to clarify that such meetings may also be held entirely by telephonic, electronic or other communication facility. (s. 132)

Additional amendments would clarify that a vote at a shareholders meeting may be held by electronic means and that any person participating electronically in such a meeting and that is entitled to vote, may exercise their right to vote by electronic means. (s. 141)

A number of amendments repealing the time periods specified and replacing them by time periods prescribed by the Regulations (ss. 134 and 135) are included to allow for greater flexibility to make modifications should the need arise in future.

In addition, many of the mechanisms for individual shareholders to submit proposals would be liberalized, including allowing beneficial shareholders to make proposals. Minimum share ownership and length of ownership requirements will be implemented by regulation (s. 137).

The rules regarding unanimous shareholder agreements would be clarified and updated to reflect current practices (ss. 145.1 and 146).

A number of minor technical amendments are also included, as well as certain amendments which are designed to facilitate the efficient operation and administration of the statute.

Briefing Book
An Act to amend the Canada Business Corporations Act and the Canada Cooperatives Act

Bill Clause No. 55
CBCA Section No.132(1) and new (3), (4) & (5)
Topic : Shareholders

Sources of Proposed Law 

Changes From Present Law 
A) Permit meetings of shareholders to be held outside Canada at any place specified in the articles and continue to allow meetings to be held outside Canada if all the shareholders entitled to vote at the meeting so agree. Subs. 132(2) is split into a modified subs. 132(2) and a new subs. 132(3).

(B) Allow any person entitled to attend the meeting of shareholders to participate by means of telephonic, electronic or other communication facilities that permit all participants to adequately communicate with each other during the meeting, unless the by-laws provide otherwise, and as long as the corporation makes available such means of communication. Provide that a meeting may only be held entirely by electronic means if specifically authorized by the by-laws.

Purpose of Change 
(A) The CBCA requires shareholder meetings to be held within Canada unless all the shareholders entitled to vote at that meeting agree to hold the meeting outside Canada (s. 132). A considerable number of Canadian inter-listed public companies have significant U.S. shareholder constituencies. The flexibility of being able to hold meetings from time to time outside of Canada, without requiring unanimous shareholder approval, is important from a shareholder relations point of view.

(B) New technological developments allow parties situated at different geographical locations to easily communicate with each other. These technologies encourage shareholder democracy as they permit more shareholders to participate in meetings. In recognition of the beneficial aspect of these technologies, the CBCA would permit their use subject to the by-laws specifically providing otherwise. However, if the meeting is to be held only by electronic means, shareholders should be given the opportunity to vote on this proposition through the by-law amendment process. This amendment achieves an appropriate balance between the need for shareholder consent and the need for flexibility. An amendment was introduced at the Senate Committee stage at the suggestion of the Coalition for CBCA Reform which clarified the language of these provisions.

Similar Provincial Laws 
Business Corporations Act (Ontario)

Current Wording 
132. (1) Meetings of shareholders of a corporation shall be held at the place within Canada provided in the by-laws or, in the absence of such provision, at the place within Canada that the directors determine.

(2) Notwithstanding subsection (1), a meeting of shareholders of a corporation may be held outside Canada if all the shareholders entitled to vote at that meeting so agree, and a shareholder who attends a meeting of shareholders held outside Canada is deemed to have so agreed except when he attends the meeting for the express purpose of objecting to the transaction of any business on the grounds that the meeting is not lawfully held.

Proposed Wording
132. (2) Despite subsection (1), a meeting of shareholders of a corporation may be held at a place outside Canada if the place is specified in the articles or all the shareholders entitled to vote at the meeting agree that the meeting is to be held at that place.

(3) A shareholder who attends a meeting of shareholders held outside Canada is deemed to have agreed to it being held outside Canada except when the shareholder attends the meeting for the express purpose of objecting to the transaction of any business on the grounds that the meeting is not lawfully held.

(4) Unless the by-laws otherwise provide, any person entitled to attend a meeting of shareholders may participate in the meeting, in accordance with the regulations, if any, by means of a telephonic, electronic or other communication facility that permits all participants to communicate adequately with each other during the meeting, if the corporation makes available such a communication facility. A person participating in a meeting by such means is deemed for the purposes of this Act to be present at the meeting.

(5) If the directors or the shareholders of a corporation call a meeting of shareholders pursuant to this Act, those directors or shareholders, as the case may be, may determine that the meeting shall be held, in accordance with the regulations, if any, entirely by means of a telephonic, electronic or other communication facility that permits all participants to communicate adequately with each other during the meeting, if the by-laws so provide.

Bill Clause No. 56
CBCA Section No.133(1), (2) and new (3)
Topic : Shareholders (Shareholder Communcations)

Sources of Proposed Law 

Changes From Present Law 
Amend s. 133 in order to:

clarify that an annual shareholders meeting must be held within six months of the end of the financial year; and

provide that, notwithstanding s. 133(1), the corporation may apply to the court for an order extending the time in which the annual meeting of the corporation will be held [see Bill s. 133(3)].

Purpose of Change 
(A) This amendment is designed to ensure that corporations report to their shareholders in a timely and regular fashion.

(B) This amendment would allow increased flexibility without creating any new risk for shareholders. The amendment is permissive and will not be seen as a requirement. It is designed to provide a method whereby corporations can receive an extension if they do not meet the time provisions found in s. 133.

Shareholders remain protected by a number of provisions which enable them to require the corporation to hold a meeting. Under s. 143, the holders of not less than five per cent of the issued shares of a corporation that carry the right to vote may requisition the directors to call a meeting. Section 144 allows members to apply to the court to have a meeting called. As well, s. 247 allows "complainants" to apply to the court for an order requiring compliance with the Act (for example, to call a meeting in accordance with the Act).

Similar Provincial Laws 
Business Corporations Act (Alberta)

Current Wording 
133. The directors of a corporation

(a) shall call an annual meeting of shareholders not later than eighteen months after the corporation comes into existence and subsequently not later than fifteen months after holding the last preceding annual meeting; and

(b) may at any time call a special meeting of shareholders.

Proposed Wording 
133. (1) The directors of a corporation shall call an annual meeting of shareholders

(a) not later than eighteen months after the corporation comes into existence; and

(b) subsequently, not later than fifteen months after holding the last preceding annual meeting but no later than six months after the end of the corporation's preceding financial year.

(2) The directors of a corporation may at any time call a special meeting of shareholders.

(3) Despite subsection (1), the corporation may apply to the court for an order extending the time for calling an annual meeting.

Bill Clause No. 57
CBCA Section No.134
Topic : Shareholders (Shareholder Communications)

Sources of Proposed Law 

Changes From Present Law 
Repeal specific time periods set out in subs. 134(1), (2), and (4) and allow them to be made by regulation. Combine subsections 134(1) and (2). Renumber subsections 134(3) and (4).

Purpose of Change 
Under the CBCA and provincial corporate legislation, issuers may fix a date for determining which shareholders are entitled to receive notice of shareholder meetings. That date must fall within a period from 21 to 50 days prior to the meeting.

National Policy Statement No. 41 (NP 41), implemented by the Canadian Securities Administrators in 1987, was designed to address complaints by issuers that 21 calendar days is too short a time for proxy material to go through one or more layers of intermediaries and for proxies to be returned to the issuer. Accordingly, NP 41 required issuers to set a record date for shareholder meetings to be 35 to 50 days before the date of the meeting. Subsequently, the maximum time for a record date prior to the meeting was extended to 60 days. However, to be able to comply simultaneously with both the requirements of federal corporations law and NP 41, issuers incorporated under the CBCA have a window of between 35 days and 50 days to set a record date for determining which shareholders are eligible to attend a shareholders meeting.

Extension of the record date periods would effectively resolve any conflicting compliance issues with NP 41. Shareholders would ultimately benefit as issuers would have additional mailing time for proxy-related materials, thereby increasing the likelihood that shareholder voting instructions will be received before the voting deadline. Delegation to the regulations would allow for quicker adjustments to be made if so required.

Similar Provincial Laws 
National Policy Statement No. 41

Current Wording 
134. (1) For the purpose of determining shareholders

(a) entitled to receive payment of a dividend,

(b) entitled to participate in a liquidation distribution, or

(c) for any other purpose except the right to receive notice of or to vote at a meeting, the directors may fix in advance a date as the record date for such determination of shareholders, but such record date shall not precede by more than fifty days the particular action to be taken.

(2) For the purpose of determining shareholders entitled to receive notice of a meeting of shareholders, the directors may fix in advance a date as the record date for such determination of shareholders, but such record date shall not precede by more than fifty days or by less than twenty-one days the date on which the meeting is to be held.

(3) If no record date is fixed,

(a) the record date for the determination of shareholders entitled to receive notice of a meeting of shareholders shall be

(i) at the close of business on the day immediately preceding the day on which the notice is given, or

(ii) if no notice is given, the day on which the meeting is held; and

(b) the record date for the determination of shareholders for any purpose other than to establish a shareholder's right to receive notice of a meeting or to vote shall be at the close of business on the day on which the directors pass the resolution relating thereto.

(4) If a record date is fixed, unless notice of the record date is waived in writing by every holder of a share of the class or series affected whose name is set out in the securities register at the close of business on the day the directors fix the record date, notice thereof shall, not less than seven days before the date so fixed, be given

Proposed Wording 
134. (1) The directors may, within the prescribed period, fix in advance a date as the record date for the purpose of determining shareholders

(a) entitled to receive payment of a dividend;

(b) entitled to participate in a liquidation distribution;

(c) entitled to receive notice of a meeting of shareholders;

(d) entitled to vote at a meeting of shareholders; or

(e) for any other purpose.

(2) If no record date is fixed,

(3) If a record date is fixed, unless notice of the record date is waived in writing by every holder of a share of the class or series affected whose name is set out in the securities register at the close of business on the day the directors fix the record date, notice of the record date must be given within the prescribed period

Bill Clause No. 58
CBCA Section No.135(1), (2) and new (1.1)
Topic : Shareholders (Shareholder Communications)

Sources of Proposed Law 

Changes From Present Law 
Repeal the specific time periods set out in s. 135(1) and allow them to be made by regulation. Make technical changes to subs. 135(2) to reflect the renumbering of section 134. Add a new provision following s. 135(1) permitting non-distributing corporations to send out a notice of meeting less than twenty-one days before the meeting, if specified in the articles or by-laws.

Purpose of Change
See clause 57.

Similar Provincial Laws 
National Policy Statement No. 41

Current Wording 
135. (1)Notice of the time and place of a meeting of shareholders shall be sent not less than twenty-one days nor more than fifty days before the meeting,

(a) to each shareholder entitled to vote at the meeting;

(b) to each director; and

(c) to the auditor of the corporation.

(2) A notice of a meeting is not required to be sent to shareholders who were not registered on the records of the corporation or its transfer agent on the record date determined under subsection 134(2) or (3), but failure to receive a notice does not deprive a shareholder of the right to vote at the meeting.

Proposed Wording 
135. (1) Notice of the time and place of a meeting of shareholders shall be sent within the prescribed period to

(a) each shareholder entitled to vote at the meeting;

(b) each director; and

(c) the auditor of the corporation.

(1.1) In the case of a corporation that is not a distributing corporation, the notice may be sent within a shorter period if so specified in the articles or by-laws.

(2) A notice of a meeting is not required to be sent to shareholders who were not registered on the records of the corporation or its transfer agent on the record date determined under paragraph 134(1)(c) or subsection 134(2), but failure to receive a notice does not deprive a shareholder of the right to vote at the meeting.

Bill Clause No. 59
CBCA Section No.137(1), (3), (5), (7), (8) and new (1.1), (1.2), (1.3), (1.4) and (5.1)
Topic : Shareholders (Shareholder Communications)

Sources of Proposed Law 
Verdun v. Toronto-Dominium Bank, [1996] 3 S.C.R. 550.
U.S. Securities and Exchange Commission, Rule 14a-8

Changes From Present Law 
A. (1) Amend s. 137(1) to clarify that beneficial owners of shares are entitled to submit proposals and to add the following eligibility requirements so that at the time a shareholder submits a proposal he/she:

(i) is the legal or beneficial owner of at least the prescribed number of the outstanding shares of the corporation; or

(ii) has the support of shareholders who in the aggregate are the legal or beneficial owners of at least the prescribed number of the outstanding shares of the corporation. [see Bill, s. 137(1.1)]

(2) Require that at the time the shareholder submits a proposal he/she must provide the corporation with their name, address, number of registered or beneficial shares owned and the date acquired. Require that this information also be provided in respect of the person's supporters, if applicable. [see Bill, s. 137(1.2)]

(3) State that the information required under subs 137(1.2) shall not be considered part of the proposal and supporting statement for the purposes of the prescribed maximum word limit. [see Bill, s. 137(1.3)]

(4) Require that, where requested by the corporation within the prescribed time period the proponent of the proposal shall provide to the corporation proof that the person meets the requirements under s. 137(1.1) within the prescribed period. [See Bill, s. 137(1.4)]

B. Amend s. 137(3) to require that if requested by a shareholder who submits a proposal, the corporation must include the shareholder's proposal in its management proxy provided that the proposal and its supporting statement do not exceed the prescribed maximum number of words.

C. (1) Replace in s. 137(5)(a) the words "at least ninety days before the anniversary date of the previous annual meeting of shareholders" with "within the prescribed time before the anniversary date of the notice of meeting that was sent to shareholders in connection with the previous annual meeting of shareholders".

(2) Modify the English version of s. 137(5)(b) so that the words "the proposal is submitted by the shareholder primarily for the purpose of…" are replaced with the comparable English version of "la proposition a pour objet principal de faire.…".

(3) Amend s. 137(5) to divide subsection (b) into (b) and a new (b.1), which would replace the second half of (b). Remove the list of general causes by which a corporation can refuse to circulate a shareholder proposal. Pursuant to the revised provision, management could only refuse a proposal if it does not relate in a significant way to the business or affairs of the corporation.

(4) Remove specified time period and allow time period to be prescribed in regulations in subsection 137(5)(c).

(5) Amend s.137(5)(d) to permit the corporation to refuse a proposal where a substantially similar proposal was submitted within the prescribed period and did not receive a prescribed minimum amount of support.

(6) Add a new provision stating that if a shareholder fails to continue to hold or own the amount of shares referred to in s. 137(1.1) up to and including the date of the meeting, the corporation shall not be required to include any proposal submitted by the proponent for any meeting held within the prescribed period of time following the date of the meeting.

D. Remove from s. 137(7) the current 10 day time limit for a corporation to give notice of refusal and allow the number of days to be prescribed by regulation.

Purpose of Change 
A. These recommendations all deal with eligibility requirements with respect to a shareholder proposal. Eligibility requirements address the concern raised by corporations that individual shareholders who have not manifested a genuine interest and stake in the affairs of the corporation still have access to this mechanism. The corporations contend that often these non-serious investors use the proposal mechanism to promote a social, economic or personal agenda unrelated to the business of the corporation.

A shareholder proposal is one of two mechanisms in the CBCA that allow a shareholder to cause a corporation to take an action which ultimately imposes a cost on the corporation (and ultimately the shareholders). The second mechanism is the shareholder right to requisition a meeting. When a shareholder requisitions a meeting, the interests of other shareholders are protected by a provision that allows the shareholders to refuse to bear the cost of the requisitioned meeting if they think it was unnecessarily called. However, the current shareholder proposal mechanism does not have an equivalent safeguard.

The eligibility requirements for shareholder proposals are designed to curtail abuse by requiring that those who put the corporation and other shareholders to the expense of including a proposal in its proxy material have had a continuous minimum level of investment in the corporation for a specified period of time.

The pooling of shareholders' holdings to meet the minimum requirements maintains the right of minor shareholders to submit proposals without imposing an unnecessary economic barrier. Minor shareholders who are unable to obtain support from fellow shareholders, however, will no longer be entitled to use the shareholder proposal mechanism.

These amendments will help ensure the quality and relevance of proposals submitted.

The amendment to s. 137(1) clarifying that a beneficial owner of shares is entitled to submit proposals is intended to reverse the Supreme Court's holding in Verdun v. Toronto-Dominion Bank.

B. This amendment would allow shareholders more room to explain proposals to other shareholders than is currently available. The lack of sufficient space may be an issue where proposals deal with complex matters. The amendment provides more opportunity, within reasonable limits, for the shareholder to adequately explain his/her proposal while maintaining reasonable limits and thereby keeping the costs for printing and postage, borne by the corporation, to a minimal level.

C. (1) Under current paragraph 137(5)(a), the deadline for submission is 90 days prior to the anniversary date of the previous year's annual meeting. This limit, coupled with the NP 41 requirement that proxy materials be sent to shareholders at least 33 days before the meeting, leave the corporation with little time to respond to a shareholder proposal. It also leaves little time for the shareholder to work through the court process in the case of a refusal by the corporation to include a proposal. Moving the critical deadline back to the "anniversary date of the notice of meeting that was sent to shareholders in connection with the previous annual meeting of shareholders" allows the corporation sufficient time to deal with the proposal. Permitting the number of days prior to that anniversary date to be prescribed increases flexibility.

(2) The amendment to paragraph 137(5)(b) would harmonize the French and English versions.

(3) As paragraph 137(5)(b) currently reads, the grounds for exclusion of a shareholder proposal are broad and shareholder activists argue that virtually any proposal can be perceived to fall into one of the categories. The amendments address this concern by deleting the grounds for exclusion. A fair balance is struck between the interest of shareholders and the interests of the corporation by providing that the corporation is only obliged to undertake proposals that relate in a significant way to the business or affairs of the corporation. This standard is also used in the U.S. rules.

(4) The amendment to paragraph 137(5)(c) would have the effect of removing the time period reference in the paragraph and replacing it with a time period to be prescribed in the regulations.

(5) The amendment to paragraph 137(5)(d) would have the effect of removing the time period reference in the paragraph and replacing it with a time period to be prescribed in the regulations. Also, if the proposal is defeated, the shareholder must have obtained a prescribed minimum amount of support in order to resubmit a similar proposal in subsequent years. This proposed amendment provides greater flexibility for shareholders to resubmit a similar proposal at subsequent meetings provided a minimum level of support is obtained.

(6) This provision is intended to operate as a deterrent to shareholders who meet the requirements at the time they submit the proposal, but either sell their shares or fail to maintain their support through the date of the meeting.

D. The current 10 day time limit provided in s. 137(7) for a corporation to give notice of refusal is very restrictive. Increasing this time limit will give the corporation sufficient time to review the proposal, give reasonable consideration as to its appropriateness and perhaps also time to communicate with the shareholder who made the proposal before refusing. Allowing the number of days to be prescribed increases flexibility. An amendment was introduced at the Senate Committee stage, at the request of stakeholders, requiring that the notice of refusal include a written statement of the reasons for refusal in order to ensure that shareholders are properly informed.

Similar Provincial Laws 

Current Wording 
137. (1) A shareholder entitled to vote at an annual meeting of shareholders may

(a) submit to the corporation notice of any matter that he proposes to raise at the meeting, hereinafter referred to as a "proposal"; and

(b) discuss at the meeting any matter in respect of which he would have been entitled to submit a proposal.

(3) If so requested by the shareholder, the corporation shall include in the management proxy circular or attach thereto a statement by the shareholder of not more than two hundred words in support of the proposal, and the name and address of the shareholder.

(5) A corporation is not required to comply with subsections (2) and (3) if

(a) the proposal is not submitted to the corporation at least ninety days before the anniversary date of the previous annual meeting of shareholders;

(b) it clearly appears that the proposal is submitted by the shareholder primarily for the purpose of enforcing a personal claim or redressing a personal grievance against the corporation or its directors, officers or security holders, or primarily for the purpose of promoting general economic, political, racial, religious, social or similar causes;

(c) the corporation, at the shareholder's request, included a proposal in a management proxy circular relating to a meeting of shareholders held within two years preceding the receipt of such request, and the shareholder failed to present the proposal, in person or by proxy, at the meeting;

(d) substantially the same proposal was submitted to shareholders in a management proxy circular or a dissident's proxy circular relating to a meeting of shareholders held within two years preceding the receipt of the shareholder's request and the proposal was defeated; or

(e) the rights conferred by this section are being abused to secure publicity.

(7) If a corporation refuses to include a proposal in a management proxy circular, the corporation shall, within ten days after receiving the proposal, notify the shareholder submitting the proposal of its intention to omit the proposal from the management proxy circular and send to him a statement of the reasons for the refusal.

(8) On the application of a shareholder claiming to be aggrieved by a corporation's refusal under subsection (7), a court may restrain the holding of the meeting to which the proposal is sought to be presented and make any further order it thinks fit.

Proposed Wording 
137. (1) Subject to subsections (1.1) and (1.2), a registered holder or beneficial owner of shares that are entitled to be voted at an annual meeting of shareholders may

(a) submit to the corporation notice of any matter that the person proposes to raise at the meeting (a "proposal"); and

(b) discuss at the meeting any matter in respect of which the person would have been entitled to submit a proposal.

(1.1) To be eligible to submit a proposal, a person

(a) must be, for at least the prescribed period, the registered holder or the beneficial owner of at least the prescribed number of outstanding shares of the corporation; or

(b) must have the support of persons who, in the aggregate, and including or not including the person that submits the proposal, have been, for at least the prescribed period, the registered holders, or the beneficial owners of, at least the prescribed number of outstanding shares of the corporation.

(1.2) A proposal submitted under paragraph (1)(a) must be accompanied by the following information:

(a) the name and address of the person and of the person's supporters, if applicable; and

(b) the number of shares held or owned by the person and the person's supporters, if applicable, and the date the shares were acquired.

(1.3) The information provided under subsection (1.2) does not form part of the proposal or of the supporting statement referred to in subsection (3) and is not included for the purposes of the prescribed maximum word limit set out in subsection (3).

(1.4) If requested by the corporation within the prescribed period, a person who submits a proposal must provide proof, within the prescribed period, that the person meets the requirements of subsection (1.1).

(3) If so requested by the person who submits a proposal, the corporation shall include in the management proxy circular or attach to it a statement in support of the proposal by the person and the name and address of the person. The statement and the proposal must together not exceed the prescribed maximum number of words.

(5) A corporation is not required to comply with subsections (2) and (3) if

(a) the proposal is not submitted to the corporation at least the prescribed number of days before the anniversary date of the notice of meeting that was sent to shareholders in connection with the previous annual meeting of shareholders;

(b) it clearly appears that the primary purpose of the proposal is to enforce a personal claim or redress a personal grievance against the corporation or its directors, officers or security holders;

(b.1) it clearly appears that the proposal does not relate in a significant way to the business or affairs of the corporation;

(c) not more than the prescribed period before the receipt of a proposal, a person failed to present, in person or by proxy, at a meeting of shareholders, a proposal that at the person's request, had been included in a management proxy circular relating to the meeting;

(d) substantially the same proposal was submitted to shareholders in a management proxy circular or a dissident's proxy circular relating to a meeting of shareholders held not more than the prescribed period before the receipt of the proposal and did not receive the prescribed minimum amount of support at the meeting; or

(e) the rights conferred by this section are being abused to secure publicity.

(5.1) If a person who submits a proposal fails to continue to hold or own the number of shares referred to in subsection (1.1) up to and including the day of the meeting, the corporation is not required to set out in the management proxy circular, or attach to it, any proposal submitted by that person for any meeting held within the prescribed period following the date of the meeting.

(7) If a corporation refuses to include a proposal in a management proxy circular, the corporation shall, within the prescribed period after the day on which it receives the proposal or the day on which it receives the proof of ownership under subsection (1.4), as the case may be, notify in writing the person submitting the proposal of its intention to omit the proposal from the management proxy circular and of the reasons for the refusal.

(8) On the application of a person submitting a proposal who claims to be aggrieved by a corporation's refusal under subsection (7), a court may restrain the holding of the meeting to which the proposal is sought to be presented and make any further order it thinks fit.

Part 12 Shareholders (clauses 60-66)

The provisions applicable to shareholders' meetings would be amended to allow persons entitled to attend such meetings to participate in the meeting by electronic means, provided the corporation makes available such means of communication. An amendment would also be introduced to clarify that such meetings may also be held entirely by telephonic, electronic or other communication facility. (s. 132)

Additional amendments would clarify that a vote at a shareholders meeting may be held by electronic means and that any person participating electronically in such a meeting and that is entitled to vote, may exercise their right to vote by electronic means. (s. 141)

A number of amendments repealing the time periods specified and replacing them by time periods prescribed by the Regulations (ss. 134 and 135) are included to allow for greater flexibility to make modifications should the need arise in future.

In addition, many of the mechanisms for individual shareholders to submit proposals would be liberalized, including allowing beneficial shareholders to make proposals. Minimum share ownership and length of ownership requirements will be implemented by regulation (s. 137).

The rules regarding unanimous shareholder agreements would be clarified and updated to reflect current practices (ss. 145.1 and 146).

A number of minor technical amendments are also included, as well as certain amendments which are designed to facilitate the efficient operation and administration of the statute.

Briefing Book
An Act to amend the Canada Business Corporations Act and the Canada Cooperatives Act

Bill Clause No. 60
CBCA Section No.138(1) to (3) and new (3.1)
Topic : Shareholders (Shareholder Communications)

Sources of Proposed Law 

Changes From Present Law 
Amend s. 138 as follows:

Reconcile the time periods for the preparation of the list of shareholders entitled to receive notice of a meeting with the proposed changes to s. 134 (see clause 57); and clarify the voting rights of shareholders (and their transferees) to whom shares have been issued following the fixing of a record date for notice of a shareholders meeting.

Purpose of Change 
Under corporate legislation in most Canadian jurisdictions, including the CBCA, the right of a shareholder to vote at a shareholders' meeting may not be restricted to those shareholders registered as of a fixed record date. With the exception of British Columbia, corporate legislation in Canada does not permit the fixing of a record date for voting purposes.

This prohibition on setting a fixed record date for voting has the potential to cause problems for publicly-traded corporations by creating a potential for over-voting. The majority of shares of most corporations are now held in the name of a registrant, usually the Canadian Depositary for Securities Limited, and owned beneficially through a chain of intermediaries. When a new shareholder purchases shares after the record date for notice of meeting, the previous owner may have already received and voted the proxies.

With so many securities now held in non-registered form, the opportunity for over-voting is more likely to occur if both the non-registered holder, as of the record date, and the non-registered holder, post record date, can vote. The corporation does not know which proxies, if any, should be cancelled. Should there be over-voting, the results of the vote may have to be cancelled or some other remedy implemented. This can be costly and time-consuming.

The over-voting of shares has proven to be problematic for many large shareholders, particularly institutional investors. The proposed amendments would help deal with this problem. It would also help to ensure that shareholder democracy is properly exercised by preventing double voting and clarifying the voting rights of shareholders and their transferees.

Similar Provincial Laws 

Current Wording 
138. (1) A corporation shall prepare a list of shareholders entitled to receive notice of a meeting, arranged in alphabetical order and showing the number of shares held by each shareholder,

(a) if a record date is fixed under subsection 134(2), not later than ten days after that date;

or

(b) if no record date is fixed

(i) at the close of business on the day immediately preceding the day on which the notice is given, or

(ii) where no notice is given, on the day on which the meeting is held.

(2) Where a corporation fixes a record date under subsection 134(2), a person named in the list prepared under paragraph (1)(a) is entitled to vote the shares shown opposite his name at the meeting to which the list relates, except to the extent that

(a) the person has transferred the ownership of any of his shares after the record date, and

(b) the transferee of those shares

(i) produces properly endorsed share certificates or otherwise establishes that he owns the shares, and

(ii)demands, not later than ten days before the meeting or such shorter period before the meeting as the by-laws of the corporation may provide, that his name be included in the list before the meeting in which case the transferee is entitled to vote his shares at the meeting.

(3) Where a corporation does not fix a record date under subsection 134(2), a person named in a list prepared under paragraph (1)(b) is entitled to vote the shares shown opposite his name at the meeting to which the list relates except to the extent that

(a) the person has transferred the ownership of any of his shares after the date on which a list referred to in subparagraph (1)(b)(i) is prepared,

and

(b) the transferee of those shares

(i) produces properly endorsed share certificates or otherwise establishes that he owns the shares, and

(ii) demands, not later than ten days before the meeting or such shorter period before the meeting as the by-laws of the corporation may provide, that his name be included in the list before the meeting in which case the transferee is entitled to vote his shares at the meeting.

Proposed Wording 
138. (1) A corporation shall prepare an alphabetical list of its shareholders entitled to receive notice of a meeting, showing the number of shares held by each shareholder,

(a) if a record date is fixed under paragraph 134(1)(c), not later than ten days after that date; or

(b) if no record date is fixed, on the record date established under paragraph 134(2)(a).

(2) If a record date for voting is fixed under paragraph 134(1)(d), the corporation shall prepare, no later than ten days after the record date, an alphabetical list of shareholders entitled to vote as of the record date at a meeting of shareholders that shows the number of shares held by each shareholder.

(3) If a record date for voting is not fixed under paragraph 134(1)(d), the corporation shall prepare, no later than ten days after a record date is fixed under paragraph 134(1)(c) or no later than the record date established under paragraph 134(2)(a), as the case may be, an alphabetical list of shareholders who are entitled to vote as of the record date that shows the number of shares held by each shareholder.

(3.1) A shareholder whose name appears on a list prepared under subsection (2) or (3) is entitled to vote the shares shown opposite their name at the meeting to which the list relates.

Bill Clause No. 61
CBCA Section No.new 141(3) & (4)
Topic : Shareholders (Shareholder Communications)

Sources of Proposed Law 

Changes From Present Law 
(A) Add a new provision specifically providing that any vote referred to in s.141(1) may be held by means of a telephonic, electronic or other communication facility, if the by-laws so provide.

(B) Another provision is added to clarify that any person participating electronically in a meeting of shareholders under new s. 132(4) or (5) and that is entitled to vote, may exercise their right to vote by electronic means.

Purpose of Change 
(A) To clarify that voting at a shareholders meeting can take place electronically whether shareholders are physically present at that meeting or are participating electronically.

(B) New s. 141(4) was added at the Senate Committee stage at the suggestion of the Coalition for CBCA reform.

Similar Provincial Laws 

Current Wording 
N/A

Proposed Wording 
141. (3) Despite subsection (1), unless the by-laws otherwise provide, any vote referred to in subsection (1) may be held, in accordance with the regulations, if any, entirely by means of a telephonic, electronic or other communication facility, if the corporation makes available such a communication facility.

(4) Unless the by-laws otherwise provide, any person participating in a meeting of shareholders under subsection 132(4) or (5) and entitled to vote at that meeting may vote, in accordance with the regulations, if any, by means of the telephonic, electronic or other communication facility that the corporation has made available for that purpose.

Bill Clause No. 62
CBCA Section No.new 142(3)
Topic : Shareholders (Shareholder Communications)

Sources of Proposed Law 

Changes From Present Law 
Add a new subsection following s. 142(2) specifying that an entry in the minutes of a meeting to the effect that the chairperson declared a resolution is adopted or rejected is evidence of this decision, without it being necessary to prove the number of votes for or against the resolution. A similar amendment is made in clause 45.

Purpose of Change 
This amendment is designed to increase flexibility and ease of record keeping.

Similar Provincial Laws 
The Business Corporations Act (Saskatchewan)

Current Wording 
N/A

Proposed Wording 
142. (3) Unless a ballot is demanded, an entry in the minutes of a meeting to the effect that the chairperson of the meeting declared a resolution to be carried or defeated is, in the absence of evidence to the contrary, proof of the fact without proof of the number or proportion of the votes recorded in favour of or against the resolution.

Bill Clause No. 63
CBCA Section No.143
Topic : Shareholders (Shareholder Communications)

Sources of Proposed Law 

Changes From Present Law 
Amend par 143(3)(a) so that it is aligned with the proposed changes to s. 134, in particular the changes to s. 134(1)(c) . See clause 57.

Purpose of Change 
This amendment is a technical change to reflect the proposed amendments to s.134(1)(c) regarding the establishment of a date for a meeting of shareholders.

Similar Provincial Laws 

Current Wording 
143. (3) On receiving the requisition referred to in subsection (1), the directors shall call a meeting of shareholders to transact the business stated in the requisition, unless

(a) a record date has been fixed under subsection 134(2) and notice thereof has been given under subsection 134(4);

Proposed Wording 
143. (3)(a) a record date has been fixed under paragraph 134(1)(c) and notice of it has been given under subsection 134(3);

Bill Clause No. 64
CBCA Section No.144(1)
Topic : Shareholders (Shareholder Communications)

Sources of Proposed Law 

Changes From Present Law 
Amend s. 144(1) so that the courts have the power to require the holding of a meeting and clarify the meaning of "impracticable" in the French version.

Purpose of Change 
This amendment is a technical change to clarify the circumstances under which the courts have the power to require that a meeting be held.

Similar Provincial Laws 

Current Wording
144. (1) If for any reason it is impracticable to call a meeting of shareholders of a corporation in the manner in which meetings of those shareholders may be called, or to conduct the meeting in the manner prescribed by the by-laws and this Act, or if for any other reason a court thinks fit, the court, on the application of a director, a shareholder entitled to vote at the meeting or the Director, may order a meeting to be called, held and conducted in such manner as the court directs.

Proposed Wording
144. (1) A court, on the application of a director, a shareholder who is entitled to vote at a meeting of shareholders or the Director, may order a meeting of a corporation to be called, held and conducted in the manner that the court directs, if

(a) it is impracticable to call the meeting within the time or in the manner in which those meetings are to be called;

(b) it is impracticable to conduct the meeting in the manner required by this Act or the by-laws; or

(c) the court thinks that the meeting should be called, held and conducted within the time or in the manner it directs for any other reason.

Bill Clause No. 65
CBCA Section No.145(2)(c)
Topic : Shareholders (Technical Amendment)

Sources of Proposed Law 

Changes From Present Law 
Amend the French version of subs. 145(2)(c) by replacing the words "sur la conduite des affaires tant commerciales qu'internes de la société" with "pour la conduite, dans l'intervalle des activités commerciales et des affaires internes de la société".

Purpose of Change 
This technical change clarifies the wording and application of the Act.

Similar Provincial Laws 

Current Wording 
145. (2) Sur demande présentée en vertu du présent article, le tribunal peut, par ordonnance, prendre toute mesure qu'il estime pertinente et notamment :

c) ordonner une nouvelle élection ou une nouvelle nomination en donnant des directives sur la conduite des affaires tant commerciales qu'internes de la société en attendant l'élection ou la nomination;

Proposed Wording 
145. (2)(c) ordonner une nouvelle élection ou une nouvelle nomination en donnant des directives pour la conduite, dans l'intervalle, des activités commerciales et des affaires internes de la société;

Bill Clause No. 66
CBCA Section No.145.1
Topic : Shareholders (Unanimous Shareholders Agreements)

Sources of Proposed Law 

Changes From Present Law 
The current subs. 146(1) is moved to a separate section.

Purpose of Change 
Moving the pooling agreement provision to a separate section of the Act makes it clear that this kind of agreement cannot be designated as a USA. A pooling agreement does not bind future shareholders (s. 146(3)) and does not transfer any powers from the directors to shareholders (s. 146(5)). It is a private agreement to which general rules of contract law apply.

Similar Provincial Laws 

Current Wording 
146. (1) A written agreement between two or more shareholders may provide that in exercising voting rights the shares held by them shall be voted as therein provided.

Proposed Wording 
145.1 A written agreement between two or more shareholders may provide that in exercising voting rights the shares held by them shall be voted as provided in the agreement.

Bill Clause No. 66
CBCA Section No.146(1) to (5) and new (6)

Topic : Shareholders (Unanimous Shareholder Agreements)

Sources of Proposed Law 

Changes From Present Law 
Changes would clarify the rules under a unanimous shareholder agreement (USA).

Purpose of Change 
Subsection 146(1) would permit the participation of more than one person who is not a shareholder. This would add flexibility.

Under the current s. 146(4), a transferee of shares subject to a unanimous shareholder agreement is deemed to be a party to the agreement provided that the transferee has actual notice of the unanimous shareholder agreement or a reference to it is noted conspicuously on the share certificate (s. 49(8)). The requirement for a note on the stock certificate is likely to be fairly effective as most shareholders in closely-held corporations, as opposed to publicly-traded corporations, do receive actual share certificates. However, s. 146(4) leaves unresolved the status and effect of the unanimous shareholder agreement if neither a note was used nor actual knowledge existed. In this situation, it is not clear whether the unanimous shareholder agreement is still in force since the agreement is no longer "unanimous" and whether transferees without notice have any recourse. Subsection 146(4) also only expressly refers to "transferees" of shares and not to shareholders (purchasers) who purchased shares directly issued by the corporation. The new subs. (4) would clarify the transfer of shares under a USA by permitting the purchaser or transferee who does not know that a USA is in place to cancel the transaction within 30 days. The effect would be to keep the agreement "unanimous".

The addition of a cross-reference to s. 49(8) in s. 146(4) highlights that a notice provided pursuant to s. 49(8) is an example of sufficient notice.

Subsection (5) would clarify that if a person who is not a shareholder is a party to a USA, he/she will also be liable.

An ambiguity in the wording of the USA provisions is the failure of s. 146(5) to expressly state that the shareholders assume the liabilities of which the directors are relieved, as well as their "rights, powers and duties." The amendment would correct that anomaly. It would also clarify that liabilities arising under other acts or the common law are transferred to shareholders and that defences available to directors would be available to shareholders. This would increase certainty for users of USA, the courts and creditors. These changes would harmonize the CBCA with corresponding provincial legislation.

The new subsection (6) would remove the uncertainty regarding the extent to which a shareholder who enters into a unanimous shareholder agreement is bound by common law rules regarding the duties of directors. For instance, at common law, directors who owe a fiduciary duty cannot fetter their discretion; they are required to remain free to make their decisions in the best interests of the corporation. One of the purpose of a USA is to permit shareholders to agree in advance how a particular issue will be decided, for example declaration of dividend. The change would make clear that the shareholders are allowed to fetter their discretion when acting in the place of directors, thereby making the USA concept effective.

Similar Provincial Laws 
Business Corporations Act (Ontario)
Companies Act (Québec)
Corporations Act (Manitoba)
Corporations Act (Newfoundland)
The Business Corporations Act (Saskatchewan)

Current Wording 
146. (1) A written agreement between two or more shareholders may provide that in exercising voting rights the shares held by them shall be voted as therein provided.

(2) An otherwise lawful written agreement among all the shareholders of a corporation, or among all the shareholders and a person who is not a shareholder, that restricts, in whole or in part, the powers of the directors to manage the business and affairs of the corporation is valid.

(3) Where a person who is the beneficial owner of all the issued shares of a corporation makes a written declaration that restricts in whole or in part the powers of the directors to manage the business and affairs of a corporation, the declaration is deemed to be a unanimous shareholder agreement.

(4) Subject to subsection 49(8), a transferee of shares subject to a unanimous shareholder agreement is deemed to be a party to the agreement.

(5) A shareholder who is a party to a unanimous shareholder agreement has all the rights, powers and duties of a director of the corporation to which the agreement relates to the extent that the agreement restricts the powers of the directors to manage the business and affairs of the corporation, and the directors are thereby relieved of their duties and liabilities, including any liabilities under section 119, to the same extent.

Proposed Wording 
146. (1) An otherwise lawful written agreement among all the shareholders of a corporation, or among all the shareholders and one or more persons who are not shareholders, that restricts, in whole or in part, the powers of the directors to manage, or supervise the management of, the business and affairs of the corporation is valid.

(2) If a person who is the beneficial owner of all the issued shares of a corporation makes a written declaration that restricts in whole or in part the powers of the directors to manage, or supervise the management of, the business and affairs of the corporation, the declaration is deemed to be a unanimous shareholder agreement.

(3) A purchaser or transferee of shares subject to a unanimous shareholder agreement is deemed to be a party to the agreement.

(4) If notice is not given to a purchaser or transferee of the existence of a unanimous shareholder agreement, in the manner referred to in subsection 49(8) or otherwise, the purchaser or transferee may, no later than 30 days after they become aware of the existence of the unanimous shareholder agreement, rescind the transaction by which they acquired the shares.

(5) To the extent that a unanimous shareholder agreement restricts the powers of the directors to manage, or supervise the management of, the business and affairs of the corporation, parties to the unanimous shareholder agreement who are given that power to manage or supervise the management of the business and affairs of the corporation have all the rights, powers, duties and liabilities of a director of the corporation, whether they arise under this Act or otherwise, including any defences available to the directors, and the directors are relieved of their rights, powers, duties and liabilities, including their liabilities under section 119, to the same extent.

(6) Nothing in this section prevents shareholders from fettering their discretion when exercising the powers of directors under a unanimous shareholder agreement.

Part 13 Proxies (clauses 67-72)

The definition of "registrant" would be repealed and replaced by a new definition of "intermediary", based on the definition in current provincial securities legislation. The proxy solicitation rules would be amended to remove unnecessary regulatory obstacles to shareholders discussing corporate performance and other corporate matters. For example, solicitations made by public broadcast and publication would be exempt from the proxy circular delivery requirements provided certain conditions are fulfilled (s. 147).

A number of consequential amendments are also included as are several minor technical amendments , including amendments designed to facilitate the efficient operation and administration of the statute.

Briefing Book
An Act to amend the Canada Business Corporations Act and the Canada Cooperatives Act

Bill Clause No. 67
CBCA Section No. 147
Topic : Proxies (Shareholder Communication)

Sources of Proposed Law 
Securities Exchange Act of 1934 (U.S.), Rule 14a

Changes From Present Law 
A. Amend the definition "solicit" or "solicitation" in section 147 to incorporate the following changes:

Exempt a public announcement by a shareholder concerning the shareholder's voting intentions, as prescribed;

Exempt a communication made for the purpose of obtaining the shares for a shareholder proposal under the new section 137(1.1) [see clause 59];

(3) Exempt a communication, other than a solicitation by or on behalf of the corporation, that is made to shareholders in any circumstances that may be prescribed;

Renumber paragraphs in the definition of "solicit" or "solicitation".

B. Repeal the definition of "registrant" and replace it with a new definition of "intermediary" based on the definition currently found in National Policy Statement No. 41.

Purpose of Change 
A. A major problem for shareholders arises out of possible interpretations of paragraph 147(c) which defines "communication to a shareholder under circumstances reasonably calculated to result in the procurement, withholding or revocation of a proxy" as a solicitation. As a result of this definition, almost any communication could be deemed to be a solicitation. The shareholder could then be held liable, upon summary conviction, to a fine not exceeding $5,000 or imprisonment for up to six months or both, for failing to send the requisite proxy documents to all shareholders.

The need for a new standard of shareholder participation was recognized in the United States, which had a similar definition of solicitation. In 1992, the Securities and Exchange Commission (SEC) amended its proxy rules for the purpose of "promoting free discussion, debate and learning among shareholders and interested persons." In the SEC's view, "the federal proxy rules [had] created unnecessary regulatory impediments to communication among shareholders and others and to the effective use of shareholder voting rights."

The amendments would eliminate unnecessary regulatory obstacles to the exchange of views and opinions by shareholders and others concerning management performance and initiatives presented for a vote of shareholders.

B. Section 147 of the CBCA defines "registrant," whose duties correspond to those of an intermediary, as: "a securities broker or dealer required to be registered to trade or deal in securities under the laws of any jurisdiction". The definition of "intermediary" under NP 41 includes a much wider range of institutions. This amendment would bring the CBCA into harmony with current securities legislation, particularly National Policy Statement No. 41 and with current securities holding practices.

Similar Provincial Laws 

Current Wording 
147. "solicit" or "solicitation" includes

(a) a request for a proxy whether or not accompanied by or included in a form of proxy,

(b) a request to execute or not to execute a form of proxy or to revoke a proxy,

(c) the sending of a form of proxy or other communication to a shareholder under circumstances reasonably calculated to result in the procurement, withholding or revocation of a proxy, and

(d) the sending of a form of proxy to a shareholder under section 149, but does not include

(e) the sending of a form of proxy in response to an unsolicited request made by or on behalf of a shareholder,

(f) the performance of administrative acts or professional services on behalf of a person soliciting a proxy,

(g) the sending by a registrant of the documents referred to in section 153, or

(h) a solicitation by a person in respect of shares of which he is the beneficial owner;

"registrant" means a securities broker or dealer required to be registered to trade or deal in securities under the laws of any jurisdiction;

Proposed Wording 
147. "solicit" or "solicitation"

(a) includes

(i) a request for a proxy whether or not accompanied by or included in a form of proxy,

(ii) a request to execute or not to execute a form of proxy or to revoke a proxy,

(iii) the sending of a form of proxy or other communication to a shareholder under circumstances reasonably calculated to result in the procurement, withholding or revocation of a proxy, and

(iv) the sending of a form of proxy to a shareholder under section 149,

(b) does not include

(i) the sending of a form of proxy in response to an unsolicited request made by or on behalf of a shareholder,

(ii) the performance of administrative acts or professional services on behalf of a person soliciting a proxy,

(iii) the sending by an intermediary of the documents referred to in section 153,

(iv) a solicitation by a person in respect of shares of which the person is the beneficial owner,

(v) a public announcement, as prescribed, by a shareholder of how the shareholder intends to vote and the reasons for that decision,

(vi) a communication for the purposes of obtaining the number of shares required for a shareholder proposal under subsection 137(1.1), or (vii) a communication, other than a solicitation by or on behalf of the management of the corporation, that is made to shareholders, in any circumstances that may be prescribed;

(vii) a communication, other than a solicitation by or on behalf of the management of the corporation, that is made to shareholders, in any circumstances that may be prescribed;

"intermediary" means a person who holds a security on behalf of another person who is not the registered holder of the security, and includes

(a) a securities broker or dealer required to be registered to trade or deal in securities under the laws of any jurisdiction;

(b) a securities depositary;

(c) a financial institution;

(d) in respect of a clearing agency, a securities dealer, trust company, bank or other person, including another clearing agency, on whose behalf the clearing agency or its nominees hold securities of an issuer;

(e) a trustee or administrator of a self-administered retirement savings plan, retirement income fund, education savings plan or other similar self-administered savings or investment plan registered under the Income Tax Act;

(f) a nominee of a person referred to in any of paragraphs (a) to (e); and

(g) a person who carries out functions similar to those carried out by individuals or entities referred to in any of paragraphs (a) to (e) and that holds a security registered in its name, or in the name of its nominee, on behalf of another person who is not the registered holder of the security.

Bill Clause No. 68
CBCA Section No. 149(2)
Topic : Proxies (Shareholder Communications)

Sources of Proposed Law 

Changes From Present Law 
Amend s. 149 to provide that non-distributing corporations with 50 shareholders or fewer (two or more joint holders being counted as one shareholder), are not required to send a form of proxy as required by s. 149(1).

Purpose of Change 
The CBCA requires the management of all corporations, distributing and non-distributing, with 15 or more shareholders entitled to vote at the meeting, to formally solicit proxies in preparation for each annual or special meeting. The CBCA provides more onerous obligations on private corporations than do provincial corporate statutes, which do not require private companies to send a form of proxy to their shareholders at all.

Implementation of this amendment would increase the level of harmonization between the CBCA and provincial securities and corporate statutes with respect to differentiating between distributing and non-distributing corporations.

Raising the threshold for mandatory proxy solicitation by management of non-distributing CBCA corporations to 50 shareholders would eliminate the paper burden and legal costs associated with the preparation and distribution of proxy forms by private corporations who now have between 15 and 50 shareholders. It would also reduce the paper burden on government due to the filing requirements of s. 150.

Finally, mandatory solicitation requirements would ensure statutory protection for minority shareholders in private companies with a large number of shareholders. This provision was amended at the Senate Committee stage to change the threshold from "fewer than fifty" to "fifty or fewer" to ensure consistency with provincial securities legislation.

Similar Provincial Laws 

Current Wording 
149. (1) Subject to subsection (2), the management of a corporation shall, concurrently with giving notice of a meeting of shareholders, send a form of proxy in prescribed form to each shareholder who is entitled to receive notice of the meeting.

(2) Where a corporation has fewer than fifteen shareholders, two or more joint holders being counted as one shareholder, the management of the corporation is not required to send a form of proxy under subsection (1).

Proposed Wording 
149. (2) The management of the corporation is not required to send a form of proxy under subsection (1) if it

(a) is not a distributing corporation; and

(b) has fifty or fewer shareholders entitled to vote at a meeting, two or more joint holders being counted as one shareholder.

Bill Clause No. 69
CBCA Section No. new 150(1.1) and (1.2)
Topic : Proxies (Shareholder Communications)

Sources of Proposed Law 
Securities Exchange Act of 1934 (U.S.)

Changes From Present Law  
Add a new provision allowing proxies to be solicited where 15 or fewer shareholders are solicited.

Provide that a person, other than management of the corporation, may solicit proxies without sending a proxy circular if the solicitation is, in the prescribed circumstances, conveyed by public broadcast, speech or publication.

Purpose of Change  
(A) Harmonization with provincial securities rules.

(B) This section is modelled on the SEC rules. See rationale set out under clause 67.

Similar Provincial Laws  

Current Wording  
N/A

Proposed Wording  
150. (1.1) Despite subsection (1), a person may solicit proxies, other than by or on behalf of the management of the corporation, without sending a dissident's proxy circular, if the total number of shareholders whose proxies are solicited is fifteen or fewer, two or more joint holders being counted as one shareholder.

(1.2) Despite subsection (1), a person may solicit proxies, other than by or on behalf of the management of the corporation, without sending a dissident's proxy circular if the solicitation is, in the prescribed circumstances, conveyed by public broadcast, speech or publication.

Bill Clause No. 70
CBCA Section No. 151
Topic : Proxies (Government Administration)

Sources of Proposed Law  

Changes From Present Law  
Any exemption order made by the Director under the section would not be subject to the Statutory Instruments Act.

This amendment deals with public notice exemptions.

Purpose of Change  
Under the Statutory Instruments Act, orders are required to be made by the Governor-in-Council. By removing the word "order", the Act is clarifying that the Director's authority to issue an exemption is not caught by the Statutory Instruments Act. The following sections would also be amended accordingly:156, 171(2) and 258.2.

See explanation in clause 6.

Similar Provincial Laws  

Current Wording  
151. (1) On the application of an interested person, the Director may make an order on such terms as he thinks fit exempting such person from any of the requirements of sections 149 or subsection 150(1), which order may have retrospective effect.

(2) The Director shall set out in the periodical referred to in section 129 the particulars of exemptions granted under this section together with the reasons therefor.

Proposed Wording  
151. (1) On the application of an interested person, the Director may exempt the person, on any terms that the Director thinks fit, from any of the requirements of section 149 or subsection 150(1), which exemption may have retrospective effect.

(2) The Director shall set out in a publication generally available to the public the particulars of exemptions granted under this section together with the reasons for the exemptions.

Bill Clause No. 71
CBCA Section No. 152(3)
Topic : Proxies (Shareholder Communications)

Sources of Proposed Law

Changes From Present Law 
Amend s. 152(3) by replacing the words "votes that might be cast at the meeting on such ballot" with the words "votes that might be cast by shareholders personally or through proxy at the meeting on the ballot…".

Purpose of Change 
This section now empowers the chairperson of the meeting of shareholders to avoid a ballot where he/she knows that the dissenting votes will represent fewer than five percent of all the votes that might be cast by the shareholders personally or by proxy at the meeting. Its purpose is to avoid wasting time at the meeting conducting futile ballots. However, the current wording is ambiguous as to which votes must be counted. The proposed change would clarify that the chairperson must consider those votes that are actually represented at the meeting by shareholders personally or by proxy.

Similar Provincial Laws 
Business Corporations Act (Alberta)

Current Wording 
152. (3) Notwithstanding subsections (1) and (2), where the chairman of a meeting of shareholders declares to the meeting that, if a ballot is conducted, the total number of votes attached to shares represented at the meeting by proxy required to be voted against what to his knowledge will be the decision of the meeting in relation to any matter or group of matters is less than five per cent of all the votes that might be cast at the meeting on such ballot, unless a shareholder or proxyholder demands a ballot,

(a) the chairman may conduct the vote in respect of that matter or group of matters by a show of hands; and

(b) a proxyholder or alternate proxyholder may vote in respect of that matter or group of matters by a show of hands.

Proposed Wording 
152. (3) Despite subsections (1) and (2), if the chairperson of a meeting of shareholders declares to the meeting that, if a ballot is conducted, the total number of votes attached to shares represented at the meeting by proxy required to be voted against what to the knowledge of the chairperson will be the decision of the meeting in relation to any matter or group of matters is less than five per cent of all the votes that might be cast by shareholders personally or through proxy at the meeting on the ballot, unless a shareholder or proxyholder demands a ballot,

Bill Clause No. 72
CBCA Section No. 153
Topic : Proxies (Consequential Amendment)

Sources of Proposed Law 

Changes From Present Law 
Amend s. 153 to replace "registrant" with "intermediary".

Amend s. 153(2) to eliminate the prohibition against a registrant appointing a proxyholder to vote shares registered in his name or in the name of his nominee and clarify that the voting instructions from the beneficial owner must be written.

Amend s. 153(5) to clarify that the beneficial owner must provide the intermediary with appropriate documentation to support a request under that provision.

Purpose of Change 
(A) The definition of "registrant" is replaced in s. 147 with a definition of "intermediary". The amendments to s. 153 are consequential amendments.

The current legislation would preclude an intermediary from appointing a proxyholder to vote securities without first obtaining voting instructions from the beneficial owner of the shares. This drafting does not accord with how the industry currently operates. Where there are multiple layers of ownership, only the last intermediary in the chain actually knows the identity of the beneficial owner of the shares - therefore only that intermediary is in a position to obtain voting instructions from the beneficial owner. The objective of s. 153(2) is to prevent securities being voted by anyone other than the beneficial owner without first obtaining the voting instructions from the beneficial owner. The legislation goes too far by also precluding intermediaries from appointing proxyholders. This problem is being corrected. The voting instructions from the beneficial owner must be written in order to ensure that an intermediary is not able to act o the basis of verbal instructions from the beneficial owner of the share.

The amendment to CBCA, s. 153(5) and CCA, s. 169(5) is desirable from an evidentiary point of view.

Similar Provincial Laws 

Current Wording 
153. (1) Shares of a corporation that are registered in the name of a registrant or his nominee and not beneficially owned by the registrant shall not be voted unless the registrant, forthwith after receipt of the notice of the meeting, financial statements, management proxy circular, dissident's proxy circular and any other documents other than the form of proxy sent to shareholders by or on behalf of any person for use in connection with the meeting, sends a copy thereof to the beneficial owner and, except where the registrant has received written voting instructions from the beneficial owner, a written request for such instructions.

(2) A registrant shall not vote or appoint a proxyholder to vote shares registered in his name or in the name of his nominee that he does not beneficially own unless he receives voting instructions from the beneficial owner.

(3) A person by or on behalf of whom a solicitation is made shall, at the request of a registrant, forthwith furnish the registrant at that person's expense with the necessary number of copies of the documents referred to in subsection (1) other than a copy of the document requesting voting instructions

(4) A registrant shall vote or appoint a proxyholder to vote any shares referred to in subsection (1) in accordance with any written voting instructions received from the beneficial owner.

(5) If requested by a beneficial owner, a registrant shall appoint the beneficial owner or a nominee of the beneficial owner as proxyholder.

(6) The failure of a registrant to comply with this section does not render void any meeting of shareholders or any action taken thereat.

(7) Nothing in this section gives a registrant the right to vote shares that he is otherwise prohibited from voting.

(8) A registrant who knowingly fails to comply with this section is guilty of an offence and liable on summary conviction to a fine not exceeding five thousand dollars or to imprisonment for a term not exceeding six months or to both.

(9) Where a registrant who is a body corporate commits an offence under subsection (8), any director or officer of the body corporate who knowingly authorized, permitted or acquiesced in the commission of the offence is a party to and guilty of the offence and is liable on summary conviction to a fine not exceeding five thousand dollars or to imprisonment for a term not exceeding six months or to both, whether or not the body corporate has been prosecuted or convicted.

Proposed Wording 
153. (1) Shares of a corporation that are registered in the name of an intermediary or their nominee and not beneficially owned by the intermediary must not be voted unless the intermediary, without delay after receipt of the notice of the meeting, financial statements, management proxy circular, dissident's proxy circular and any other documents other than the form of proxy sent to shareholders by or on behalf of any person for use in connection with the meeting, sends a copy of the document to the beneficial owner and, except when the intermediary has received written voting instructions from the beneficial owner, a written request for such instructions.

(2) An intermediary, or a proxyholder appointed by an intermediary, may not vote shares that the intermediary does not beneficially own and that are registered in the name of the intermediary or in the name of a nominee of the intermediary unless the intermediary or proxyholder, as the case may be, receives written voting instructions from the beneficial owner.

(3) A person by or on behalf of whom a solicitation is made shall provide, at the request of an intermediary, without delay, to the intermediary at the person's expense the necessary number of copies of the documents referred to in subsection (1), other than copies of the document requesting voting instructions.

(4) An intermediary shall vote or appoint a proxyholder to vote any shares referred to in subsection (1) in accordance with any written voting instructions received from the beneficial owner.

(5) If a beneficial owner so requests and provides an intermediary with appropriate documentation, the intermediary must appoint the beneficial owner or a nominee of the beneficial owner as proxyholder.

(6) The failure of an intermediary to comply with this section does not render void any meeting of shareholders or any action taken at the meeting.

(7) Nothing in this section gives an intermediary the right to vote shares that the intermediary is otherwise prohibited from voting.

(8) An intermediary who knowingly fails to comply with this section is guilty of an offence and liable on summary conviction to a fine not exceeding five thousand dollars or to imprisonment for a term not exceeding six months or to both.

(9) If an intermediary that is a body corporate commits an offence under subsection (8), any director or officer of the body corporate who knowingly authorized, permitted or acquiesced in the commission of the offence is a party to and guilty of the offence and is liable on summary conviction to a fine not exceeding five thousand dollars or to imprisonment for a term not exceeding six months or to both, whether or not the body corporate has been prosecuted or convicted.

Part 14 Financial Disclosure (clauses 73-82)

A number of consequential amendments required as a result of amendments to other parts of the Act are made in this Part. In addition, several minor technical amendments, amendments to the French version and amendments designed to facilitate the efficient operation and administration of the statute are also included.

A provision would be added specifying that in the case of a proposed replacement of an auditor, the corporation must make a statement regarding the reasons for the proposed replacement. Also, the new auditor will be allowed to make a statement on the corporation's statement

(s. 168(5.1)).

Briefing Book
An Act to amend the Canada Business Corporations Act and the Canada Cooperatives Act

Bill Clause No. 73
CBCA Section No. Heading before s. 155
Topic : Financial Disclosure (Technical Amendments)

Sources of Proposed Law 

Changes From Present Law 
The heading "Présentation de renseignements financiers" before section 155 of the French version of the Act is replaced by "Présentation de renseignements d'ordre financier"

Purpose of Change 
This technical change clarifies the wording and application of the Act.

Similar Provincial Laws 

Current Wording 
Présentation de renseignements financiers

Proposed Wording 
Présentation de renseignements d'ordre financier

Bill Clause No. 74
CBCA Section No. 156
Topic : Financial Disclosure (Government Administration)

Sources of Proposed Law 

Changes From Present Law 
Any exemption made by the Director under the section would not be subject to the Statutory Instruments Act.

Purpose of Change 
Under the Statutory Instruments Act, orders are required to be made by the Governor-in-Council. By removing the word "order", the Act is clarifying that the Director's authority to issue an exemption is not caught by the Statutory Instruments Act.

Similar Provincial Laws 

Current Wording 
156. A corporation may apply to the Director for an order authorizing the corporation to omit from its financial statements any item prescribed, or to dispense with the publication of any particular financial statement prescribed, and the Director may, if he reasonably believes that disclosure of the information therein contained would be detrimental to the corporation, permit such omission on such reasonable conditions as he thinks fit.

Proposed Wording 
156. The Director may, on application of a corporation, authorize the corporation to omit from its financial statements any item prescribed, or to dispense with the publication of any particular financial statement prescribed, and the Director may, if the Director reasonably believes that disclosure of the information contained in the statements would be detrimental to the corporation, permit the omission on any reasonable conditions that the Director thinks fit.

Bill Clause No. 75
CBCA Section No. 157(2)
Topic : Financial Disclosure (Consequential Amendment)

Sources of Proposed Law

Changes From Present Law 
Replace the phrase "legal representative" with the phrase "personal representative".

Purpose of Change 
This amendment is consequential to the addition of the definition of "personal representative" in clause 1(5).

Similar Provincial Laws

Current Wording 
157. (2) Shareholders of a corporation and their agents and legal representatives may on request therefor examine the statements referred to in subsection (1) during the usual business hours of the corporation and may make extracts therefrom free of charge.

Proposed Wording
157. (2) Shareholders of a corporation and their personal representatives may on request examine the statements referred to in subsection (1) during the usual business hours of the corporation and may make extracts free of charge.

Bill Clause No. 76
CBCA Section No. 8(1)
Topic : Financial Disclosure (Technical Amendment)

Sources of Proposed Law 

Changes From Present Law 
Allow facsimiles of directors' signatures to be used as evidence of their approval of the corporation's financial statements.

Purpose of Change 
The flexibility of the CBCA would be increased by allowing the use of a facsimile of the director's signature on the financial statements.

Similar Provincial Laws 

Current Wording 
158. (1) The directors of a corporation shall approve the financial statements referred to in section 155 and the approval shall be evidenced by the signature of one or more directors.

Proposed Wording 
158. (1) The directors of a corporation shall approve the financial statements referred to in section 155 and the approval shall be evidenced by the manual signature of one or more directors or a facsimile of the signatures reproduced in the statements.

Bill Clause No. 77
CBCA Section No. 160
Topic : Financial Disclosure (Technical Amendment)

Sources of Proposed Law 

Changes From Present Law 
(A) Clarify s. 160(1)(b) by replacing the phrase "after the last date when the last preceding annual meeting should have been held" with the wording found in s. 133. (See clause 56).

(B) Repeal subsection (4).

(C) Renumber subsections (5) and (6) as (2) and (3).

Purpose of Change 
(A) Subsection 160(1)(b): This amendment is designed to harmonise the CBCA "securities" terminology with the provincial securities legislation.

(B) Subsection (4): This section is repealed to reduce the filing burdens of corporations. Should the Director have occasion to need a corporation's interim financial statements, they are available as public documents through the securities commissions.

(C) Subsections (5) and (6): Renumbering is a consequence of the 1994 repeal of subsections (2) and (3) and the present repeal of subsection (4).

Similar Provincial Laws 

Current Wording 
160. (1) A corporation any of the securities of which are or were part of a distribution to the public, remain outstanding and are held by more than one person shall send a copy of the documents referred to in section 155 to the Director

(a) not less than twenty-one days before each annual meeting of shareholders or forthwith after the signing of a resolution under paragraph 142(1)(b) in lieu of the annual meeting; and

(b) in any event not later than fifteen months after the last date when the last preceding annual meeting should have been held or a resolution in lieu of the meeting should have been signed.

(2) and (3) [Repealed, 1994, c. 24, s. 17]

(4) If a corporation referred to in subsection (1)

(a) sends to its shareholders, or

(b) is required to file with or send to a public authority or a stock exchange interim financial statements or related documents, the corporation shall forthwith send copies thereof to the Director.

(5) A subsidiary corporation is not required to comply with this section if

(a) the financial statements of its holding corporation are in consolidated or combined form and include the accounts of the subsidiary; and

(b) the consolidated or combined financial statements of the holding corporation are included in the documents sent to the Director by the holding corporation in compliance with this section.

(6) A corporation that fails to comply with this section is guilty of an offence and liable on summary conviction to a fine not exceeding five thousand dollars.

Proposed Wording 
160. (1) A distributing corporation, any of the issued securities of which remain outstanding and are held by more than one person, shall send a copy of the documents referred to in section 155 to the Director

(a) not less than twenty-one days before each annual meeting of shareholders, or without delay after a resolution referred to in paragraph 142(1)(b) is signed; and

(b) in any event within fifteen months after the last preceding annual meeting should have been held or a resolution in lieu of the meeting should have been signed, but no later than six months after the end of the corporation's preceding financial year.

(2) A subsidiary corporation is not required to comply with this section if

(a) the financial statements of its holding corporation are in consolidated or combined form and include the accounts of the subsidiary; and

(b) the consolidated or combined financial statements of the holding corporation are included in the documents sent to the Director by the holding corporation in compliance with this section.

(3) A corporation that fails to comply with this section is guilty of an offence and is liable on summary conviction to a fine not exceeding five thousand dollars.

Bill Clause No. 78
CBCA Section No. new 161(2.1) and 161(5)
Topic : Financial Disclosure (Technical Amendments)

Sources of Proposed Law 

Changes From Present Law
A) Add a new subsection immediately following 161(2) providing that a person's business partner includes a shareholder of that person.

B) Amend the French version of subsection (5) to replace the words "de ne causer aucun préjudice aux actionnaires" with the words " pas causer un préjudice injustifié aux actionnaires", and the word "pertinentes" with the word "indiquées".

Purpose of Change
A) To reflect the new definition of "auditor" in clause (1) of the Bill, which includes incorporated auditors.

B) subsection (5): This technical change clarifies the wording and application of the Act.

Similar Provincial Laws 

Current Wording 
161. (2) For the purposes of this section,

(a) independence is a question of fact; and

(b) a person is deemed not to be independent if he or his business partner

(i) is a business partner, a director, an officer or an employee of the corporation or any of its affiliates, or a business partner of any director, officer or employee of any such corporation or any of its affiliates,

(ii) beneficially owns or controls, directly or indirectly, a material interest in the securities of the corporation or any of its affiliates, or

(iii) has been a receiver, receiver-manager, liquidator or trustee in bankruptcy of the corporation or any of its affiliates within two years of his proposed appointment as auditor of the corporation.

161. (5) Le tribunal, s'il est convaincu de ne causer aucun préjudice aux actionnaires, peut, à la demande de tout intéressé, dispenser, même rétroactivement, le vérificateur de l'application du présent article, aux conditions qu'il estime pertinentes.

Proposed Wording 
161. (2.1) For the purposes of subsection (2), a person's business partner includes a shareholder of that person.

161. (5) Le tribunal, s'il est convaincu de ne pas causer un préjudice injustifié aux actionnaires, peut, à la demande de tout intéressé, dispenser, même rétroactivement, le vérificateur de l'application du présent article, aux conditions qu'il estime indiquées.

Bill Clause No. 79
CBCA Section No. 163(1)
Topic : Financial Disclosure (Consequential Amendment)

Sources of Proposed Law 

Changes From Present Law 
Amend subsection 163(1) to refer to "a distributing corporation".

Purpose of Change 
This change reflects the new definition of "distributing corporation" added by clause 1(5).

Similar Provincial Laws

Current Wording 
163. (1) The shareholders of a corporation that is not required to comply with section 160 may resolve not to appoint an auditor.

Proposed Wording 
163. (1) The shareholders of a corporation that is not a distributing corporation may resolve not to appoint an auditor.

Bill Clause No. 80
CBCA Section No. new 168(5.1) and 168(6)
Topic : Financial Disclosure (Shareholder Communications)

Sources of Proposed Law 

Changes From Present Law 
(A) Add a provision following s. 168(5) to:

(1) require the corporation to prepare a statement setting out the reason for changing auditors, and

(2) provide the new auditor with the right to comment on the reason for changing auditors.

(B) Amend s. 168(6) to give effect to the above changes.

Purpose of Change 
The proposed changes are designed to address the concerns of auditors that they should not be summarily dismissed. Auditors play an important role in protecting shareholder interests. In the context of privately-held corporations, shareholders have the right to pass a resolution dispensing with the expense of having an auditor (see s. 163). In a situation where the auditor is not dispensed with, shareholders should be entitled to a formal explanation for the auditor's proposed replacement.

Similar Provincial Laws 

Current Wording 
168. (6) The corporation shall forthwith send a copy of the statement referred to in subsection (5) to every shareholder entitled to receive notice of any meeting referred to in subsection (1) and to the Director unless the statement is included in or attached to a management proxy circular required by section 150.

Proposed Wording 
168. (5.1) In the case of a proposed replacement of an auditor, whether through removal or at the end of the auditor's term, the following rules apply with respect to other statements:

(a) the corporation shall make a statement on the reasons for the proposed replacement; and

(b) the proposed replacement auditor may make a statement in which he or she comments on the reasons referred to in paragraph (a).

(6) The corporation shall send a copy of the statements referred to in subsections (5) and (5.1) without delay to every shareholder entitled to receive notice of a meeting referred to in subsection (1) and to the Director, unless the statement is included in or attached to a management proxy circular required by section 150.

Bill Clause No. 81
CBCA Section No. new 170(3)
Topic : Financial Disclosure (Directors' Liability)

Sources of Proposed Law 

Changes From Present Law 
Provide in s. 170 that a person who in good faith makes an oral or written communication to the auditor is exonerated from civil liability.

Purpose of Change 
This change will help protect individuals who make an oral or written communication to the auditor.

Similar Provincial Laws 
Bank Act

Current Wording 
N/A

Proposed Wording 
170. (3) A person who in good faith makes an oral or written communication under subsection (1) or (2) is not liable in any civil proceeding arising from having made the communication.

Bill Clause No. 82
CBCA Section No. 171(2)
Topic : Financial Disclosure (Government Administration)

Sources of Proposed Law  

Changes From Present Law  
Any exemption made by the Director under the section would not be subject to the Statutory Instruments Act.

Purpose of Change 
Under the Statutory Instruments Act, orders are required to be made by the Governor-in-Council. By removing the word "order", the Act is clarifying that the Director's authority to issue an exemption is not caught by the Statutory Instruments Act.

Similar Provincial Laws  

Current Wording  
171. (2) A corporation may apply to the Director for an order authorizing the corporation to dispense with an audit committee, and the Director may, if he is satisfied that the shareholders will not be prejudiced by such an order, permit the corporation to dispense with an audit committee on such reasonable conditions as he thinks fit.

Proposed Wording  
171. (2) The Director may, on the application of a corporation, authorize the corporation to dispense with an audit committee, and the Director may, if satisfied that the shareholders will not be prejudiced, permit the corporation to dispense with an audit committee on any reasonable conditions that the Director thinks fit.

Part 15 Fundamental Changes (clauses 83-89)

A number of consequential amendments required as a result of amendments to other parts of the Act are included in this Part. In addition, several minor technical amendments, amendments to the French version and amendments designed to clarify and facilitate the efficient operation and administration of the statute are included.

Briefing Book
An Act to amend the Canada Business Corporations Act and the Canada Cooperatives Act

Bill Clause No. 83
CBCA Section No. 173(1)(b) and (c)
Topic : Fundamental Changes (Technical Amendments)

Sources of Proposed Law

Changes From Present Law 
Amend par. 173(1)(b) to provide for amendment to the articles where there is a change in the province in which the corporation's registered office is located.

Amend par. 173(1)(c) by replacing, in the French version, the word "apporter" by "ajouter".

Purpose of Change 
See explanation: clause 9.
This technical change clarifies the wording and application of the Act.

Similar Provincial Laws 

Current Wording
173. (1) Subject to sections 176 and 177, the articles of a corporation may by special resolution be amended to

(b) change the place in which its registered office is situated;

c ) d'apporter, de modifier ou de supprimer toute restriction quant à ses activités commerciales;

Proposed Wording 
173. (1)( b ) change the province in which its registered office is situated;

(c ) d'"ajouter", de modifier ou de supprimer toute restriction quant à ses activités commerciales;

Bill Clause No. 84
CBCA Section No. 174(1) and (1)(d)
Topic : Fundamental Changes: (Technical Amendments)

Sources of Proposed Law 

Changes From Present Law 
(A) The reference in the portion of subsection 174(1) before paragraph (a) is update to refer to "distributing" corporation.

(B) Specific references to sections of the Trust and Loan Companies Act (s. 379) and the Insurance Companies Act (s. 411) are removed.

Purpose of Change 
(A) The proposed amendment in subs. 174(1) reflects the new definition of "distributing corporation" found in subsection 2(1).

(B) Removing the specific references to the Trust and Loan Companies Act and the Insurance Companies Act and allowing them to be prescribed by regulation allows for easier amendment should the specific section numbers of those acts change and also eases the addition or removal of specified acts as required.

Similar Provincial Laws 

Current Wording 
174. (1) Subject to sections 176 and 177, a corporation any of the issued shares of which are or were part of a distribution to the public and remain outstanding and are held by more than one person may by special resolution amend its articles in accordance with the regulations to constrain

(1)(d) the issue, transfer or ownership of shares of any class or series in order to assist the corporation to comply with

(i) section 379 of the Trust and Loan Companies Act , or

(ii) section 411 of the Insurance Companies Act ; or

Proposed Wording 
174. (1) Subject to sections 176 and 177, a distributing corporation, any of the issued shares of which remain outstanding and are held by more than one person, may by special resolution amend its articles in accordance with the regulations to constrain

(1)( d ) the issue, transfer or ownership of shares of any class or series in order to assist the corporation to comply with any prescribed law.

Bill Clause No. 85
CBCA Section No. 177(1)
Topic : Fundamental Changes (Government Administration)

Sources of Proposed Law 

Changes From Present Law 

The words "prescribed form" would be replaced with "in the form that the Director fixes".

Purpose of Change 
See explanation: clause 3.

Similar Provincial Laws 

Current Wording 
177. (1) Subject to any revocation under subsection 173(2) or 174(5), after an amendment has been adopted under section 173, 174 or 176 articles of amendment in prescribed form shall be sent to the Director.

Proposed Wording 
177. (1) Subject to any revocation under subsection 173(2) or 174(5), after an amendment has been adopted under section 173, 174 or 176 articles of amendment in the form that the Director fixes shall be sent to the Director.

Bill Clause No. 86
CBCA Section No. 180(1) and (2)
Topic : Fundamental Changes (Government Administration)

Sources of Proposed Law 

Changes From Present Law 
(A) Remove the words "as amended" in subsection (1).

(B) The words "prescribed form" in subsection (2) would be replaced with "in the form that the Director fixes".

Purpose of Change 
(A) Subsection (1): This amendment clarifies the wording of the Act by removing words that had indicated that the subsection required articles to be amended before they are restated.

(B) Subsection (2): See explanation: clause 3.

Similar Provincial Laws 

Current Wording 
180. (1) The directors may at any time, and shall when reasonably so directed by the Director, restate the articles of incorporation as amended.

(2) Restated articles of incorporation in prescribed form shall be sent to the Director.

Proposed Wording 
180. (1) The directors may at any time, and shall when reasonably so directed by the Director, restate the articles of incorporation.

(2) Restated articles of incorporation in the form that the Director fixes shall be sent to the Director.

Bill Clause No. 87
CBCA Section No. 183(3) and (4)
Topic : Fundamental Changes (Technical Amendments)

Sources of Proposed Law 

Changes From Present Law 
Addition of the word "agreement" after the word "amalgamation" in the English version and a corresponding amendment to the French version (subs. 183(3)).

The words "in respect of an amalgamation" are replaced with "in respect of the amalgamation agreement", and the word "an" with "each" before "amalgamating corporation" in the English version.

Addition of the words "de chaque société fusionnante" after the word "série" in the French version.

Purpose of Change 
These technical changes clarify the wording and application of the Act and ensure that the English and French versions have the same interpretation.

Similar Provincial Laws 

Current Wording 
183. (3) Each share of an amalgamating corporation carries the right to vote in respect of an amalgamation whether or not it otherwise carries the right to vote.

(4) The holders of shares of a class or series of shares of an amalgamating corporation are entitled to vote separately as a class or series in respect of an amalgamation if the amalgamation agreement contains a provision that, if contained in a proposed amendment to the articles, would entitle such holders to vote as a class or series under section 176.

(3) Chaque action des sociétés fusionnantes, assortie ou non du droit de vote, emporte droit de vote quant à la fusion.

(4) Les détenteurs d'actions d'une catégorie ou d'une série sont habiles à voter séparément sur la convention de fusion si celle-ci contient une clause qui, dans une proposition de modification des statuts, leur aurait conféré ce droit en vertu de l'article 176.

Proposed Wording 
183. (3) Each share of an amalgamating corporation carries the right to vote in respect of an amalgamation agreement whether or not it otherwise carries the right to vote.

(4) The holders of shares of a class or series of shares of each amalgamating corporation are entitled to vote separately as a class or series in respect of an amalgamation agreement if the amalgamation agreement contains a provision that, if contained in a proposed amendment to the articles, would entitle such holders to vote as a class or series under section 176.

183. (3) Chaque action des sociétés fusionnantes, assortie ou non du droit de vote, comporte un droit de vote quant à la convention de fusion.

(4) Les détenteurs d'actions d'une catégorie ou d'une série de chaque société fusionnante sont habiles à voter séparément au sujet de la convention de fusion si celle-ci contient une clause qui, dans une proposition de modification des statuts, leur aurait conféré ce droit en vertu de l'article 176.

Bill Clause No. 88
CBCA Section No. 184(1)(b)(ii) and (2)(b)(ii)
Topic : Fundamental Changes (Technical Amendments)

Sources of Proposed Law 

Changes From Present Law 
Amend clauses 184(1)(b)(ii) and (2)(b)(ii) by replacing "articles of incorporation" with "articles".

Purpose of Change 
The purpose of the change is to clarify the wording of the CBCA. The use of phrase "articles of incorporation" is limiting. The phrase does not include amended articles or articles of a previous amalgamation. The intent of the provision is to refer to "articles" in its broad sense, as it is defined in s. 2 of the CBCA. This amendment would broaden the wording of the CBCA.

Similar Provincial Laws 

Current Wording 
184. (1)(b)(ii) except as may be prescribed, the articles of amalgamation shall be the same as the articles of incorporation of the amalgamating holding corporation, and

(2)(b)(ii) except as may be prescribed, the articles of amalgamation shall be the same as the articles of incorporation of the amalgamating subsidiary corporation whose shares are not cancelled, and

Proposed Wording
184. (1)(b)(ii) except as may be prescribed, the articles of amalgamation shall be the same as the articles of the amalgamating holding corporation, and

(2)(b)(ii) except as may be prescribed, the articles of amalgamation shall be the same as the articles of the amalgamating subsidiary corporation whose shares are not cancelled, and

Bill Clause No. 89
CBCA Section No. 185(1)
Topic  Fundamental Changes (Government Administration)

Sources of Proposed Law 

Changes From Present Law 
The Director would be allowed to set the form of the articles of amalgamation.

Purpose of Change 
See explanation: clause 3.

Similar Provincial Laws 

Current Wording 
185. (1) Subject to subsection 183(6), after an amalgamation has been adopted under section 183 or approved under section 184, articles of amalgamation in prescribed form shall be sent to the Director together with the documents required by sections 19 and 106.

Proposed Wording 
185. (1) Subject to subsection 183(6), after an amalgamation has been adopted under section 183 or approved under section 184, articles of amalgamation in the form that the Director fixes shall be sent to the Director together with the documents required by sections 19 and 106.

Part 15 Fundamental Changes (clauses 90-96)

A number of consequential amendments required as a result of amendments to other parts of the Act are included in this Part. In addition, several minor technical amendments, amendments to the French version and amendments designed to clarify and facilitate the efficient operation and administration of the statute are included.

Briefing Book
An Act to amend the Canada Business Corporations Act and the Canada Cooperatives Act

Bill Clause No. 90
CBCA Section No. 186.1(4)
Topic  Fundamental Changes (Government Administration)

Sources of Proposed Law 

Changes From Present Law 
The Director would be allowed to set the form of the articles.

Purpose of Change 
See explanation: clause 3.

Similar Provincial Laws 

Current Wording 
186.1. (4) For the purposes of section 262, a notice referred to in subsection (3) is deemed to be articles that are in the prescribed form.

Proposed Wording 
186.1. (4) For the purposes of section 262, a notice referred to in subsection (3) is deemed to be articles that are in the form that the Director fixes .

Bill Clause No. 91
CBCA Section No. 187(3) and (11)
Topic : Fundamental Changes (Technical Amendments)

Sources of Proposed Law 

Changes From Present Law
(A) The Director would be allowed to set the form of the articles.

(B) Clarification in the French version of the meaning of "impracticable."

Purpose of Change
(A) Subsection (3): See explanation: clause 3.

(B) Subsection (11): This technical change clarifies the wording and application of the Act.

Similar Provincial Laws

Current Wording 
187. (3) Articles of continuance in prescribed form shall be sent to the Director together with the documents required by sections 19 and 106.

187. (11) Au cas où le directeur, saisi par une personne morale, décide qu'il n'y a pas lieu de supprimer la référence aux actions à valeur nominale ou au pair d'une catégorie ou d'une série qu'elle était autorisée à émettre avant sa prorogation en vertu de la présente loi, il peut, par dérogation au paragraphe 24(1), autoriser la personne morale à maintenir, dans ses statuts, la désignation de ces actions, même non encore émises, comme actions à valeur nominale ou au pair.

Proposed Wording 
187. (3) Articles of continuance in the form that the Director fixes shall be sent to the Director together with the documents required by sections 19 and 106.

187. (11) Au cas où le directeur, saisi par une personne morale, décide qu'il est pratiquement impossible de supprimer la référence aux actions à valeur nominale ou au pair d'une catégorie ou d'une série que celle-ci était autorisée à émettre avant sa prorogation en vertu de la présente loi, il peut, par dérogation au paragraphe 24(1), l' autoriser à maintenir, dans ses statuts, la désignation de ces actions, même non encore émises, comme actions à valeur nominale ou au pair.

Bill Clause No. 92
CBCA Section No. 188(1), (2), (2.1) and (8)
Topic : Fundamental Changes (Technical amendment)

Sources of Proposed Law 

Changes From Present Law
Subs. 188(1) and (2.1) would be replaced with new subsections 188(1) and (2) as a result of the repeal of the Investment Companies Act on July 31, 1996; The word "prescribed" is replaced with "that the Director fixes"in s. 188(8).

Purpose of Change 
This technical change would clarify the wording and application of the Act and remove a reference to a statute that was repealed in 1996. Subsection 2.1 is renumbered as (2).

Subsection 188(8): See explanation at clause 3.

Similar Provincial Laws 

Current Wording 
188. (1) Subject to subsections (2) and (10), a corporation

(a) that is authorized by the shareholders in accordance with this section, and

(b) that establishes to the satisfaction of the Director that its proposed continuance in another jurisdiction will not adversely affect creditors or shareholders of the corporation may apply to the appropriate official or public body of the other jurisdiction requesting that the corporation be continued as if it had been incorporated under the laws of that other jurisdiction.

(2) A corporation to which the Investment Companies Act applies shall not apply for continuance in another jurisdiction without the prior consent of the Minister of Finance.

(2.1) A corporation that is authorized by the shareholders in accordance with this section may apply to the appropriate Minister for its continuance under the Bank Act, the Canada Cooperative Associations Act, the Insurance Companies Act or the Trust and Loan Companies Act.

(8) For the purposes of section 262, a notice referred to in subsection (7) is deemed to be articles that are in the prescribed form.

Proposed Wording 
188. (1) Subject to subsection (10), a corporation may apply to the appropriate official or public body of another jurisdiction requesting that the corporation be continued as if it had been incorporated under the laws of that other jurisdiction if the corporation

( a ) is authorized by the shareholders in accordance with this section to make the application; and

( b ) establishes to the satisfaction of the Director that its proposed continuance in the other jurisdiction will not adversely affect creditors or shareholders of the corporation.

(2) A corporation that is authorized by the shareholders in accordance with this section may apply to the appropriate Minister for its continuance under the Bank Act , the Canada Cooperatives Act , the Insurance Companies Act or the Trust and Loan Companies Act .

(8) For the purposes of section 262, a notice referred to in subsection (7) is deemed to be articles that are in the form that the Director fixes .

Bill Clause No. 93
CBCA Section No. 89(1), (b) and (c)
Topic : Fundamental Changes (Technical Amendments)

Sources of Proposed Law 

Changes From Present Law 
The words "the articles of a corporation are deemed to state" in s. 189(1) are no longer necessary. Reference to "hypothec" is added in s. 189(1)(b) and reference to s. 44 is removed in 189(1)(c).

Purpose of Change 
These technical changes clarify the wording and application of the Act and update the CBCA to match the terminology used in the new Civil Code of Québec regarding debt obligations. Reference to s. 44 is removed because this section is being repealed.

Similar Provincial Laws 

Current Wording 
189. (1) Unless the articles or by-laws of or a unanimous shareholder agreement relating to a corporation otherwise provide, the articles of a corporation are deemed to state that the directors of a corporation may, without authorization of the shareholders,

(b) issue, reissue, sell or pledge debt obligations of the corporation;

(c) subject to section 44, give a guarantee on behalf of the corporation to secure performance of an obligation of any person;

Proposed Wording 
189. (1) Unless the articles or by-laws of or a unanimous shareholder agreement relating to a corporation otherwise provide, the directors of a corporation may, without authorization of the shareholders,

( b ) issue, reissue, sell, pledge or hypothecate debt obligations of the corporation;

( c ) give a guarantee on behalf of the corporation to secure performance of an obligation of any person; and

Bill Clause No. 94
CBCA Section No. 190(1)(b), new (f) and (2.1)
Topic : Fundamental Changes (Going-Private Transactions)

Sources of Proposed Law 

Changes From Present Law 
(A) Amend par. 190(1)(b) by replacing, in the French version, the words "étendre" by "ajouter" and "certaines restrictions" by "toute restriction".

(B) Provide that the right to dissent under s. 190 is also available to shareholders of a corporation that carries out a going-private transaction.

(C) Provide that the right to dissent is also available to shareholders under s. 190(2) even where there is only one class of shares. This amendment applies to all situations where the right to dissent is or should be given.

Purpose of Change 
(A) This technical change clarifies the wording and application of the Act.

(B) This amendment provides a shareholder who is being forced out of the corporation pursuant to a going-private transaction (in the case of a distributing corporation) or a squeeze-out transaction (in the case of a non-distributing corporation) with the same rights as shareholders undergoing other fundamental changes in the affairs of the corporation. (Going-private transaction and squeeze-out transaction - see clauses 1(5) and 97.)

(C) While the CBCA does not deal expressly with this issue, class votes under s. 176 may not be available to shareholders of a corporation with only one class of shares. Subsection 190(2) provides that a holder of shares of any class or series of shares entitled to vote under section 176 may dissent if the corporation resolves to amend its articles in a manner described in that section. The "manners" of amending the articles described in section 176 are very broad, including share consolidations and the creation of a new class of shares with equal or superior rights. Thus, shareholders entitled to vote under s. 176 have a broad right to dissent. If shareholders of a corporation with one class of shares cannot vote under s. 176, they have a much more limited right to dissent. This amendment addresses this imbalance by providing shareholders with a right to dissent even where there is only one class of shares.

Similar Provincial Laws 
Business Corporations Act (Ontario )

Current Wording 
190. (1) Subject to sections 191 and 241, a holder of shares of any class of a corporation may dissent if the corporation is subject to an order under paragraph 192(4)( d ) that affects the holder or if the corporation resolves to …

( b ) amend its articles under section 173 to add, change or remove any restriction on the business or businesses that the corporation may carry on; …

Proposed Wording 
190. (1) b) de modifier ses statuts, conformément à l'article 173, afin d' ajouter , de modifier ou de supprimer toute restriction à ses activités commerciales;

( f ) carry out a going-private transaction or a squeeze-out transaction.

190. (2.1) The right to dissent described in subsection (2) applies even if there is only one class of shares.

Bill Clause No. 95
CBCA Section No. 191(4)
Topic : Fundamental Changes (Government Administration)

Sources of Proposed Law 

Changes From Present Law 
The Director would be allowed to set the form of the articles.

Purpose of Change 
See explanation: clause 3.

Similar Provincial Laws 

Current Wording 
191. (4) After an order referred to in subsection (1) has been made, articles of reorganization in prescribed form shall be sent to the Director together with the documents required by sections 19 and 113, if applicable.

Proposed Wording 
191. (4) After an order referred to in subsection (1) has been made, articles of reorganization in the form that the Director fixes shall be sent to the Director together with the documents required by sections 19 and 113, if applicable.

Bill Clause No. 96
CBCA Section No. 192(1), new (f.1) and 192(3) and (6)
Topic : Fundamental Changes (Going-Private Transactions)

Sources of Proposed Law 

Changes From Present Law 
(A) Expand the definition of "arrangement" set out in s. 192(1) to include going-private transactions and squeeze-out transactions.

(B) Clarification in the French version of the meaning of "impracticable".

(C) The Director would be allowed to set the form of the articles.

Purpose of Change 
(A) Paragraph 192(1)(f.1): This amendment will allow a corporation to carry out a going-private transaction pursuant to terms and conditions prescribed by the court (see s. 192(4)), where it is not practicable to do so under any other provision of the Act (see clause 97).

(B) Subsection (3): This technical change clarifies the wording and application of the Act.

(C) Subsection (6): See explanation: clause 3.

Similar Provincial Laws  

Current Wording 
192. (1) In this section, "arrangement" includes…

( f ) an exchange of securities of a corporation held by security holders for property, money or other securities of the corporation or property, money or securities of another body corporate that is not a take-over bid as defined in section 194;

(3) Lorsque la société, qui n'est pas insolvable, n'est pas en mesure d'opérer, en vertu d'une autre disposition de la présente loi, une modification de structure équivalente à un arrangement, elle peut demander au tribunal d'approuver, par ordonnance, l'arrangement qu'elle propose.

(6) After an order referred to in paragraph (4)(e) has been made, articles of arrangement in prescribed form shall be sent to the Director together with the documents required by sections 19 and 113, if applicable.

Proposed Wording 
192. (1)( f ) an exchange of securities of a corporation for property, money or other securities of the corporation or property, money or securities of another body corporate;

( f .1) a going-private transaction or a squeeze-out transaction in relation to a corporation ;

(3) Lorsqu'il est pratiquement impossible pour la société qui n'est pas insolvable d'opérer, en vertu d'une autre disposition de la présente loi, une modification de structure équivalente à un arrangement, elle peut demander au tribunal d'approuver, par ordonnance, l'arrangement qu'elle propose.

(6) After an order referred to in paragraph (4)( e ) has been made, articles of arrangement in the form that the Director fixes shall be sent to the Director together with the documents required by sections 19 and 113, if applicable.

Part 16 Going-Private Transactions ans Squeeze-Out Transactions (clause 97)

The provisions respecting prospectus qualification would be repealed (s. 193).

Going-private transactions (GPTs), in relation to distributing corporations, would be expressly permitted, subject to compliance with applicable provincial securities legislation.

A GPT must comply with prescribed requirements (i.e., fairness criteria parallel to the protections adopted from time to time by provincial securities legislation).

A squeeze-out transaction must be approved by an ordinary resolution of the majority of the minority of the shareholders.

Provisions are also included enabling the Director to grant individual and blanket exemptions from the prescribed requirements applicable to GPTs.

Briefing Book
An Act to amend the Canada Business Corporations Act and the Canada Cooperatives Act

Bill Clause No. 97
CBCA Section No. 193(1)
Topic  Going-private Transactions and Squeeze-out Transactions (Going-Private Transactions)

Sources of Proposed Law

Changes From Present Law
Expressly permits going-private transactions, as defined by the regulations (see clause 1(5) - definition of "going-private transaction"). However, if there are any applicable provincial securities laws, the corporation must comply with those laws.

Purpose of Change 
GPTs refer to amalgamations, arrangements, consolidations or any other transaction that would result in the termination of shareholder interests with compensation, but without consent and without a replacement of equivalent value in a participating security. There is a concern that the CBCA only sets out rules for one type of GPT (compulsory acquisitions) and that other forms of GPT may not be permitted. This uncertainty can cause CBCA corporations considering a GPT to continue into another jurisdiction in order to ensure that the desired transactions can legally be carried out. The amendment would define a GPT in the regulations and specify that such transactions are allowed to the extent that such transactions comply with the applicable provincial securities laws, if any.

This provision was substantially changed as a result of an amendment introduced at the Senate Committee stage. Bill S-11 originally proposed to expressly allow GPTs and to incorporate by reference - in the regulations - standards of fairness for minority shareholders mandated by provincial securities regulators. The proposed amendment was predicated on Ontario and Quebec harmonizing their GPT requirements. Before the Bill went to print, Industry Canada was informed by both Ontario and Québec that they had agreed to harmonize their requirements. Bill S-11 was therefore tabled with a GPT regime that incorporated by reference a harmonized set of rules. It was later learned that although the Ontario rule and the Quebec policy are harmonized in substance, there are technical differences of application which makes incorporation by reference difficult, if not impossible. As a result, under Bill S-11, a corporation would in practice be required to comply with inconsistent provincial requirements, which was not the intent of the provision and would cause great confusion in the marketplace.

Another issue is that the Québec requirements are contained in a policy statement rather than in legislation, regulations or rules. Policy statements do not have the force of law. It would therefore be inappropriate for federal legislation to mandate compliance with a provincial policy statement since this would have the effect of elevating its legal status beyond that intended by its province of origin. In order to avoid these problems, the incorporation by reference has been removed. The CBCA would now permit GPTs subject to compliance with applicable provincial securities legislation.

Similar Provincial Laws 

Current Wording 
N/A

Proposed Wording 
Going-Private Transactions and Squeeze-Out Transactions
193. A corporation may carry out a going-private transaction. However, if there are any applicable provincial securities laws, a corporation may not carry out a going-private transaction unless the corporation complies with those laws.

Bill Clause No. 97
CBC Section No. 194
Topic  Going-private Transactions and Squeeze-out Transactions (Going-Private Transactions)

Sources of Proposed Law 

Changes From Present Law 
(A) Expressly permits squeeze-out transactions, as defined by the regulations (see clause 1(5) - definition of "squeeze-out transaction")

(B) Provides that a squeeze-out transaction (relating to a non-distributing corporation) shall be approved by an ordinary resolution of the majority of the minority of the shareholders.

Purpose of Change 
(A) See Clause 97, s. 193 - Purpose of Change (introduction)

(B) Private company minority shareholders are as deserving of protection as their public company counterparts. However, this fact must be balanced against the high costs to offerors of providing the full panoply of procedural safeguards. For example, having to obtain valuations or fairness opinions for a corporation with only five minority shareholders may be unnecessary where the shareholders are intimately aware of the financial situation and prospects of the corporation. In addition, difficulties may be encountered valuing the minority shares of a private corporation given the general absence of a market in those circumstances. Accordingly, the safeguards adopted preserve the majority of the minority approval also found in the requirements relating to going-private transactions, but does not mandate any requirements respecting valuations or enhanced disclosure. In addition, aggrieved shareholders would also be entitled to exercise their dissent and appraisal rights pursuant to s. 190 (see clause 94(2)) and the oppression remedy under s. 241.

Similar Provincial Laws
Business Corporations Act (Ontario )

Current Wording 
N/A

Proposed Wording 
194. A corporation may not carry out a squeeze-out transaction unless, in addition to any approval by holders of shares required by or under this Act or the articles of the corporation, the transaction is approved by ordinary resolution of the holders of each class of shares that are affected by the transaction, voting separately, whether or not the shares otherwise carry the right to vote. However, the following do not have the right to vote on the resolution:

(a) affiliates of the corporation; and

(b) holders of shares that would, following the squeeze-out transaction, be entitled to consideration of greater value or to superior rights or privileges than those available to other holders of shares of the same class.

Part 17 Complusory and Compelled Acquisitions (clauses 97)

The provisions with respect to take-over bids would be repealed and the definitions amended to reflect this.

The compulsory acquisition section would be amended to include a new provision requiring that a corporation which offers to repurchase its own shares (i.e., an issuer bid) must hold the payment owing to dissenting offerees in trust and deposit the money in a separate account in a bank, within the same time period currently required with respect to other offerors (s. 206(7.1)). In addition, a provision is included which requires a dissenting offeree to elect to transfer their shares on the terms of the take-over bid or to demand fair payment (s. 206(5)(b)).

The amendments would include a new right of compelled acquisition enabling a minority shareholder of a distributing corporation to force the majority shareholder to purchase their shares in certain circumstances. (s. 206.1).

A number of consequential amendments required as a result of amendments to other parts of the Act are also included in this Part. In addition, several minor technical amendments, amendments to the French version and amendments designed to clarify and facilitate the efficient operation and administration of the statute, are also made.

Briefing Book
An Act to amend the Canada Business Corporations Act and the Canada Cooperatives Act

Bill Clause No. 97
CBCA Section No. 194 to 205
Topic  Take-Over Bids

Sources of Proposed Law 

Changes From Present Law
Repeal s. 194 to 205, inclusive

Purpose of Change 
A takeover bid under the CBCA is an offer to purchase any class of shares of the corporation that, if combined with the shares already owned by the offeror, would be more than 10 per cent of the total outstanding shares of that class.

Offerors who want to make a take-over bid for a CBCA corporation now are subject to the CBCA's takeover bid provisions and to the applicable takeover bid requirements under provincial securities legislation. The CBCA provisions apply to all corporations whose shares are publicly traded or that have more than 15 shareholders.

The repeal of the CBCA's takeover bid provisions would eliminate duplication in an area that is regulated by the provinces.

Similar Provincial Laws 
N/A

Current Wording 
194. In this Part,

"exempt offer" means an offer

(a) to fewer than fifteen shareholders to purchase shares by way of separate agreements,

(b) to purchase shares through a stock exchange or in the over-the-counter market in such circumstances as may be prescribed,

(c) to purchase shares of a corporation that has fewer than fifteen shareholders, two or more joint holders being counted as one shareholder,

(d) exempted under section 204, or

(e) by a corporation to repurchase its own shares to be held under section 32;

"offer" includes an invitation to make an offer;

"offeree" means a person to whom a take-over bid is made;

"offeree corporation" means a corporation whose shares are the object of a take-over bid;

"offeror" means a person, other than an agent, who makes a take-over bid, and includes two or more persons who, directly or indirectly,

(a) make take-over bids jointly or in concert, or

(b) intend to exercise jointly or in concert voting rights attached to shares for which a take-over bid is made;

"share" means a share carrying voting rights under all circumstances or by reason of the occurrence of an event that has occurred and that is continuing, and includes

(a) a security currently convertible into such a share, and

(b) currently exercisable options and rights to acquire such a share or such a convertible security;

"take-over bid" means an offer, other than an exempt offer, made by an offeror to shareholders at approximately the same time to acquire shares that, if combined with shares already beneficially owned or controlled, directly or indirectly, by the offeror or an affiliate or associate of the offeror on the date of the take-over bid, would exceed ten per cent of any class of issued shares of an offeree corporation and includes every offer, other than an exempt offer, by an issuer to repurchase its own shares.

195. Where a take-over bid is for all the shares of any class,

(a) shares deposited pursuant to the take-over bid, if not taken up by the offeror, may be withdrawn by or on behalf of an offeree at any time after sixty days following the date of the take-over bid;

(b) the offeror shall not take up shares deposited pursuant thereto until ten days after the date of the take-over bid; and

(c) the offeror, if he so intends, shall state in the take-over bid circular that he intends to invoke the right under section 206 to acquire the shares of offerees who do not accept the take-over bid and that the offeree is entitled to dissent and to demand the fair value of his shares.

196. (1) Where a take-over bid is for less than all the shares of any class,

(a) the offeror shall not take up shares deposited pursuant thereto until twenty-one days after the date of the take-over bid;

(b) the period of time within which shares may be deposited pursuant to the take-over bid or any extension thereof shall not exceed thirty-five days from the date of the take-over bid; and

(c) if a greater number of shares is deposited pursuant to the take-over bid than the offeror is bound or willing to take up and pay for, the shares taken up by the offeror shall be taken up rateably, disregarding fractions, according to the number of shares deposited by each offeree.

(2) Where a take-over bid for all the shares of any class is converted by amendment or otherwise to a bid for less than all the shares of a class, the take-over bid is deemed to be a take-over bid to which subsection (1) applies.

197. Whether a take-over bid is for all or less than all the shares of any class,

(a) shares deposited pursuant to the take-over bid may be withdrawn by or on behalf of an offeree at any time within ten days after the date of the take-over bid;

(b) shares deposited pursuant to the take-over bid shall, if the terms stipulated by the offeror and not subsequently waived by him have been complied with, be taken up and paid for within fourteen days after the last day within which shares may be deposited pursuant to the take-over bid;

(c) the period of time within which shares may be deposited pursuant to a take-over bid shall not be less than twenty-one days after the date of the take-over bid;

(d) if the terms of the take-over bid are amended by increasing the consideration offered for the shares, the offeror shall pay the increased consideration to each offeree whose shares are taken up pursuant to the take-over bid whether or not such shares have been taken up by the offeror before the amendment of the take-over bid;

(e) if the offeror intends to purchase shares to which the take-over bid relates in the market during the period of time within which shares may be deposited pursuant to the take-over bid, the offeror shall so state in the take-over bid circular; and

(f) if the offeror purchases shares to which a take-over bid relates other than pursuant to the take-over bid during the period of time within which shares may be deposited pursuant to the take-over bid,

(i) the payment other than pursuant to the take-over bid of an amount for a share that is greater than the amount offered in the take-over bid is deemed to be an amendment of the take-over bid to which paragraph (d) applies,

(ii) the offeror shall immediately notify the offerees of the increased consideration being offered for the shares,

(iii) the shares acquired other than pursuant to the take-over bid shall be counted to determine whether a condition as to minimum acceptance has been fulfilled, and

(iv) the shares acquired other than pursuant to the take-over bid shall not be counted among the shares taken up rateably under paragraph 196(1)(c).

198. (1) A take-over bid, including a copy of the take-over bid circular in prescribed form and any amendment of the take-over bid, shall be sent concurrently to each director of the offeree corporation, to each shareholder of the offeree corporation resident in Canada and to the Director.

(2) A take-over bid is deemed to be dated as of the date on which it is sent.

(3) For the purposes of this section and section 201, a shareholder of an offeree corporation is deemed to be resident in Canada if his latest address as shown in the securities register of the offeree corporation is an address within Canada.

199. Where a take-over bid states that the consideration for the shares deposited pursuant thereto is to be paid in money or partly in money, the offeror shall make adequate arrangements to ensure that funds are available to make the required money payment for such shares.

200. Where a take-over bid states that the consideration for the shares of the offeree corporation is to be, in whole or in part, securities of the offeror or any other body corporate, the take-over bid circular shall be in prescribed form.

201. (1) The directors of an offeree corporation shall send a directors' circular in prescribed form to each director of the offeree corporation, to each shareholder of the offeree corporation resident in Canada, to the offeror and to the Director.

(2) Unless the directors of an offeree corporation send a directors' circular under subsection (1) within ten days of the date of the take-over bid, the directors shall forthwith notify the offerees and the Director that a directors' circular will be sent and may recommend that the offerees do not tender their shares pursuant to the take-over bid until they receive the directors' circular.

(3) The notice required by subsection (2) shall be in prescribed form.

(4) The directors shall send the directors' circular required by subsection (1) to each offeree and to the Director at least seven days before the date the take-over bid terminates or before the sixtieth day of the take-over bid, whichever is earlier.

(5) Where a director of an offeree corporation is of the opinion that a take-over bid is not advantageous to the shareholders of the offeree corporation or where a director disagrees with any statement in a directors' circular, he is entitled to indicate his opinion or disagreement in the directors' circular required by subsection (1) and, if he indicates his opinion or disagreement, he shall include in that circular a statement setting out the reasons for his opinion or disagreement.

202. (1) A report, opinion or statement of a solicitor, auditor, accountant, engineer, appraiser or other person whose profession lends credibility to a statement made by him shall not be included in a take-over bid circular or a directors' circular unless that person has consented in writing to the use of the report, opinion or statement.

(2) On the demand of the Director, a person referred to in subsection (1) shall forthwith send to the Director a copy of any report, opinion or statement referred to in that subsection that is made by that person together with a copy of his consent.

203. (1) When a take-over bid is made by or on behalf of a body corporate, the directors of the body corporate shall approve the take-over bid and the take-over bid circular, and the approval shall be evidenced on the circular by the signature of one or more directors.

(2) The directors of an offeree corporation shall approve a directors' circular that contains the recommendations of a majority of the directors, and the approval shall be evidenced by the signature of one or more directors.

204. (1) Any interested person may apply to a court having jurisdiction in the place where the offeree corporation has its registered office for an order exempting a take-over bid from any of the provisions of this Part, and the court may, if it is satisfied that an exemption would not unfairly prejudice a shareholder of the offeree corporation, make an exemption order on such terms as it thinks fit, which order may have retrospective effect.

(2) An applicant under subsection (1) shall give the Director notice of the hearing of an application under that subsection, and the Director is entitled to appear and be heard in person or by counsel.

(3) The Director shall set out in the periodical referred to in section 129 the particulars of exemptions granted under this section.

205. (1) An offeror who, without reasonable cause, fails to comply with this Part or the regulations is guilty of an offence and liable on summary conviction to a fine not exceeding five thousand dollars or to imprisonment for a term not exceeding six months or to both.

(2) Where an offeror who is a body corporate commits an offence under subsection (1), any director or officer of the body corporate who knowingly authorized, permitted or acquiesced in the commission of the offence is a party to and guilty of the offence and is liable on summary conviction to a fine not exceeding five thousand dollars or to imprisonment for a term not exceeding six months or to both, whether or not the body corporate has been prosecuted or convicted.

(3) Where in connection with a take-over bid a person does not comply with this Act or the regulations, the Director or any interested person may apply to a court and on such application the court may make any order it thinks fit, including, without limiting the generality of the foregoing,

(a) an order restraining the distribution of a take-over bid circular, a directors' circular or other document used in connection with the take-over bid;

(b) an order, if the take-over bid is to continue, requiring correction of the take-over bid circular, directors' circular or other document and distribution of the corrected document to each offeree;

(c) an order varying the dates and times referred to in sections 195 to 197;

(d) an order requiring any person to comply with this Act or the regulations;

(e) an order compensating an aggrieved person;

(f) an order rescinding a transaction;

(g) an order requiring an offeror to dispose of shares acquired pursuant to the take-over bid; and

(h) an order prohibiting an offeror from voting shares acquired pursuant to a take-over bid.

(4) For the purposes of subsection (3), "interested person" includes

(a) an offeree whether or not he deposits shares pursuant to a take-over bid;

(b) an offeree corporation;

(c) an offeror; and

(d) a rival offeror.

Proposed Wording 
N/A

Part 17 Complusory and Compelled Acquisitions (clauses 98-100)

The provisions with respect to take-over bids would be repealed and the definitions amended to reflect this.

The compulsory acquisition section would be amended to include a new provision requiring that a corporation which offers to repurchase its own shares (i.e., an issuer bid) must hold the payment owing to dissenting offerees in trust and deposit the money in a separate account in a bank, within the same time period currently required with respect to other offerors (s. 206(7.1)). In addition, a provision is included which requires a dissenting offeree to elect to transfer their shares on the terms of the take-over bid or to demand fair payment (s. 206(5)(b)).

The amendments would include a new right of compelled acquisition enabling a minority shareholder of a distributing corporation to force the majority shareholder to purchase their shares in certain circumstances. (s. 206.1).

A number of consequential amendments required as a result of amendments to other parts of the Act are also included in this Part. In addition, several minor technical amendments, amendments to the French version and amendments designed to clarify and facilitate the efficient operation and administration of the statute, are also made.

Briefing Book
An Act to amend the Canada Business Corporations Act and the Canada Cooperatives Act

Bill Clause No. 98 & 99
CBCA Section No. 206(1)
Topic Compulsory and Compelled Acquisitions

Sources of Proposed Law 

Changes From Present Law 
Keeps and redefines appropriate definitions in s. 194 and subs. 206(1) as follows:

Adds a new heading before s. 206.

(B) redefines take-over bids in s. 206 to include any offer to acquire all the shares of any class of shares;

(B) redefines the term "share" to include voting and non-voting shares; and

(C) moves the following definitions now found in s. 194: "offer", "offeree", "offeree corporation" and "offeror" into subs. 206(1).

Purpose of Change 
If sections 194 to 205, which regulate take-over bids are repealed, several definitions in s. 194, which are necessary for the proper interpretation of s. 206, need to be transferred to s. 206(1). In addition, the definitions of share and take-over bid need to be modified to reflect that the CBCA no longer regulates take-over bids. Therefore, any bid for all the shares of a class, whether or not the shares are voting, could be followed up by a compulsory acquisition (where the bid is accepted by the holders of 90% or more of the relevant class of shares, excluding shares held by the offeror or related party). These definitions are now found in the compulsory acquisition sections of other corporate laws.

The definition of "offeree corporation" would be amended to clarify that the compulsory acquisition provisions are only applicable to distributing corporations.

Similar Provincial Laws
Business Corporations Act (Saskatchewan)

Current Wording 
194. In this Part,

"offer" includes an invitation to make an offer;

"offeree" means a person to whom a take-over bid is made;

"offeree corporation" means a corporation whose shares are the object of a take-over bid;

"offeror" means a person, other than an agent, who makes a take-over bid, and includes two or more persons who, directly or indirectly,

"share" means a share carrying voting rights under all circumstances or by reason of the occurrence of an event that has occurred and that is continuing, and includes

(a) a security currently convertible into such a share, and

(b) currently exercisable options and rights to acquire such a share or such a convertible security;

206. (1)"take-over bid" includes

(a) an offer to purchase shares of a class of shares to which no voting rights are attached if the offer complies with sections 195 to 203, and

(b) an offer to purchase shares, including shares to which no voting rights are attached, of a corporation having fewer than fifteen shareholders if the offer is made to all shareholders in the prescribed form and manner.

Proposed Wording 
Part XVII

Compulsory and Compelled Acquisitions

206. (1) The definitions in this subsection apply in this Part.

"take-over bid" means an offer made by an offeror to shareholders of a distributing corporation at approximately the same time to acquire all of the shares of a class of issued shares, and includes an offer made by a distributing corporation to repurchase all of the shares of a class of its shares.

"offer" includes an invitation to make an offer.

"offeree" means a person to whom a take-over bid is made.

"offeree corporation" means a distributing corporation whose shares are the object of a take-over bid.

"offeror" means a person, other than an agent, who makes a take-over bid, and includes two or more persons who, directly or indirectly,

(a) make take-over bids jointly or in concert; or

(b) intend to exercise jointly or in concert voting rights attached to shares for which a take-over bid is made.

"share" means a share, with or without voting rights, and includes

(a) a security currently convertible into such a share; and

(b) currently exercisable options and rights to acquire such a share or such a convertible security.

Bill Clause No. 99(4)
CBCA Section No. 206(3)(a)
Topic  Compulsory and Compelled Acquisitions

Sources of Proposed Law

Changes From Present Law 
Replaces the word "more" with the words "not less" in par. 206(3)(a).

Purpose of Change 
Subsection 206(2) indicates that a compulsory acquisition may occur where "not less than ninety percent of the shares of any class of shares to which the take-over bid relates, …" are tendered to the offer. Subsection 206(3) indicates that an offeror may send a notice to dissenting offerees and the (CBCA) Director advising, among other things, that ",… the offerees holding more than ninety percent of the shares, to which the bid relates, …" The language appears to be inconsistent as subsection (2) which refers to a threshold of 90% or more whereas subsection (3) refers to a threshold of more than 90%.

This clarification would amend what appears to be inadvertence in statutory drafting.

Moreover, s. 206(2) is the substantive subsection whereas subsection 206(3) is procedural. Deference should therefore be paid to subsection (2).

Similar Provincial Laws 
N/A

Current Wording 
206. (3) An offeror may acquire shares held by a dissenting offeree by sending by registered mail within sixty days after the date of termination of the take-over bid and in any event within one hundred and eighty days after the date of the take-over bid, an offeror's notice to each dissenting offeree and to the Director stating that

(a) the offerees holding more than ninety per cent of the shares to which the bid relates accepted the take-over bid;

Proposed Wording 
206. (3)(a) the offerees holding not less than ninety per cent of the shares to which the bid relates accepted the take-over bid;

Bill Clause No. 99(5), (6) and (10)
CBCA Section No. 206(3)(d), (5), new (5.1), (6), (9), (13) and (14)(a)
Topic  Compulsory and Compelled Acquisitions

Sources of Proposed Law 

Changes From Present Law
(A) Amends s. 206(5) to provide that the dissenting offeree:

(1) is required to elect to transfer shares on terms of the take-over bid or to demand fair payment (repeating same language now found in s. 206(3)(c) concerning offeror's notice); and

(2) is deemed to have elected to transfer shares on the terms of the take-over bid if he/she does not give the required notice in s. 206(5) that he/she wishes to demand fair value (repeating same language now found in s. 206(3)(d) concerning offeror's notice).

(B) Amends s. 206(3)(d), 206(6), 206(9), and 206(14)(a) to reflect the revision of subsection 206(5). S. 206(13) of the French version is amended to effect a grammatical change.

Purpose of Change 
(1) Currently, the obligation on the dissenting offeree to elect to transfer shares on terms of take-over bid or to demand fair payment is only inferred in the notice requirement set out in s. 206(3). Under that provision, the offeror is required to send to dissenting offerees a notice that they must make the election. However, there is no actual requirement for the dissenting offeree to make the election. S. 206(5) now requires the dissenting offeree to forward shares to the corporation and this seems like the logical place to add in the requirement to make the election.

This change would clarify the section.

(2) The section does not expressly set out the consequences for the dissenting offeree not having chosen between the take-over bid price and demanding fair value. Rather, the effect of paragraphs 206(3)c) and (d) is that if the dissenting offeree does not demand payment of the fair value, the dissenting offeree is deemed to have elected to transfer his shares at the take-over bid price. However, since subsection 206(3) deals only with the notice that must be given, it is not clear that dissenting offerees would be aware that this subsection has implications for their rights. By clearly outlining the effects for dissenting offerees of not making an election, this change clarifies this section.

(B) The revisions to s. 206(3)(d), 206(9) and 206(14)(a) are consequential amendments.

Similar Provincial Laws 
N/A

Current Wording 
206. (3)(c) a dissenting offeree is required to elect

(i) to transfer his shares to the offeror on the terms on which the offeror acquired the shares of the offerees who accepted the take-over bid, or

(ii) to demand payment of the fair value of his shares in accordance with subsections (9) to (18) by notifying the offeror within twenty days after he receives the offeror's notice;

(3)(d) a dissenting offeree who does not notify the offeror in accordance with subparagraph (c)(ii) is deemed to have elected to transfer his shares to the offeror on the same terms that the offeror acquired the shares from the offerees who accepted the take-over bid; and

(5) A dissenting offeree to whom an offeror's notice is sent under subsection (3) shall, within twenty days after he receives that notice, send his share certificates of the class of shares to which the take-over bid relates to the offeree corporation.

(6) Within twenty days after the offeror sends an offeror's notice under subsection (3), the offeror shall pay or transfer to the offeree corporation the amount of money or other consideration that the offeror would have had to pay or transfer to a dissenting offeree if the dissenting offeree had elected to accept the take-over bid under subparagraph (3)(c)(i).

(9) If a dissenting offeree has elected to demand payment of the fair value of his shares under subparagraph (3)(c)(ii), the offeror may, within twenty days after it has paid the money or transferred the other consideration under subsection (6), apply to a court to fix the fair value of the shares of that dissenting offeree.

(13) Dans le cadre d'une demande visée aux paragraphes (9) ou (10), les pollicités dissidents ne sont pas tenus de fournir caution pour les frais.

(14) On an application under subsection (9) or (10)

(a) all dissenting offerees referred to in subparagraph (3)(c)(ii) whose shares have not been acquired by the offeror shall be joined as parties and are bound by the decision of the court; and

(b) the offeror shall notify each affected dissenting offeree of the date, place and consequences of the application and of his right to appear and be heard in person or by counsel.

Proposed Wording 
206. (3) (d) a dissenting offeree who does not notify the offeror in accordance with subparagraph (5)(b)(ii) is deemed to have elected to transfer the shares to the offeror on the same terms that the offeror acquired the shares from the offerees who accepted the take-over bid; and

(5) A dissenting offeree to whom an offeror's notice is sent under subsection (3) shall, within twenty days after receiving the notice,

(a) send the share certificates of the class of shares to which the take-over bid relates to the offeree corporation; and

(b) elect

(i) to transfer the shares to the offeror on the terms on which the offeror acquired the shares of the offerees who accepted the take-over bid, or

(ii) to demand payment of the fair value of the shares in accordance with subsections (9) to (18) by notifying the offeror within those twenty days.

(5.1) A dissenting offeree who does not notify the offeror in accordance with subparagraph

(5)(b)(ii) is deemed to have elected to transfer the shares to the offeror on the same terms on which the offeror acquired the shares from the offerees who accepted the take-over bid.

(6) Within twenty days after the offeror sends an offeror's notice under subsection (3), the offeror shall pay or transfer to the offeree corporation the amount of money or other consideration that the offeror would have had to pay or transfer to a dissenting offeree if the dissenting offeree had elected to accept the take-over bid under subparagraph (5)(b)(i).

(9) If a dissenting offeree has elected to demand payment of the fair value of the shares under subparagraph (5)(b)(ii), the offeror may, within twenty days after it has paid the money or transferred the other consideration under subsection (6), apply to a court to fix the fair value of the shares of that dissenting offeree.

(13) Dans le cadre d'une demande visée aux paragraphes (9) ou (10), les pollicités dissidents ne sont pas tenus de fournir de cautionnement pour les frais.

(14)(a) all dissenting offerees referred to in subparagraph (5)(b)(ii) whose shares have not been acquired by the offeror shall be joined as parties and are bound by the decision of the court; and

Bill Clause No. 99(7) and (11)
CBCA Section No. new 206(7.1) and 206(18)(a)
Topic  Compulsory and Compelled Acquisitions

Sources of Proposed Law

Changes From Present Law 
(A) Amend s. 206 by adding a new provision dealing with issuer bids and payments in trust. In particular, require a corporation that offers to repurchase its own shares to hold the payment owing to dissenting offerees in trust, and to deposit the money in a separate account in a bank, within twenty days after a notice is sent under subs. 206(3).

(B) Amends s. 206(18)(a) to reflect the addition of subs. 7.1.

Purpose of Change 
While the definition of "take over bid" in s. 194 expressly includes an issuer bid, it is not clear that the rules in s. 206(7) concerning holding money in trust and paying it into a separate bank account also apply to the case where the offeror is the offeree corporation (the intention of s. 206 is to apply to both situations).

As a matter of fairness and protection for dissenting shareholders, a corporation making an issuer bid should not be entitled to cancel shares under s. 206(8) until the consideration has been put aside and protected.

This change would clarify the section and ensure that dissenting shareholders are protected. It would also further harmonize the CBCA with the Ontario Business Corporations Act.

Similar Provincial Laws 
Business Corporations Act (Ontario)

Current Wording 
206. (18) In connection with proceedings under this section, a court may make any order it thinks fit and, without limiting the generality of the foregoing, it may

(a) fix the amount of money or other consideration that is required to be held in trust under subsection (7);

Proposed Wording 
206. (7.1) A corporation that is an offeror making a take-over bid to repurchase all of the shares of a class of its shares is deemed to hold in trust for the dissenting shareholders the money and other consideration that it would have had to pay or transfer to a dissenting offeree if the dissenting offeree had elected to accept the take-over bid under subparagraph (5)(b)(i), and the corporation shall, within twenty days after a notice is sent under subsection (3), deposit the money in a separate account in a bank or other body corporate any of whose deposits are insured by the Canada Deposit Insurance Corporation or guaranteed by the Quebec Deposit Insurance Board, and shall place the other consideration in the custody of a bank or such other body corporate.

(18)(a) fix the amount of money or other consideration that is required to be held in trust under subsection (7) or (7.1);

Bill Clause No. 99(8)
CBCA Section No. 206(8)
Topic  Compulsory and Compelled Acquisitions

Sources of Proposed Law 

Changes From Present Law 
Amends s. 206(8) to make the issuance of a share certificate by the offeree corporation expressly conditional on the offeror complying with the payment obligation set out in s. 206(6).

Purpose of Change 
This change would clarify that a share certificate cannot be issued until payment has been made in accordance with s. 206(6).

Similar Provincial Laws 
N/A

Current Wording 
206. (8) Within thirty days after the offeror sends an offeror's notice under subsection (3), the offeree corporation shall

(a) issue to the offeror a share certificate in respect of the shares that were held by dissenting offerees;

(b) give to each dissenting offeree who elects to accept the take-over bid terms under subparagraph (3)(c)(i) and who sends his share certificates as required under subsection (5) the money or other consideration to which he is entitled, disregarding fractional shares, which may be paid for in money; and

(c) send to each dissenting shareholder who has not sent his share certificates as required under subsection (5) a notice stating that

(i) his shares have been cancelled,

(ii) the offeree corporation or some designated person holds in trust for him the money or other consideration to which he is entitled as payment for or in exchange for his shares, and

(iii) the offeree corporation will, subject to subsections (9) to (18), send that money or other consideration to him forthwith after receiving his shares.

Proposed Wording 
206. (8) Within thirty days after the offeror sends a notice under subsection (3), the offeree corporation shall

(a) if the payment or transfer required by subsection (6) is made, issue to the offeror a share certificate in respect of the shares that were held by dissenting offerees;

(b) give to each dissenting offeree who elects to accept the take-over bid terms under subparagraph (5)(b)(i) and who sends share certificates as required by paragraph (5)(a) the money or other consideration to which the offeree is entitled, disregarding fractional shares, which may be paid for in money; and(c) if the payment or transfer required by subsection (6) is made and the money or other consideration is deposited as required by subsection (7) or (7.1), send to each dissenting shareholder who has not sent share certificates as required by paragraph (5)(a) a notice stating that

(i) the dissenting shareholder's shares have been cancelled,

(ii) the offeree corporation or some designated person holds in trust for the dissenting shareholder the money or other consideration to which that shareholder is entitled as payment for or in exchange for the shares, and

(iii) the offeree corporation will, subject to subsections (9) to (18), send that money or other consideration to that shareholder without delay after

Bill Clause No. 100
CBCA Section No. new 206.1
Topic  Compulsory and Compelled Acquisitions

Sources of Proposed Law 

Changes From Present Law 
Provides for a limited compelled acquisition right applicable to shareholders of distributing corporations, giving such shareholders the right to compel the acquisition of their shares from the offeror, where a take-over bid has been accepted by 90% of shares or shares of a class, other than those held by the offeror, on the same terms under which the offeror acquired the shares of those who accepted the take-over bid.

Purpose of Change 
The purpose of this change is to balance the rights of minority shareholders with the rights of the offeror. It is also structured to place the financial costs of a takeover bid on the offeror rather than the corporation.

By setting the exit price at the take-over bid price accepted by 90% of shares held by third parties, the exit mechanism is both fair for a shareholder that wants out of the corporation (and provides equal treatment) and the offeror who may have to pay that amount to a large number of shareholders.

This provision was amended at the Senate Committee stage to clarify the time period within which shareholders, who wish to exercise their right to compel the acquisition of their shares by the offeror following a take-over bid, must require the offeror to acquire those shares.

Similar Provincial Laws 
Business Corporations Act (Ontario)

Current Wording 
N/A

Proposed Wording 
206.1 (1) If a shareholder holding shares of a distributing corporation does not receive an offeror's notice under subsection 206(3), the shareholder may

(a) within ninety days after the date of termination of the take-over bid, or

(b) if the shareholder did not receive an offer pursuant to the take-over bid, within ninety days after the later of

(i) the date of termination of the take-over bid, and

(ii) the date on which the shareholder learned of the take-over bid,

require the offeror to acquire those shares.

(2) If a shareholder requires the offeror to acquire shares under subsection (1), the offeror shall acquire the shares on the same terms under which the offeror acquired or will acquire the shares of the offerees who accepted the take-over bid.

Part 18 Liquidation and Dissolution (clauses 101-112)

This Part includes a number of amendments designed to update and improve the efficient administration of the CBCA. In that regard, the revival procedure is being modified to clarify that a revival of a corporation is retroactive. Further, the Director would have the ability to attach conditions to a revival (s. 209). The dissolution powers of the Director would be expanded to provide the Director with the power to immediately dissolve a corporation which fails to pay the incorporation fee without having to wait one year to do so (s. 212(3.1)). In addition, the Director would be able to dissolve insolvent corporations (s. 208(1).

The good faith reliance defence available to liquidators would be replaced by a due diligence defence whereby a liquidator is not liable if that liquidator exercises the same degree of care, diligence and skill that a reasonably prudent person would have exercised in comparable circumstances (s. 222(2)). This is comparable to the due diligence defence proposed in respect of directors (Part 10).

A number of consequential amendments required as a result of amendments to other parts of the Act are also included in this Part. In addition, several minor technical amendments and amendments to the French version are made.

Briefing Book
An Act to amend the Canada Business Corporations Act and the Canada Cooperatives Act

Bill Clause No. 101
CBCA Section No. 208
Topic  Liquidation and Dissolution (Technical Amendments)

Sources of Proposed Law 

Changes From Present Law 
Sections 209 and 212 would be applicable to an insolvent corporation.

Purpose of Change 
By making ss. 209 and 212 applicable to insolvent corporations, the proposed amendment would permit the Director to dissolve insolvent corporations. In most cases, these corporations are either insolvent with no assets (proceeding under the Bankruptcy and Insolvency Act (BIA) has been completed, leaving a "shell corporation") or insolvent without sufficient assets to warrant a BIA proceeding. If the Director dissolves an insolvent corporation where the trustee in bankruptcy has not yet been discharged, it would be possible for the trustee to apply to the Director to have the corporation revived (see new definition of "interested person" in s. 209(6)(e)).

Similar Provincial Laws 

Current Wording 
208. (1) This Part does not apply to a corporation that is insolvent within the meaning of the Bankruptcy and Insolvency Act or that is a bankrupt within the meaning of that Act.

(2) Any proceedings taken under this Part to dissolve or to liquidate and dissolve a corporation shall be stayed if the corporation is at any time found, in a proceeding under the Bankruptcy and Insolvency Act, to be insolvent within the meaning of that Act.

Proposed Wording 
208. (1) This Part, other than sections 209 and 212, does not apply to a corporation that is an insolvent person or a bankrupt as those terms are defined in subsection 2(1) of the Bankruptcy and Insolvency Act.

(2) Any proceedings taken under this Part to dissolve or to liquidate and dissolve a corporation shall be stayed if the corporation is at any time found, in a proceeding under the Bankruptcy and Insolvency Act, to be an insolvent person as defined in subsection 2(1) of that Act.

Bill Clause No. 102
CBCA Section No. 209 (2), (3), new (3.1), (4), new (5) and new (6)
Topic  Liquidation and Dissolution (Government Administration)

Sources of Proposed Law 

Changes From Present Law 
Clarification of the revival provisions in the Act.

Purpose of Change 
The amendment to subs. (3) would clarify that the Director has the discretion to decide whether to issue a certificate of revival. Currently, the CBCA is not clear. There is a right to appeal from the Director's decision which suggests that there is a discretion. The real purpose of the discretion is to impose terms and conditions of revival. The discretion gives leverage to oppose a revival but also allows the Director to assist in the revival and to consider terms which may protect shareholders.

Proposed subs. (3.1) would clarify the date upon which the corporation is revived.

The proposed amendment to subs. (4) would clarify the current wording in the CBCA which is ambiguous as to whether a revival is intended to have retroactive effect. The amendment makes a revival retroactive by expressly providing that the corporation can benefit from and is bound and liable for all acts of the corporation taken while the corporation was dissolved and by validating any changes to the internal affairs of the corporation. It would make the revived corporation liable for the contracts and torts/faults occurring between dissolution and revival, something which is not explicit in the current provision. Par. (4)(a) and (b) clarifies that the rights, liabilities, privileges and obligations, arising before and after the dissolution, are restored to the revived corporation.

An amendment was introduced at the Senate Committee stage removing the reference to "property" from par. 4(a) in response to the submission of the Barreau du Québec that such reference together with the reference to "rights and privileges" in the same provision, creates an inference with respect to the amalgamation and continuance sections (ss. 186 and 187) that the word "property" referred to there does not include rights and privileges.

Proposed subs. (5) would clarify that legal actions respecting the affairs of a revived corporation taken between the time of dissolution and its revival are valid and effective.

Subs. (1) authorizes "any interested person" to apply to the CBCA Director for revival of a CBCA corporation which has been dissolved. The expression "interested person" is not defined, leaving it to the courts to develop the law. The proposed definition of "interested person" would add certainty to the law. An amendment was introduced at the Senate Committee stage at the request of the Barreau du Québec clarifying this definition.

Similar Provincial Laws 
Business Corporations Act (Ontario)
Corporations Act (British Columbia)
Corporations Act (Northwest Territories)
Business Corporations Act (Alberta)

Current Wording 
209. (2) Articles of revival in prescribed form shall be sent to the Director.

(3) On receipt of articles of revival, the Director shall issue a certificate of revival in accordance with section 262.

(4) A body corporate is revived as a corporation under this Act on the date shown on the certificate of revival, and thereafter the corporation, subject to such reasonable terms as may be imposed by the Director and to the rights acquired by any person after its dissolution, has all the rights and privileges and is liable for the obligations that it would have had if it had not been dissolved.

Proposed Wording 
209. (2) Articles of revival in the form that the Director fixes shall be sent to the Director.

(3) On receipt of articles of revival, the Director shall issue a certificate of revival in accordance with section 262, if

(a) the body corporate has fulfilled all conditions precedent that the Director considers reasonable; and

(b) there is no valid reason for refusing to issue the certificate.

(3.1) A body corporate is revived as a corporation under this Act on the date shown on the certificate of revival.

(4) Subject to any reasonable terms that may be imposed by the Director, to the rights acquired by any person after its dissolution and to any changes to the internal affairs of the corporation after its dissolution, the revived corporation is, in the same manner and to the same extent as if it had not been dissolved,

(a) restored to its previous position in law, including the restoration of any rights and privileges whether arising before its dissolution or after its dissolution and before its revival; and

(b) liable for the obligations that it would have had if it had not been dissolved whether they arise before its dissolution or after its dissolution and before its revival.

(5) Any legal action respecting the affairs of a revived corporation taken between the time of its dissolution and its revival is valid and effective.

(6) In this section, "interested person" includes

(a) a shareholder, a director, an officer, an employee and a creditor of the dissolved corporation;

(b) a person who has a contractual relationship with the dissolved corporation;

(c) a person who, although at the time of dissolution of the corporation was not a person described in paragraph (a), would be such a person if a certificate of revival is issued under this section; and

(d) a trustee in bankruptcy for the dissolved corporation.

Bill Clause No. 103
CBCA Section No. 210(3)(b) and (4)
Topic  Liquidation and Dissolution (Technical Amendments)

Sources of Proposed Law 

Changes From Present Law 
Replace in the French version par. 210(3)(b) the word "ou" with "et".

The Director would be allowed to set the form of the articles of dissolution.

Purpose of Change 
This technical change makes the French and English version equivalent.

See explanation clause 3.

Similar Provincial Laws 

Current Wording 
210. (3) La société, qui a des biens ou des dettes ou les deux à la fois, peut être dissoute par résolution spéciale soit des actionnaires soit, en présence de plusieurs catégories d'actions, des détenteurs d'actions de chaque catégorie assorties ou non du droit de vote, pourvu que :

b) d'autre part, la société ait effectué une répartition de biens ou un règlement de dettes avant d'envoyer les clauses de dissolution au directeur conformément au paragraphe (4).

(4) Articles of dissolution in prescribed form shall be sent to the Director.

Proposed Wording 
210. (3)b) d'autre part, la société ait effectué une répartition de biens et un règlement de dettes avant d'envoyer les clauses de dissolution au directeur conformément au paragraphe (4).

(4) Articles of dissolution in the form that the Director fixes shall be sent to the Director.

Bill Clause No.104
CBCA Section No. 211(7)(b), (10) and (14)
Topic  Liquidation and Dissolution (Government Administration)

Sources of Proposed Law 

Changes From Present Law
The requirement found in par. 211(7)(b) that a corporation shall publish notice of its intention to liquidate or dissolve in a local newspaper, would be removed.

Subsections 211(10) and (14) are amended by replacing the word "prescribed" by the words "that the Director fixes".

Purpose of Change 
A corporation would still be required to give notice in each province in Canada where it is carrying on business. However, the removal of this requirement would increase the flexibility afforded to corporations by allowing them to use the most appropriate means of conveying notice to the public. As well, it removes the necessity of giving notice in the province where the corporation has its head office if the corporation did not carry on business in that province.

Subsections (10) and (14): See explanation at clause 3.

Similar Provincial Laws 

Current Wording 
211. (7) After issue of a certificate of intent to dissolve, the corporation shall

(b) forthwith publish notice thereof once a week for four consecutive weeks in a newspaper published or distributed in the place where the corporation has its registered office and take reasonable steps to give notice thereof in each province in Canada where the corporation was carrying on business at the time it sent the statement of intent to dissolve to the Director;

(10) At any time after issue of a certificate of intent to dissolve and before issue of a certificate of dissolution, a certificate of intent to dissolve may be revoked by sending to the Director a statement of revocation of intent to dissolve in the prescribed form, if such revocation is approved in the same manner as the resolution under subsection (3).

(14) Articles of dissolution in the prescribed form shall be sent to the Director.

Proposed Wording 
211. (7)(b) without delay take reasonable steps to give notice of it in each province in Canada where the corporation was carrying on business at the time it sent the statement of intent to dissolve to the Director;

(10) At any time after issue of a certificate of intent to dissolve and before issue of a certificate of dissolution, a certificate of intent to dissolve may be revoked by sending to the Director a statement of revocation of intent to dissolve in the form that the Director fixes, if such revocation is approved in the same manner as the resolution under subsection (3).

(14) Articles of dissolution in the form that the Director fixes shall be sent to the Director.

Bill Clause No. 105
CBCA Section No. new 212(1)(iv), (2)(b), (3) and new (3.1)
Topic  Liquidation and Dissolution (Government Administration)

Sources of Proposed Law 

Changes From Present Law 
(A) The Director may dissolve a corporation that does not have any directors or is in the situation described in proposed subs.109(4).

(B) The reference to publish the required notice in the Canada Gazette would be eliminated.

(C) The words "in prescribed form" are replaced with "in the form that the Director fixes".

Purpose of Change 
Subsection 212(1)(iv): This new provision would provide an administrative means of quickly dissolving directorless corporations. Currently, under the CBCA, the earliest that the Director can start dissolution proceedings against a corporation is one year after the corporation is in default of paying a required fee. This amendment is linked with the new provision (s. 109(3), (4)) regarding directorless corporations (see clause 40).

Paragraph 212(2)(b): See explanation in clause 6.

Subsection (3): See explanation in clause 3.

Subsection 212(3.1): This provision would permit the Director to dissolve a corporation that fails to pay its incorporation fees without having to wait one year. Currently, under the CBCA, the Director can only start dissolution proceedings against that corporation when the corporation has been in default of paying a required fee for a period of one year.

Similar Provincial Laws 

Current Wording
212. (1) Subject to subsections (2) and (3), where a corporation

(a) has not commenced business within three years after the date shown in its certificate of incorporation,

(b) has not carried on its business for three consecutive years, or

(c) is in default for a period of one year in sending to the Director any fee, notice or document required by this Act,

the Director may dissolve the corporation by issuing a certificate of dissolution under this section or he may apply to a court for an order dissolving the corporation, in which case section 217 applies.

(2)(b) published notice of that decision in the Canada Gazette and in the periodical referred to in section 129.

(3) Unless cause to the contrary has been shown or an order has been made by a court under section 246, the Director may, after the expiration of the period referred to in subsection (2), issue a certificate of dissolution in prescribed form.

Proposed Wording 
212. (1) Subject to subsections (2) and (3), the Director may

(a) dissolve a corporation by issuing a certificate of dissolution under this section if the corporation

(i) has not commenced business within three years after the date shown in its certificate of incorporation,

(ii) has not carried on its business for three consecutive years,

(iii) is in default for a period of one year in sending to the Director any fee, notice or document required by this Act, or

(iv) does not have any directors or is in the situation described in subsection 109(4); or

(b) apply to a court for an order dissolving the corporation, in which case section 217 applies.

(2)(b) published notice of that decision in a publication generally available to the public.

(3) Unless cause to the contrary has been shown or an order has been made by a court under section 246, the Director may, after the expiration of the period referred to in subsection (2), issue a certificate of dissolution in the form that the Director fixes.

(3.1) Despite anything in this section, the Director may dissolve a corporation by issuing a certificate of dissolution if the required fee for the issuance of a certificate of incorporation has not been paid.

Bill Clause No. 106
CBCA Section No. 213(4)
Topic  Liquidation and Dissolution (Government Administration)

Sources of Proposed Law 

Changes From Present Law
(A) Eliminate the reference to publish the required notice in the Canada Gazette.

(B) The contents of the form would be fixed by the Director

Purpose of Change 
See explanation: clauses 6 and 3.

Similar Provincial Laws 

Current Wording 
213. (4) On receipt of an order under this section, section 212 or 214, the Director shall

(a) if the order is to dissolve the corporation, issue a certificate of dissolution in prescribed form; or

(b) if the order is to liquidate and dissolve the corporation under the supervision of the court, issue a certificate of intent to dissolve in prescribed form and publish notice of such order in the Canada Gazette and in the periodical referred to in section 129.

Proposed Wording 
213. (4) On receipt of an order under this section, section 212 or 214, the Director shall

(a) if the order is to dissolve the corporation, issue a certificate of dissolution in the form that the Director fixes; or

(b) if the order is to liquidate and dissolve the corporation under the supervision of the court, issue a certificate of intent to dissolve in the form that the Director fixes and publish notice of the order in a publication generally available to the public.

Bill Clause No. 107 CBCA Section No. 214(1)(a) and (1)(a)(ii)
Topic  Liquidation and Dissolution (Technical Amendments)

Sources of Proposed Law 

Changes From Present Law 
(A) The concept of "unfairly" found in the English version would be included in the French version.

(B) Amend the French version of subs. 214(1)(ii) by replacing the words "ses affaires tant commerciales qu'internes" with "ses activités commerciales ou ses affaires internes,".

Purpose of Change 
These technical changes clarify the wording and application of the Act.

Similar Provincial Laws 

Current Wording 
214. (1)a) il constate qu'elle abuse des droits des détenteurs de valeurs mobilières, créanciers, administrateurs ou dirigeants, qu'elle porte atteinte à leurs intérêts ou n'en tient pas compte :

214. (1)(a)(ii) soit par la façon don't elle conduit ou a conduit ses affaires tant commerciales qu'internes,

Proposed Wording
214. (1)a) il constate qu'elle abuse des droits de tout détenteur de valeurs mobilières, créancier, administrateur ou dirigeant, ou se montre injuste à leur égard en leur portant préjudice ou en ne tenant pas compte de leurs intérêts :

214. (1)(a) (ii) soit par la façon dont elle conduit ou a conduit ses activités commerciales ou ses affaires internes,

Bill Clause No. 108
CBCA Section No. 217(b)
Topic  Liquidation and Dissolution (Technical Amendments)

Sources of Proposed Law 

Changes From Present Law 
Replace in the French version of s. 217(b) the word "caution" with the word "cautionnement" where the provision incorrectly uses this term in relation to the security mechanism (as opposed to the person who provides the security, which is the correct use of the word "caution"). Also, the English version is amended to be gender-neutral.

Purpose of Change 
This technical change clarifies the wording and application of the Act.

Similar Provincial Laws

Current Wording 
217. À l'occasion de la dissolution ou de la liquidation et de la dissolution, le tribunal peut, s'il constate la capacité de la société de payer ou de constituer une provision pour honorer ses obligations, rendre les ordonnances qu'il estime pertinentes et en vue, notamment :

b) de nommer un liquidateur, avec ou sans caution, de fixer sa rémunération et de le remplacer;

(b) an order appointing a liquidator, with or without security, fixing his remuneration and replacing a liquidator;

Proposed Wording
217. b) de nommer un liquidateur, avec ou sans cautionnement, de fixer sa rémunération et de le remplacer;

(b) an order appointing a liquidator, with or without security, fixing the liquidator's remuneration and replacing a liquidator;

Bill Clause No. 109
CBCA Section No. 221(b)
Topic Liquidation and Dissolution (Government Administration)

Sources of Proposed Law 

Changes From Present Law 
The reference to publish the required notice in the Canada Gazette in the portion of the section immediately before subparagraph (i) would be eliminated.

Purpose of Change 
See explanation: clause 6

Similar Provincial Laws 

Current Wording 
221. A liquidator shall

(b) forthwith publish notice in the Canada Gazette and in the periodical referred to in section 129 and by insertion once a week for two consecutive weeks in a newspaper published or distributed in the place where the corporation has its registered office and take reasonable steps to give notice thereof in each province where the corporation carries on business, requiring any person

Proposed Wording 
221. (b) without delay publish notice by insertion once a week for two consecutive weeks in a newspaper published or distributed in the place where the corporation has its registered office and take reasonable steps to give notice of the appointment in each province where the corporation carries on business, requiring any person

Bill Clause No. 110
CBCA Section No. 222(2)
Topic  Liquidation and Dissolution (Directors' Liability)

Sources of Proposed Law 

Changes From Present Law 
A due diligence defence is provided for liquidators.

Purpose of Change 
This amendment would allow liquidators to rely on the same due diligence defence as directors. It will ensure that defences are consistent throughout the act.

Similar Provincial Laws 

Current Wording 
222. (2) A liquidator is not liable if he relies in good faith on

(a) financial statements of the corporation represented to him by an officer of the corporation or in a written report of the auditor of the corporation to reflect fairly the financial condition of the corporation; or

(b) an opinion, a report or a statement of a lawyer, an accountant, an engineer, an appraiser or other professional adviser retained by the liquidator.

Proposed Wording 
222. (2) A liquidator is not liable if the liquidator exercised the care, diligence and skill that a reasonably prudent person would have exercised in comparable circumstances, including reliance in good faith on

(a) financial statements of the corporation represented to the liquidator by an officer of the corporation or in a written report of the auditor of the corporation fairly to reflect the financial condition of the corporation; or

(b) a report of a person whose profession lends credibility to a statement made by the professional person.

Bill Clause No. 111
CBCA Section No. 223(4)
Topic  Liquidation and Dissolution (Government Administration)

Sources of Proposed Law 

Changes From Present Law 
Clarification of the application of the section.

Purpose of Change 
The purpose of this amendment is to help clarify the Act and its application.

Similar Provincial Laws 

Current Wording 
223. (4) A liquidator shall give notice of his intention to make an application under subsection (2) to the Director, each inspector appointed under section 217, each shareholder and any person who provided a security or fidelity bond for the liquidation, and he shall publish the notice in a newspaper published or distributed in the place where the corporation has its registered office or as otherwise directed by the court.

Proposed Wording 
223. (4) A liquidator shall give notice of their intention to make an application under subsection (2) to the Director, to each inspector appointed under section 217, to each shareholder and to any person who provided a security or fidelity bond for the liquidation, and shall publish the notice in a newspaper published or distributed in the place where the corporation has its registered office, or as otherwise directed by the court.

Bill Clause No.112
CBCA Section No. 226(1)
Topic  Liquidation and Dissolution (Technical Amendments)

Sources of Proposed Law 

Changes From Present Law 
Replace the term "legal representative" with the term "personal representative".

Purpose of Change
The purpose of this change is to harmonize the CBCA with other federal statutes, to clarify the language of the Act and to reduce ambiguity.

Similar Provincial Laws 
Bank Act

Current Wording 
226. (1) In this section, "shareholder" includes the heirs and legal representatives of a shareholder.

Proposed Wording 
226. (1) In this section, "shareholder" includes the heirs and personal representatives of a shareholder.

Part 19 Investigation (clauses 113-114)

This part includes a number of amendments to the French version of the Act to clarify the wording and to reconcile it with the English version. Consequential amendments required as a result of changes to other parts of the statute are also included.

Briefing Book
An Act to amend the Canada Business Corporations Act and the Canada Cooperatives Act

Bill Clause No. 113
CBCA Section No. 229(1)(2) and (4)
Topic  Investigation (Technical Amendments)

Sources of Proposed Law

Changes From Present Law 
The expression "personne morale du même groupe" is replaced with the more accurate term "société du même groupe".

The words "affaires tant commerciales qu'internes" is replaced with "activités commerciales ou ses affaires internes", and "porte atteinte à leurs intérêts ou n'en tient pas compte" with "ou se montre injuste à leur égard en leur portant préjudice ou en ne tenant".

Replace in the French version of s. 229(4) the word "caution" with the word "de cautionnement".

Purpose of Change 
These technical changes clarify the wording and application of the Act.

The provision incorrectly uses "cautionnement" in relation to the security mechanism as opposed to the person who provides the security, which is the correct use of the word "caution".

Similar Provincial Laws 

Current Wording 
229. (1) Tout détenteur de valeurs mobilières ou le directeur peut demander au tribunal du ressort du siège social de la société, ex parte ou après avoir donné l'avis que celui-ci peut exiger, d'ordonner la tenue d'une enquête sur la société et sur toute personne morale du même groupe.

(2) Le tribunal peut ordonner la tenue de l'enquête demandée conformément au paragraphe (1), s'il lui paraît établi, selon le cas :

a) que la société ou des personnes morales de son groupe exercent ou ont exercé leurs activités commerciales avec une intention de fraude ;

b) que la société ou toute autre personne morale de son groupe, soit par la façon don't elle conduit ou a conduit ses affaires tant commerciales qu'internes, soit par la façon don't ses administrateurs exercent ou ont exercé leurs pouvoirs, abuse des droits des détenteurs de valeurs mobilières, porte atteinte à leurs intérêts ou n'en tient pas compte ;

c) que la constitution ou la dissolution soit de la société soit des personnes morales de son groupe répond à un but frauduleux ou illégal ;

d) que des personnes ont commis des actes frauduleux ou malhonnêtes en participant à la constitution soit de la société soit de personnes morales du même groupe, ou dans la conduite de leurs affaires tant internes que commerciales.

(4) La personne qui intente une action en vertu du présent article n'est pas tenue de fournir caution pour les frais.

Proposed Wording 
229. (1) Tout détenteur de valeurs mobilières ou le directeur peut demander au tribunal du ressort du siège social de la société, ex parte ou après avoir donné l'avis que celui-ci peut exiger, d'ordonner la tenue d'une enquête sur la société et sur toute société du même groupe.

(2) Le tribunal peut ordonner la tenue de l'enquête demandée conformément au paragraphe (1), s'il lui paraît établi, selon le cas :

a) que la société ou des sociétés de son groupe exercent ou ont exercé leurs activités commerciales avec une intention de fraude;

b) que la société ou toute autre société de son groupe, soit par la façon dont elle conduit ou a conduit ses activités commerciales ou ses affaires internes, soit par la façon dont ses administrateurs exercent ou ont exercé leurs pouvoirs, abuse des droits des détenteurs de valeurs mobilières ou se montre injuste à leur égard en leur portant préjudice ou en ne tenant pas compte de leurs intérêts;

c) que la constitution ou la dissolution soit de la société soit des sociétés de son groupe répond à un but frauduleux ou illégal;

d) que des personnes ont commis des actes frauduleux ou malhonnêtes en participant à la constitution soit de la société soit de sociétés du même groupe, ou dans la conduite de leurs activités commerciales ou de leurs affaires internes.

(4) La personne qui intente une action en vertu du présent article n'est pas tenue de fournir de cautionnement pour les frais.

Bill Clause No. 114 CBCA Section No. 235(1) and (3) Topic  Investigation (Technical Amendments)

Sources of Proposed Law 

Changes From Present Law 
(A) Amend the French version of subsection (1) to replace the words "personnes morales" with the more accurate term "sociétés".

(B) Replace the word "periodical" in subsection (3) with the words "publication generally available to the public".

Purpose of Change 
(A) Subsection 235(1): This change will clarify the wording and interpretation of the French version of the section.

(B) Subsection (3): This technical amendment will clarify the language and application of the Act.

Similar Provincial Laws 

Current Wording 
235. (1) S'il est convaincu, pour l'application des parties XI, XIII ou XVII ou de tout règlement d'application de l'article 174, de la nécessité d'enquêter sur la propriété ou le contrÔle de valeurs mobilières d'une société ou de personnes morales de son groupe, le directeur peut demander à toute personne dont il a de bonnes raisons de croire qu'elle détient ou a détenu un droit sur ces valeurs, ou agit ou a agi pour le compte de telle personne de lui fournir, ou à la personne qu'il désigne :

235. (3) The Director shall publish in the periodical referred to in section 129 the particulars of information obtained by him under this section, if the particulars

Proposed Wording 
235. (1) S'il est convaincu, pour l'application des parties XI, XIII ou XVII ou de tout règlement d'application de l'article 174, de la nécessité d'enquêter sur la propriété ou le contrÔle de valeurs mobilières d'une société ou de sociétés de son groupe, le directeur peut demander à toute personne dont il a de bonnes raisons de croire qu'elle détient ou a détenu un droit sur ces valeurs, ou agit ou a agi pour le compte de telle personne de lui fournir, ou à la personne qu'il désigne :

235. (3) The Director shall publish in a publication generally available to the public the particulars of information obtained by the Director under this section, if the particulars

Part 19.1 Apportioning Award of Damages (clause 115)

These amendments would provide that every defendant and third party found responsible for a financial loss arising out of an error, omission or misstatement in financial information that is required under the Act or the regulations would be liable to the plaintiff only for the portion of the damages corresponding to the defendant's and third party's degree of responsibility. Allocation of responsibility among the parties is provided for in the event one or more defendants/third parties are insolvent or unavailable. The joint and several liability regime would continue to apply to the Crown, charitable organizations, unsecured trade creditors and individual plaintiffs whose investment in the corporation is worth less than a prescribed amount.

Briefing Book
An Act to amend the Canada Business Corporations Act and the Canada Cooperatives Act

Bill Clause No. 115
CBCA Section No. 237.1 Definitions
Topic: Apportioning Award of Damages

Sources of Proposed Law
Reports of the Standing Senate Committee on Banking, Trade and Commerce on Modified Proportionate Liability, dated March and September 1998

Changes From Present Law 
New regime

Purpose of Change 
The definition of "financial interest" in a corporation would include a "security" as defined in s. 2 of the CBCA in addition to other instruments traditionally regarded as financial interests. The definition is not exclusive.

Definition of "financial loss" - The modified liability regime is applicable only to claims for economic (i.e., financial) loss arising out of an error, omission or misstatement in respect of financial information that is required under the Act or the Regulations. Neither personal injury claims nor claims involving professionals and other professional services will be affected.

Definition of "third party" - The definition is necessary in the English version in order to clarify that the modified proportionate liability regime applies even if there is only one defendant, provided that other parties are subsequently joined to the action. The regime should be applicable to defendants and any subsequent party that is joined in proceedings before a court. It is not necessary to include a comparable definition of the term "mise en cause" in the French version because the term "mise en cause" is broad enough to cover defendants and third parties.

Similar Provincial Laws 
Securities Act (Ontario)

Current Wording 
N/A

Proposed Wording
237.1 The definitions in this section apply in this Part:

"financial interest", with respect to a corporation, includes

( a ) a security;

( b ) a title to or an interest in capital, assets, property, profits, earnings or royalties;

( c ) an option or other interest in, or a subscription to, a security;

( d ) an agreement under which the interest of the purchaser is valued for purposes of conversion or surrender by reference to the value of a proportionate interest in a specified portfolio of assets;

( e ) an agreement providing that money received will be repaid or treated as a subscription for shares, units or interests at the option of any person or the corporation;

( f ) a profit-sharing agreement or certificate;

( g ) a lease, claim or royalty in oil, natural gas or mining, or an interest in the lease, claim or royalty;

( h ) an income or annuity contract that is not issued by an insurance company governed by an Act of Parliament or a law of a province;

( I ) an investment contract; and

( j ) anything that is prescribed to be a financial interest.

"financial loss" means a financial loss arising out of an error, omission or misstatement in financial information concerning a corporation that is required under this Act or the regulations.

"third party" includes any subsequent party that is joined in proceedings before a court.

Bill Clause No. 115
CBCA Section No. 237.2(1)
Topic: Apportioning Award of Damages

Sources of Proposed Law 
Reports of Standing Senate Committee on Banking, Trade and Commerce on Modified Proportionate Liability, dated March and September 1998

Changes From Present Law 
To provide for a regime of modified proportionate liability applicable to all claims for economic (financial) loss arising by reason of any error, omission or misstatement in financial information required under the CBCA. The regime applies after a court has found more than one defendant responsible for a financial loss (see s. 237.1 - definition of "financial loss").

Purpose of Change 
Currently, each defendant is jointly and severally liable for damages arising from any error, omission or misstatement in financial information issued by a CBCA corporation. Pursuant to the proposed amendments, each defendant and third party would be liable only for the portion of a plaintiff's loss that corresponds to the degree of responsibility of that defendant and/or third party, subject to certain exceptions (see ss. 237.4 and 237.5). For example, if a defendant and/or third party is 10 percent liable for a loss of $100,000, they would be liable for $10,000. The court would establish the amount of the loss and the degree of responsibility.

Similar Provincial Laws 
none

Current Wording 
N/A

Proposed Wording 
237.2 (1) This Part applies to the apportionment of damages awarded to a plaintiff for financial loss after a court has found more than one defendant or third party responsible for the financial loss.

Bill Clause No. 115
CBCA Section No. 237.2(2)
Topic: Apportioning Award of Damages

Sources of Proposed Law 
Reports of Standing Senate Committee on Banking, Trade and Commerce on Modified Proportionate Liability, dated March and September, 1998

Changes From Present Law 
New regime

Purpose of Change 
To ensure that certain classes of claimants, namely, the government, charitable organizations and unsecured trade creditors are unaffected by the implementation of the proposed modified proportionate liability regime, with the result that such claimants would continue to be governed by the rules respecting joint and several liability.

The effect of the exclusion applicable to government is that joint and several liability will continue to apply to all claims brought by the government as plaintiff, except where the plaintiff is a Crown agent or Crown corporation where a substantial part of its activities involves making investments in securities or other financial instruments. This approach is designed to ensure that the regime will not have the effect of shifting the risk to the Canadian taxpayer (i.e., as a result of moving from a joint and several liability regime to a modified proportionate liability regime in which a plaintiff will generally not recover all its losses), except where the government entity is operating as an investor. Such entities will be subject to the modified proportionate liability regime and therefore will be on a "level playing field" with all other sophisticated market players.

Unsecured trade creditors and charitable organizations are excluded from the regime because these plaintiffs would normally not be expected to scrutinize the affairs of CBCA corporations in the same manner as large investors, and therefore merit the stronger protection provided by a joint and several liability regime.

Similar Provincial Laws 
none

Current Wording 
N/A

Proposed Wording 
237.2 (2) This Part does not apply to an award of damages to any of the following plaintiffs:

a ) Her Majesty in right of Canada or of a province;

( b ) an agent of Her Majesty in right of Canada or of a province or a federal or provincial Crown corporation or government agency, unless a substantial part of its activities involves trading, including making investments in, securities or other financial instruments;

( c ) a charitable organization, private foundation or public foundation within the meaning of subsection 149.1(1) of the Income Tax Act ; or

( d ) an unsecured creditor in respect of goods or services that the creditor provided to a corporation.

Bill Clause No. 115
CBCA Section No. 237.3(1) - (4)
Topic: Apportioning Award of Damages

Sources of Proposed Law 
Reports of the Standing Senate Committee on Banking, Trade and Commerce on Modified Proportionate Liability, dated March and September 1998;
US Securities and Exchange Act of 1934, s. 21(D)g).

Changes From Present Law 
New regime

Purpose of Change 
Each defendant or third party would be liable for the portion of a plaintiff's loss that corresponds to the degree of responsibility of that defendant, subject to reallocation of any uncollectible amount.

This provision attempts to reallocate the amount owed by an insolvent or unavailable defendant or third party amongst all of the remaining parties. It divides the risk of insolvency between the plaintiffs and the defendants/third parties and enables plaintiffs to recover more than they would without the reallocation. Because the amount reallocated to a defendant/third party is based upon their respective percentage of fault, marginal defendants/third parties are protected from liability for the total loss.

In order for the reallocation to occur, the plaintiff would have to bring a motion to the courts, within 1 year of the judgment becoming enforceable, requesting that this reallocation be effected by the court. Example :

Defendant X is liable for 50 percent of the damage, defendant Y is responsible for 30 percent, and defendant Z is responsible for 20 percent.

If Y is insolvent, X will be responsible for his/her 50 percent plus 50 percent of Y's 30 percent, for a total of 65 percent of the total liability. Defendant Z would be responsible for his/her 20 percent plus 20 percent of Y's 30 percent, for a total of 26 percent of the total liability. The remaining amount of defendant Y's liability (9 percent of the total) will be borne by the plaintiff.

A key feature of the reallocation regime is a 50 percent cap on reallocated liability. Under the cap, the reallocation which takes place as a result of the existence of an insolvent or unavailable defendant/third party is limited to 50 percent of the solvent or available party's original proportionate liability. In the above case, this cap did not affect either party. It is triggered only when there are multiple defendants or third parties, a large defendant is insolvent and other defendants/third parties are responsible for only a small portion of the fault. The intent of the cap is to make sure that a defendant/third party that is only 5 percent responsible for the fault is not held liable for the entire negligence of another person who is 95 percent responsible for the fault and who happens to go bankrupt.

Similar Provincial Laws  none

Current Wording 
N/A

Proposed Wording 
237.3 (1) Subject to this section and sections 237.4 to 237.6, every defendant or third party who has been found responsible for a financial loss is liable to the plaintiff only for the portion of the damages that corresponds to their degree of responsibility for the loss.

(2) If any part of the damages awarded against a responsible defendant or third party is uncollectable, the court may, on the application of the plaintiff, reallocate that amount to the other responsible defendants or third parties, if the application is made within one year after the date that the judgment was made enforceable.

(3) The amount that may be reallocated to each of the other responsible defendants or third parties under subsection (2) is calculated by multiplying the uncollectable amount by the percentage that corresponds to the degree of responsibility of that defendant or third party for the total financial loss.

(4) The maximum amount determined under subsection (3), in respect of any responsible defendant or third party, may not be more than fifty per cent of the amount originally awarded against that responsible defendant or third party.

Bill Clause No. 115
CBCA Section No. 237.4
Topic: Apportioning Award of Damages

Sources of Proposed Law 
Reports of the Standing Senate Committee on Banking, Trade and Commerce on Modified Proportionate Liability, dated March and September 1998;
U.S. Securities and Exchange Act of 1934, s. 21(D)g).

Changes From Present Law
New regime

Purpose of Change 
This provision preserves the status quo in cases of fraud or dishonesty. Plaintiffs who are victims of fraud or dishonesty will continue to be compensated fully for their loss.

Similar Provincial Laws 
none

Current Wording 
N/A

Proposed Wording 
237.4 (1) The plaintiff may recover the whole amount of the damages awarded by the court from any defendant or third party who has been held responsible for a financial loss if it was established that the defendant or third party acted fraudulently or dishonestly.

(2) The defendant or third party referred to in subsection (1) is entitled to claim contribution from any other defendant or third party who is held responsible for the loss.

Bill Clause No .115
CBCA Section No. 237.5
Topic: Apportioning Award of Damages

Sources of Proposed Law 
Reports of the Standing Senate Committee on Banking, Trade and Commerce on Modified Proportionate Liability, dated March and September 1998

Changes From Present Law 
New regime

Purpose of Change 
This section provides that joint and several liability is applicable to individual plaintiffs and personal bodies corporate (see s. 237.5(2)) who have a financial interest in the corporation of less than the prescribed amount. Personal bodies corporate are included in order to provide personal investment vehicles with the same benefit as individuals.

This approach is aimed at providing full compensation to plaintiffs who are least able to absorb the loss. While large creditors or investors normally take the possibility of loss into consideration before making an investment decision and should therefore assume the risk associated with the insolvency of one or more of the defendants/third parties, small investors may not necessarily be aware of the risks.

Similar Provincial Laws 
none

Current Wording 
N/A

Proposed Wording 
237.5 (1) Defendants and third parties referred to in subsection 237.2(1) are jointly and severally, or solidarily, liable for the damages awarded to a plaintiff who is an individual or a personal body corporate and who

( a ) had a financial interest in a corporation on the day that an error, omission or misstatement in financial information concerning the corporation occurred, or acquired a financial interest in the period between the day that the error, omission or misstatement occurred and the day, as determined by the court, that it was generally disclosed; and

( b ) has established that the value of the plaintiff's total financial interest in the corporation was not more than the prescribed amount at the close of business on the day that the error, omission or misstatement occurred or at the close of business on any day that the plaintiff acquired a financial interest in the period referred to in paragraph ( a ).

(2) In subsection (1), "personal body corporate" means a body corporate that is not actively engaged in any financial, commercial or industrial business and that is controlled by an individual or a group of individuals, each member of which is connected by blood relationship, adoption or marriage or by cohabiting with another member in a conjugal relationship.

(3) Subsection (1) does not apply when the plaintiff brings the action as a member of a partnership or other association or as a trustee in bankruptcy, liquidator or receiver of a body corporate.

Bill Clause No. 115
CBCA Section No. 237.6
Topic: Apportioning Award of Damages

Sources of Proposed Law 
Reports of the Standing Committee on Banking Trade and Commerce on Modified Proportionate Liability, dated March and September 1998

Changes From Present Law 
New regime

Purpose of Change 
The application of the threshold could in some cases bring unnecessary hardship to individuals who fall on the "wrong side of the line" by denying joint and several liability protection to those who need it. The courts would, therefore, be permitted to apply the rule of joint and several liability where it is just and reasonable to so.

Section 237.6(2) permits the Governor in Council to establish factors that the court must take into account in making its determination. Such factors would be required to be published in Part I of the Canada Gazette .

Similar Provincial Laws 
none

Current Wording 
N/A

Proposed Wording 
237.6 (1) If the value of the plaintiff's total financial interest referred to in subsection 237.5(1) is greater than the prescribed amount, a court may nevertheless determine that the defendants and third parties are jointly and severally, or solidarily, liable if the court considers that it is just and reasonable to do so.

(2) The Governor in Council may establish factors that the court shall take into account in deciding whether to hold the defendants and third parties jointly and severally, or solidarily liable.

(3) The Statutory Instruments Act does not apply to the factors referred to in subsection (2), but the factors shall be published in Part I of the Canada Gazette

Bill Clause No. 115
CBCA Section No. 237.7, 237.8 and 237.9
Topic: Apportioning Award of Damages

Sources of Proposed Law 
Reports of Standing Senate Committee on Banking, Trade and Commerce on Modified Proportionate Liability, dated March and September 1998

Changes From Present Law
New regime

Purpose of Change 
It is necessary to establish the value of the financial interest in order to determine whether it falls above or below the threshold prescribed pursuant to paragraph 237.5(1) and section 237.7 provides a mechanism for doing so.

Subsection 237.7(2) provides the court with the discretion to adjust the value of the security that has been determined under subsection (1) when the court considers it reasonable to do so. The rationale for this provision is to cover off those situations where the closing price, the highest and lowest prices, or relevant bid prices, as the case may be, do not reflect the true value of the security. For example, this could occur where a security is thinly traded.

Section 237.8(1) provides that for financial interests subject to resale restrictions or in respect of which there is no organized market, the court will determine the value. The Governor in Council will establish factors that the court may take into account.

Pursuant to section 237.9, the plaintiff may, at any time before or during the course of the proceedings, bring a motion to determine the value of the plaintiff's financial interest. This provision was included in order to avoid a situation where the plaintiff goes through the entire proceeding only to find out that it will be subject to modified proportionate liability.

Similar Provincial Laws 
Securities Act , (Ontario)
Securities Act , (Ontario) General Regulation

Current Wording 
N/A

Proposed Wording 
237.7 (1) When, in order to establish the value of the total financial interest referred to in subsection 237.5(1), it is necessary to determine the value of a security that is traded on an organized market, the value of the security is, on the day specified in subsection (3),

( a ) the closing price of that class of security;

( b ) if no closing price is given, the average of the highest and lowest prices of that class of security; or

( c ) if the security was not traded, the average of the bid and ask prices of that class of security.

Court may adjust value

(2) The court may adjust the value of a security that has been determined under subsection (1) when the court considers it reasonable to do so.

(3) The value of the security is to be determined as of the day that the error, omission or misstatement occurred. If the security was acquired in the period between that day and the day, as determined by the court, that the error, omission or misstatement was generally disclosed, the value is to be determined as of the day that it was acquired.

(4) In this section, "organized market" means a recognized exchange for a class of securities or a market that regularly publishes the price of that class of securities in a publication that is generally available to the public.

237.8 (1) The court shall determine the value of all or any part of a financial interest that is subject to resale restrictions or for which there is no organized market.

(2) The Governor in Council may establish factors that the court may take into account in determining value under subsection (1).

(3) The Statutory Instruments Act does not apply to the factors referred to in subsection (2), but the factors shall be published in Part I of the Canada Gazette .

237.9 The plaintiff may, by application made at any time before or during the course of the proceedings, request the court to determine the value of the plaintiff's financial interest for the purpose of subsection 237.5(1).

Part 20 Remedies (clauses 116-120)

The section dealing with appeals from the Director's decision would be amended to clarify the right of appeal of a person who feels aggrieved by a decision made by the Director. In addition, the list of appealable decisions would be expanded (s. 246).

A number of consequential amendments required as a result of amendments to other parts of the Act are included in this Part. In addition, several minor technical amendments, amendments to the French version and amendments designed to clarify and facilitate the efficient operation and administration of the statute are included.

Briefing Book
An Act to amend the Canada Business Corporations Act and the Canada Cooperatives Act

Bill Clause No. 116
CBCA Section No. 239(2)(a)
Topic  Remedies, Offences and Punishment (Technical Amendments)

Sources of Proposed Law 

Changes From Present Law 
Replace paragraph 239(2)(a) with a new paragraph that replaces the reasonable notice requirement with a 14 day notice requirement and gives the courts the discretion to order otherwise.

Purpose of Change 
Under the current version of paragraph 239(2)(a), the court will not grant leave to commence a derivative action without first being satisfied that "reasonable notice" was given to the directors. This adds an element of uncertainty to the proceedings. The amendment will add clarity and certainty. One disadvantage is that if an emergency situation arises and the shareholders feel they must act quickly, 14 days notice may not be possible. For this reason, some discretion is given to the courts to order a shorter notice period if necessary.

Similar Provincial Laws 
Business Corporations Act (Ontario)

Current Wording 
239. (1) A security holder or the Director may apply, ex parte or on such notice as the court may require, to a court having jurisdiction in the place where the corporation has its registered office for an order directing an investigation to be made of the corporation and any of its affiliated corporations.

(2) If, on an application under subsection (1), it appears to the court that

(a) the complainant has given reasonable notice to the directors of the corporation or its subsidiary of his intention to apply to the court under subsection (1) if the directors of the corporation or its subsidiary do not bring, diligently prosecute or defend or discontinue the action;

Proposed Wording  239. (2)(a) the complainant has given notice to the directors of the corporation or its subsidiary of the complainant's intention to apply to the court under subsection (1) not less than fourteen days before bringing the application, or as otherwise ordered by the court, if the directors of the corporation or its subsidiary do not bring, diligently prosecute or defend or discontinue the action;

Bill Clause No. 117
CBCA Section No. 241(2) and 241(2)(b)
Topic  Remedies, Offences and Punishment (Technical Amendments)

Sources of Proposed Law 

Changes From Present Law 
Include in the French version of s. 241 the concept of "unfairly" found in the English version.

Amend the French version of subs. 241(2)(b) by replacing the words "affaires tant commerciales qu'internes" with "ses activités commerciales ou ses affaires internes".

Purpose of Change 
These technical changes clarify the wording and application of the Act.

Similar Provincial Laws 

Current Wording 
241. (2) Le tribunal, saisi d'une demande visée au paragraphe (1), peut, par ordonnance, redresser la situation provoquée par la société ou l'une des personnes morales de son groupe qui, à son avis, abuse des droits des détenteurs de valeurs mobilières, créanciers, administrateurs ou dirigeants, ou porte atteinte à leurs intérêts ou n'en tient pas compte :

b) soit par la façon don't elle conduit ses affaires tant commerciales qu'internes

Proposed Wording 
241. (2) Le tribunal saisi d'une demande visée au paragraphe (1) peut, par ordonnance, redresser la situation provoquée par la société ou l'une des personnes morales de son groupe qui, à son avis, abuse des droits des détenteurs de valeurs mobilières, créanciers, administrateurs ou dirigeants, ou, se montre injuste à leur égard en leur portant préjudice ou en ne tenant pas compte de leurs intérêts :

b) soit par la façon dont elle conduit ses activités commerciales ou ses affaires internes;

Bill Clause No. 118
CBCA Section No. 242(3)
Topic  Remedies, Offences and Punishment (Technical Amendments)

Sources of Proposed Law 

Changes From Present Law 
Replace in the French version of s. 242(3) the word "caution" with the word "cautionnement" where the provision incorrectly uses this term in relation to the security mechanism (as opposed to the person who provides the security, which is the correct use of the word "caution").

Purpose of Change 
This technical change clarifies the wording and application of the Act.

Similar Provincial Laws 

Current Wording 
242. (3) Les plaignants ne sont pas tenus de fournir caution pour les frais des demandes, actions ou interventions visées à la présente partie.

Proposed Wording 
242. (3) Les plaignants ne sont pas tenus de fournir de cautionnement pour les frais des demandes, actions ou interventions visées à la présente partie.

Bill Clause No. 119
CBCA Section No. 246
Topic Remedies, Offences and Punishment (Government Administration)

Sources of Proposed Law 

Changes From Present Law -
Clarification of the right of appeal of a person who feels aggrieved by a decision made by the Director. Addition of new decisions to the list of decisions that are appealable.

Purpose of Change 
The general purpose of these changes is to ensure that justice is served. The proposed changes are made to clarify the decisions that may be appealed:

- subs.(c): Currently, only the decision to refuse an exemption is appealable. However, the CBCA Director may impose reasonable terms as a condition for the exemption, to protect interested parties. These terms may be onerous, or perhaps in the eyes of a third party who may be prejudiced, not onerous enough. A third party might even feel that the exemption should not be granted on any terms.

- subs. (e): Allows a right of appeal concerning decisions made in respect of the new s. 263.1 (clause 129), which allows the Director to issue certificates attesting to a corporations existence at a particular date.

- subs.(f): Currently, only the decision to refuse a revival is appealable. However, the CBCA Director may impose reasonable terms as a condition for the revival of the corporation, to protect interested parties. These terms may be onerous, or perhaps in the eyes of a third party who may be prejudiced, not onerous enough. A third party might even feel that the revival should not be granted on any terms.

- subs. (f.1) and (f.2): Add new decisions which may be appealed under this section.

Similar Provincial Laws 

Current Wording 
246. A person who feels aggrieved by a decision of the Director

(a) to refuse to file in the form submitted to him any articles or other document required by this Act to be filed by him,

(b) to give a name, to change or revoke a name, or to refuse to reserve, accept, change or revoke a name under section 12,

(c) to refuse to grant an exemption under subsection 2(8), 10(2), 82(3), 127(8), 151(1), section 156, subsection 163(4) or 171(2) or subsection 160(3) and any regulations under that subsection,

(d) to refuse under subsection 187(11) to permit a continued reference to shares having a nominal or par value,

(e) to refuse to issue a certificate of discontinuance under section 188,

(f) to refuse to revive a corporation under section 209, or

(g) to dissolve a corporation under section 212,

may apply to a court for an order requiring the Director to change his decision, and on such application the court may so order and make any further order it thinks fit.

Proposed Wording 
246. A person who feels aggrieved by a decision of the Director referred to in any of paragraphs (a) to (g) may apply to a court for an order, including an order requiring the Director to change the decision

(a) to refuse to file in the form submitted any articles or other document required by this Act to be filed;

(b) to give a name, to change or revoke a name, or to refuse to reserve, accept, change or revoke a name under section 12;

(c) to grant, or to refuse to grant, an exemption that may be granted under this Act and the regulations;

(d) to refuse under subsection 187(11) to permit a continued reference to shares having a nominal or par value;

(e) to refuse to issue a certificate of discontinuance under section 188 or a certificate attesting that as of a certain date the corporation exists under subsection 263.1(2);

(f) to issue, or to refuse to issue, a certificate of revival under section 209, or the decision with respect to the terms for revival imposed by the Director;

(f.1) to correct, or to refuse to correct, articles, a notice, a certificate or other document under section 265;

(f.2) to cancel, or to refuse to cancel, the articles and related certificate under section 265.1; or

(g) to dissolve a corporation under section 212.

The Court may make any order it thinks fit.

Bill Clause No. 120
CBCA Section No. 249(1) and new (2)
Topic  Remedies, Offences and Punishment (Government Administration)

Sources of Proposed Law 

Changes From Present Law 
Clarification that only final court orders are appealable as of right. Further clarification that a judge of the court of appeal may grant leave to appeal any order by a lower court.

Purpose of Change
Section 249 provides that "An appeal lies to the court of appeal from any order made by a court under this Act." Generally, under provincial rules of court, only final orders are appealable so that litigants cannot tie up the court process and use procedural delays to prevent timely hearing of cases. The proposed change will prevent improper appeals of interim orders made under this Act and unnecessary use of court time.

Similar Provincial Laws 

Current Wording 
249. An appeal lies to the court of appeal from any order made by a court under this Act.

Proposed Wording 
249. (1) An appeal lies to the court of appeal of a province from any final order made by a court of that province under this Act.

(2) An appeal lies to the court of appeal of a province from any order other than a final order made by a court of that province, only with leave of the court of appeal in accordance with the rules applicable to that court.

Part 20.1 Documents in Electronic or Other Form (Clause 121)

These amendments would help to ensure that communications between the corporation and stakeholders are as facilitative as possible. Although the CBCA permits corporations to communicate electronically with government, it allows only paper-based communications with shareholders and other stakeholders. This restricts corporations from using modern and emerging technologies to reduce costs and speed up information flows to many of the parties with whom they communicate.

The amendments would facilitate and encourage corporations (and other parties with whom corporations interact) to employ new and emerging communications technologies. All shareholders would still have a right to receive everything in paper based form. The regime is structured in terms of general principles that would permit corporations and others to employ new and emerging communications technologies as they are developed.

Briefing Book
An Act to amend the Canada Business Corporations Act and the Canada Cooperatives Act

Bill Clause No. 121
CBCA Section No. 252.1: Definition of "electronic document"
Topic  Documents in Electronic or Other Form

Sources of Proposed Law 
Bill C-6: Personal Information Protection and Electronic Documents Act.

Changes From Present Law 
New

Purpose of Change 
The definition of electronic document is central to Part XX.1 since it encompasses all of the different types of documents, notices and information referred to throughout the CBCA. Mirroring the policy underlying all of Part XX.1, the definition of electronic document is intended to be enabling, technology-neutral, and expansive. It is enabling and flexible in that the parties will be able to choose the technology that best suits their purpose. It is technology-neutral in that it does not impose particular technologies on the parties subject to the CBCA. It is expansive since it is intended to encompass future technological developments. The use of the term "electronic" is not intended to be read in a literal manner and is not intended to exclude optical, digital and other technologies.

Similar Provincial Laws 
None

Current Wording 
N/A

Proposed Wording 
252.1 The definitions in this section apply in this Part.

"electronic document" means, except in section 252.6, any form of representation of information or of concepts fixed in any medium in or by electronic, optical or other similar means and that can be read or perceived by a person or by any means.

Bill Clause No. 121
CBCA Section No. 252.1: Definition of "information system"
Topic Documents in Electronic or Other Form

Sources of Proposed Law 
Commonwealth of Australia: Electronic Transactions Act 1999, No. 162, 1999.

Changes From Present Law 
New

Purpose of Change 
One of the conditions for an informed consent is that the recipient must designate an information system for receiving information by electronic means. In practice, this means that the party indicates the electronic address at which they will access this information. This provision clarifies that this term encompasses all types of technologies that may be used to create and deliver information.

Similar Provincial Laws 

Current Wording 
N/A

Proposed Wording 
252.1 The definitions in this section apply in this Part.

"information system" means a system used to generate, send, receive, store, or otherwise process an electronic document.

Bill Clause No. 121
CBCA Section No. 252.2: Application
Topic  Documents in Electronic or Other Form

Sources of Proposed Law 
None

Changes From Present Law 
New

Purpose of Change 
The Corporations Directorate utilises specific technologies. The general use of electronic documents may expose it to a variety of formats and mediums that may not be compatible with its technologies and which they may not have the capacity to handle. As such, this provision clarifies that Part XX.1 will not apply to any information sent to or issued by the CBCA Director.

Moreover, a number of policy considerations dictate that certain activities continue to be accomplished on paper. These provisions will allow these to be identified in the regulations. For example, Part XX.1 will not apply to the provisions pertaining to the share certificates (s. 48-81).

Similar Provincial Laws 
None

Current Wording 
N/A

Proposed Wording
252.2 This Part does not apply to a notice, document or other information sent to or issued by the Director pursuant to this Act or to any prescribed notice, document or other information.

Bill Clause No. 121
CBCA Section No. 252.3: (1) Use not mandatory; (2) Consent and other requirements; (3) Revocation of consent
Topic  Documents in Electronic or Other Form

Sources of Proposed Law 
Bill C-6: Personal Information Protection and Electronic Documents Act;

Uniform Law Conference of Canada: Uniform Electronic Commerce Act;

Ontario Securities Commission, National Policy 11-201 - Delivery of Documents by Electronic Means;

Securities and Exchange Commission: Use of Electronic Media for Delivery Purposes, Release No. 32-7233;

Commonwealth of Australia: Electronic Transactions Act 1999, No. 162, 1999.

Changes From Present Law 
New

Purpose of Change 
This Part is being enacted so as to permit parties to communicate with each other through efficient and economical means available to them. However, this Part is structured such that the paper-based and technology-based regime will co-exist. This provision ensures that no individual will be compelled to utilize electronic documents. Individuals can continue to operate in the paper-based environment.

The most significant safeguard included in this Part is the provision dealing with consent. No information may be provided via electronic means of communication unless the consent of the recipient is obtained. The requirement for revoking consent will be detailed in the regulations.

Similar Provincial Laws 
Saskatchewan: Bill 11: An Act respecting Electronic Information and Documents

Current Wording 
N/A

Proposed Wording 
252.3 (1) Nothing in this Act or the regulations requires a person to create or provide an electronic document.

(2) Despite anything in this Part, a requirement under this Act or the regulations to provide a person with a notice, document or other information is not satisfied by the provision of an electronic document unless

(a) the addressee has consented, in the manner prescribed, and has designated an information system for the receipt of the electronic document; and

(b) the electronic document is provided to the designated information system, unless otherwise prescribed.

(3) An addressee may revoke the consent referred to in paragraph (2)(a) in the manner prescribed.

Bill Clause No. 121
CBCA Section No. 252.4: Creation and Provision of Information
Topic  Documents in Electronic and Other Form

Sources of Proposed Law 
Bill C-6: Personal Information Protection and Electronic Documents Act;

Uniform Law Conference of Canada: Uniform Electronic Commerce Act;

Securities and Exchange Commission: Use of Electronic Media for Delivery Purposes, Release No. 33-7233;

Ontario Securities Commission, National Policy 11-201 - Delivery of Documents by Electronic Means;

Commonwealth of Australia: Electronic Transactions Act 1999, No. 162, 1999.

Changes From Present Law 
New

Purpose of Change 
This is the general provision that enables parties to create and provide information through technological means. Provided that their by-laws or articles do not impose limitations, corporations will be able to use the technologies that they choose. The consent provision in 252.3 will ensure that this freedom to use any technologies is not imposed on the recipients of the information.

Similar Provincial Laws
Saskatchewan: Bill 11: An Act respecting Electronic Information and Documents

Current Wording 
N/A

Proposed Wording 
252.4 A requirement under this Act or the regulations that a notice, document or other information be created or provided, is satisfied by the creation or provision of an electronic document if

(a) the by-laws or the articles of the corporation do not provide otherwise; and

(b) the regulations, if any, have been complied with.

Bill Clause No. 121
CBCA Section No. 252.5: (1)Creation of information in writing; (2) Provision of information in writing; (3) Copies; (4) Registered Mail
Topic  Documents in Electronic and Other Form

Sources of Proposed Law 
Bill C-6: Personal Information Protection and Electronic Documents Act;

Uniform Law Conference of Canada: Uniform Electronic Commerce Act;

Securities and Exchange Commission: Use of Electronic Media for Delivery Purposes, Release No. 33-7233;

Ontario Securities Commission, National Policy 11-201 - Delivery of Documents by Electronic Means;

Commonwealth of Australia: Electronic Transactions Act 1999, No. 162, 1999.

Changes From Present Law 
New

Purpose of Change 
Certain sections of the CBCA explicitly require that documents be in writing. The policy underlying this requirement is to provide for a durable record of the information. This policy is achieved in the technological environment by requiring that an electronic document be accessible for future use.

In a number of sections, the CBCA explicitly requires that documents be provided to the intended recipient in written form. The policy underlying such a requirement is that the recipient receive the document in a manner that gives him or her some control over the document. This policy is achieved in the technological environment by requiring that the electronic document in question is not only accessible for future use but also that the recipient be capable of retaining it.

Certain provisions of the CBCA require that multiple copies be provided. In a paper-based environment, this would imply that the person would have to provide the required number of copies. However, in the technological environment, an electronic document may easily be copied a number of times or provided to a number of recipients simultaneously. Therefore, sending one copy of an electronic document that can be copied numerous times will achieve the same result.

The CBCA requires that certain information be sent by registered mail. In the paper-based environment this is accomplished through the postal or other mail delivery system. However, in the technological environment, there is no universally-accepted system for sending registered mail. Therefore, the regulations will stipulate the requirements that must be fulfilled in order to have registered mail effectively delivered electronically.

Similar Provincial Laws 
Saskatchewan: Bill 11: An Act respecting Electronic Information and Documents

Current Wording 
N/A

Proposed Wording 
252.5 (1) A requirement under this Act or the regulations that a notice, document or other information be created in writing is satisfied by the creation of an electronic document if, in addition to the conditions in section 252.4,

(a) the information in the electronic document is accessible so as to be usable for subsequent reference; and

(b) the regulations pertaining to this subsection, if any, have been complied with.

(2) A requirement under this Act or the regulations that a notice, document or other information be provided in writing is satisfied by the provision of an electronic document if, in addition to the conditions set out in section 252.4,

(a) the information in the electronic document is accessible by the addressee and capable of being retained by the addressee, so as to be usable for subsequent reference; and

(b) the regulations pertaining to this subsection, if any, have been complied with.

(3) A requirement under this Act or the regulations for one or more copies of a document to be provided to a single addressee at the same time is satisfied by the provision of a single version of the electronic document.

(4) A requirement under this Act or the regulations to provide a document by registered mail is not satisfied by the sending of an electronic document unless prescribed.

Bill Clause No. 121
CBCA Section No. 252.6: Statutory Declaration and Affidavits
Topic  Documents in Electronic and Other Form

Sources of Proposed Law 
Bill C-6: Personal Information Protection and Electronic Documents Act

Changes From Present Law 
New

Purpose of Change 
In a number of sections, the CBCA requires that parties provide an affidavit or a statutory declaration. In the paper-based regime, these are governed by the rules enacted in the Canada Evidence Act. Bill C-6 (Personal Information Protection and Electronic Documents Act) provides a detailed regime for the electronic creation of these types of documents. Moreover, the regime enacted in Bill C-6 is applicable to the Canada Evidence Act, which governs the admissibility of these types of documents in court proceedings. For these reasons, the regime created in Bill C-6 will be applicable to affidavits and statutory declarations required under the CBCA.

Similar Provincial Laws 
None

Current Wording 
N/A

Proposed Wording 
252.6 (1) A statutory declaration or an affidavit required under this Act or the regulations may be created or provided in an electronic document if

(a) the person who makes the statutory declaration or affidavit signs it with his or her secure electronic signature;

(b) the authorized person before whom the statutory declaration or affidavit is made signs it with his or her secure electronic signature; and

(c) the requirements of sections 252.3 to 252.5 are complied with.

(2) For the purposes of this section, "electronic document" and "secure electronic signature" have the same meaning as in subsection 31(1) of thePersonal Information Protection and Electronic Documents Act.

(3) For the purpose of complying with paragraph (1)(c), the references to an "electronic document" in sections 252.3 to 252.5 are to be read as references to an "electronic document" as defined in subsection 31(1) of thePersonal Information Protection and Electronic Documents Act.

Bill Clause No. 121
CBCA Section No. 252.7: Signatures
Topic  Documents in Electronic and Other Form

Sources of Proposed Law 
Bill C-6: Personal Information Protection and Electronic Documents Act;
Uniform Law Conference of Canada: Uniform Electronic Commerce Act.

Changes From Present Law 
New

Purpose of Change 
A number of provisions of the CBCA require that documents be signed or executed. Enacted when documents were solely in paper format, such requirements may be an impediment to the use of technological means for creating or sending documents. The proposed amendment effectively allows for the use of technological means to communicate information by permitting signatures through these means.

Generally, signatures are personal to the signatory, evidence that the person intended to be associated with the document that they have signed and identify the person signing. These premises are maintained in the technological context. First, in a technological environment, a signature will not have to "look like" a handwritten signature, provided it is distinguishable from other signatures. Second, in a technological environment, a signature will not necessarily be attached to an electronic document in the same manner that an ink signature is placed onto paper. The person's signature may be "associated" with the document by mathematical logic or otherwise. Third, in a technological environment, the "physical appearance" of the signature may not permit the immediate identification of the signatory, provided that verification of the signature is subsequently possible.

Similar Provincial Laws 
Saskatchewan: Bill 11: An Act respecting Electronic Information and Documents

Current Wording 
N/A

Proposed Wording 
252.7 A requirement under this Act or the regulations for a signature or for a document to be executed, except with respect to a statutory declaration or an affidavit, is satisfied if, in relation to an electronic document, the prescribed requirements pertaining to this section, if any, are met and if the signature results from the application by a person of a technology or a process that permits the following to be proven:

(a) the signature resulting from the use by a person of the technology or process is unique to the person;

b) the technology or process is used by a person to incorporate, attach or associate the person's signature to the electronic document; and

(c) the technology or process can be used to identify the person using the technology or process.

Part 21 General (clauses 122-127)

The correction provisions would be expanded to enable corporations or other interested persons to request a correction to articles, certificates or other documents. The Director would be permitted to correct the document provided no shareholders or creditors of the corporation are prejudiced. A new provision is included enabling the Director or any interested party to apply to the court for a correction order in the event the applicant is of the view that a correction would be prejudicial to a shareholder or creditor (s. 265). Similarly, a new cancellation provision would allow the Director to cancel the articles and related certificate of a corporation (s. 265.1).

The following amendments would also be made:

The Director would be permitted to establish the requirements for the content and fix the form of notices and documents sent to or issued by the Director pursuant to the Act (s. 258.1).

The regulation making power would be broadened to reflect amendments made elsewhere in the statute (s. 261).

A new provision would be added requiring that the requisite fee must be paid before the Director performs the service requested (s. 261.1).

The number of people authorized to sign forms 3, 6 and 22 would be expanded to those with authority and knowledge of the corporation. The execution of a document by several persons in several documents of like form would be permitted (s. 262.1(2) and (3)).

The Director would be permitted to refuse to issue a certificate of existence if the Director has knowledge that the corporation has not sent a document required to be sent under the Act or has not paid a required fee (s. 263.1(2)).

A number of consequential amendments required as a result of amendments to other parts of the Act are also included in this Part, as are several minor technical amendments, amendments to the French version and amendments designed to clarify and facilitate the efficient operation and administration of the statute.

Briefing Book
An Act to amend the Canada Business Corporations Act and the Canada Cooperatives Act

Bill Clause No.122
CBCA Section No. 253(4)
Topic General (Shareholder Communications)

Sources of Proposed Law 

Changes From Present Law 
Amend s. 253(4) to require that if a notice or document is returned to the corporation twice, the corporation is not required to send further notices and documents to the shareholder until the shareholder informs the corporation in writing of his/her new address.

Purpose of Change 
Section 253 addresses the issue of how to give notice to directors and shareholders. In s. 253(4) a corporation is relieved of the obligation to send further notices or documents to a shareholder if a notice or document, sent in accordance with s. 253, is returned to the corporation three times because the shareholder cannot be found.

It seems unnecessary to require a corporation to mail the same document three times to the same address and to keep the necessary records of returned mail over a substantial period of time.

By reducing the number of returned mailings to two, the proposed change would lighten the administrative burden and lessen the costs faced by corporations. Two returns lessens the risk of human error being responsible for misdelivery.

Similar Provincial Laws

Current Wording 
253. (4) If a corporation sends a notice or document to a shareholder in accordance with subsection (1) and the notice or document is returned on three consecutive occasions because the shareholder cannot be found, the corporation is not required to send any further notices or documents to the shareholder until he informs the corporation in writing of his new address.

Proposed Wording 
253. (4) If a corporation sends a notice or document to a shareholder in accordance with subsection (1) and the notice or document is returned on two consecutive occasions because the shareholder cannot be found, the corporation is not required to send any further notices or documents to the shareholder until the shareholder informs the corporation in writing of the shareholder's new address.

Bill Clause No. 123
CBCA Section No. 257(3)
Topic General (Technical Amendments)

Sources of Proposed Law 

Changes From Present Law 
Replace in the French version the word "délivrés" with "émis".

Purpose of Change 
This technical change clarifies the wording and application of the Act.

Similar Provincial Laws 

Current Wording 
257. (3) Les mentions du registre des valeurs mobilières et les certificats de valeurs mobilières délivrés par la société établissent, à défaut de preuve contraire, que les personnes au nom desquelles les valeurs mobilières sont inscrites sont propriétaires des valeurs mentionnées dans le registre ou sur les certificats.

Proposed Wording 
257. (3) Les mentions du registre des valeurs mobilières et les certificats de valeurs mobilières émis par la société établissent, à défaut de preuve contraire, que les personnes au nom desquelles les valeurs mobilières sont inscrites sont propriétaires des valeurs mentionnées dans le registre ou sur les certificats.

Bill Clause No. 124
CBCA Section No. 258.1 and 258.2
Topic General (Government Administration)

Sources of Proposed Law 

Changes From Present Law 
The current sections 258.1 and 258.2 would be replaced with new sections that retain and update the contents of the current subsections 261(1)(c.1) and (d).

Purpose of Change 
(A) Section 258.1 would permit the Director to establish the requirements for the content and fix the form, including electronic or other forms, of notices and documents sent to or issued by the Director pursuant to this Act.

(B) Section 258.2 would allow the Director to grant exemptions in prescribed circumstances.

The current section makes reference to orders. Under the Statutory Instruments Act, orders are required to be made by the Governor-in-Council. By removing the words "as are specified in the order" and replacing it with the words "as the Director specifies", the Act is clarifying that the Director's authority to issue an exemption does not fall under the Statutory Instruments Act.

Similar Provincial Laws 

Current Wording 
258.1. (1) Subject to the regulations, notices and documents that are sent to or issued by the Director pursuant to this Act may be sent or issued in electronic or other form in any manner specified by the Director.

(2) For the purposes of this Act, any notice or document that is sent or issued in accordance with subsection (1) is deemed to have been received at the time and date provided by the regulations.

258.2. In the prescribed circumstances, the Director may, by order made subject to any conditions that the Director considers appropriate, exempt from the application of any provision of this Act requiring notices or documents to be sent to the Director such notices or documents or classes of notices or documents containing information similar to that contained in notices or documents required to be made public pursuant to any other Act of Parliament or to any Act of the legislature of a province as are specified in the order.

Proposed Wording 
258.1 The Director may establish the requirements for the content and fix the form, including electronic or other forms, of notices and documents sent to or issued by the Director pursuant to this Act, including

(a) the notices and documents that may be transmitted in electronic or other form;

(b) the persons or classes of persons who may transmit the notices and documents;

(c) their signature in electronic or other form, or their execution, adoption or authorization in a manner that is to have the same effect for the purposes of this Act as their signature;

(d) the time and circumstances when electronic notices and documents are to be considered to be sent or received, and the place where they are considered to have been sent or received; and

(e) any matter necessary for the purposes of the application of this section.

258.2. In the prescribed circumstances, the Director may, on any conditions that the Director considers appropriate, exempt from the application of any provision of this Act requiring notices or documents to be sent to the Director any notices or documents or classes of notices or documents containing information similar to that contained in notices or documents required to be made public pursuant to any other Act of Parliament or to any Act of the legislature of a province as the Director specifies.

Bill Clause No. 125
CBCA Section No. 261
Topic General (Government Administration)

Sources of Proposed Law

Changes From Present Law 
Clarification of the Governor in Council's authority to make regulations.

Purpose of Change 
(A) Subs. (1)(a.1): Clarifies that the Governor in Council may make regulations regarding the definition of anything that is to be defined by regulation.

(B) Subs. (1)(b): Allows fees and/or the manner of determining fees.

(C) Subs. (1)(c): Clarifies the Governor in Council's authority to make regulations regarding the payment of fees, additional fees for late charges and the refunding of fees.

(D) Subs. (1)(d): In accordance with clause 59(3), this amendment clarifies that the Governor in Council has the authority to make regulations regarding the minimum amount of support required in relation to the number of times the shareholder has submitted substantially the same proposal and to prescribe the period of time during which the re-submissions may be considered.

(E) Subs. (1)(g): Authorizes the Governor in Council to make regulations regarding the new Part XX.1, Documents in Electronic or Other Form (clause 121). Allowing these matters to be prescribed in the regulations will increase flexibility by allowing the requirements to adapt as technology changes.

(F) Subs. (1)(h): Authorizes the Governor in Council to make regulations that allow meetings held by telephonic, electronic or other communicative means to satisfy the statutory requirements for participation at meetings.

(G) Subs. (1)(i): Authorizes the Governor in Council to make regulations for voting at a meeting of shareholders by means of a telephonic, electronic or other means of communication, for the purposes of new s. 141(3).

Subs. (2): This amendment increases flexibility by authorizing the Governor in Council to reference outside documents.

(I) Subs. (3): This amendment clarifies that material incorporated into regulations by reference does not become "regulation" itself for the purposes of the Statutory Instruments Act.

Similar Provincial Laws 

Current Wording 
261. (1) Subject to subsections (2) and (3), the Governor in Council may make regulations

(a) prescribing any matter required or authorized by this Act to be prescribed;

(b) requiring the payment of a fee in respect of the filing, examination or copying of any document, or in respect of any action that the Director is required or authorized to take under this Act, and prescribing the amount thereof;

(c) prescribing the contents and electronic or other forms of notices and documents required to be sent to or issued by the Director;

(c.1) respecting the sending or issuance of notices and documents in electronic or other form, including

(i) the notices and documents that may be sent or issued in electronic or other form,

(ii) the persons or classes of persons by whom they may be sent or issued,

(iii) their signature in electronic or other form or their execution, adoption or authorization in a manner that pursuant to the regulations is to have the same effect for the purposes of this Act as their signature, and

(iv) the time and date when they are deemed to be received;

(d) prescribing rules with respect to exemptions permitted by this Act; and

(e) prescribing that, for the purpose of paragraph 155(1)(a), the standards as they exist from time to time, of an accounting body named in the regulations shall be followed.

(2) Subject to subsection (3), the Minister shall publish in the Canada Gazette and in the periodical referred to in section 129 at least sixty days before the proposed effective date thereof a copy of every regulation that the Governor in Council proposes to make under this Act and a reasonable opportunity shall be afforded to interested persons to make representations with respect thereto.

(3) The Minister is not required to publish a proposed regulation if the proposed regulation

(a) grants an exemption or relieves a restriction;

(b) establishes or amends a fee;

(c) has been published pursuant to subsection (2) whether or not it has been amended as a result of representations made by interested persons as provided in that subsection; or

(d) makes no material substantive change in an existing regulation.

Proposed Wording 
261. (1) The Governor in Council may make regulations

(a) prescribing any matter required or authorized by this Act to be prescribed;

(a.1) defining anything that, by this Act, is to be defined by regulation;

(b) requiring the payment of a fee in respect of the filing, examination or copying of any document, or in respect of any action that the Director is required or authorized to take under this Act, and prescribing the amount of the fee or the manner of determining the fee;

(c) respecting the payment of fees, including the time when and the manner in which the fees are to be paid, the additional fees that may be charged for the late payment of fees and the circumstances in which any fees previously paid may be refunded in whole or in part;

(c.1) prescribing, for the purposes of subsection 137(1.1), a manner of determining the number of shares required for a person to be eligible to submit a proposal, including the time and manner of determining a value or percentage of the outstanding shares of the corporation;

(d) prescribing, for the purposes of paragraph 137(5)(d), the minimum amount of support required in relation to the number of times the shareholder has submitted substantially the same proposal within the prescribed period;

(e) prescribing rules with respect to exemptions permitted by this Act;

(f) prescribing that, for the purpose of paragraph 155(1)(a), the standards as they exist from time to time, of an accounting body named in the regulations shall be followed;

(g) prescribing any matter necessary for the purposes of the application of Part XX.1, including the time and circumstances when an electronic document is to be considered to have been provided or received and the place where it is considered to have been provided or received;

(h) prescribing the manner of, and conditions for, participating in a meeting by means of a telephonic, electronic or other communication facility that permits all participants to communicate adequately with each other during the meeting; and

(i) prescribing, for the purposes of subsection 141(3), the manner of, and conditions for, voting at a meeting of shareholders by means of a telephonic, electronic or other communication facility.

(2) The regulations may incorporate any material by reference regardless of its source and either as it exists on a particular date or as amended from time to time.

(3) Material does not become a regulation for the purposes of the Statutory Instruments Act because it is incorporated by reference.

Bill Clause No. 126
CBCA Section No. new 261.1
Topic General (Government Administration)

Sources of Proposed Law 

Changes From Present Law 
Requires that fees be paid before the Director takes the action in respect to which the fee is payable.

Purpose of Change 
The CBCA amendments will allow the Director to fix many fees in accordance with the Department of Industry Act (DIA) and the CBCA. There may be a potential problem arising out of setting fees under the DIA. The distinction between fees for mandatory actions required to be taken by the Director pursuant to the Act (denoted by words such as "must" and "shall") and fees for discretionary or service-oriented actions creates a potential problem stemming from the ability to enforce payment of fees in an efficient manner. It appears that the Crown cannot withhold the provision of services on the sole basis of non-payment of fees. Therefore, where mandatory duties are prescribed by the Act and the DIA is used as the fee making authority, the service mandated by the Act must be performed regardless of whether or not a fee is paid.

This amendment will make the payment of the required fee a prerequisite to any mandatory act by the Director. In essence, no action by the Director is mandatory unless the required fee has been paid. This amendment allows effective enforcement of payment for services when the DIA is used to set fees.

Similar Provincial Laws 

Current Wording 
N/A

Proposed Wording 
261.1 The fee in respect of the filing, examination, or copying of any document, or in respect of any action that the Director is required or authorized to take, shall be paid to the Director on the filing, examination, or copying or before the Director takes the action in respect of which the fee is payable.

Bill Clause No. 127
CBCA Section No. 262(2)(b)
Topic  General (Government Administration)

Sources of Proposed Law 

Changes From Present Law 
Consequential changes to amendments related to a) the content of the form that the CBCA Director will fix, b) the payment of fees and, c) the publication generally available to the public.

Purpose of Change 
(A) see explanation: clause 3

(B) see explanation: clause 126

(C) see explanation: clause 6

Similar Provincial Laws 

Current Wording 
262 (2) Where this Act requires that articles or a statement relating to a corporation be sent to the Director,

(b) on receiving the articles or statement in the prescribed form, any other required documents and the prescribed fees, the Director shall

(iv) send the certificate and the articles or statement, or a copy, image or photographic, electronic or other reproduction of the certificate and of the articles or statement, to the corporation or its representative, and

(v) publish a notice of the issuance of the certificate in the Canada Gazette or in the periodical referred to in section 129.

Proposed Wording 
262 (2)(b) on receiving the articles or statement in the form that the Director fixes, any other required documents and the required fees, the Director shall

(iv) send the certificate, or a copy, image or photographic, electronic or other reproduction of the certificate, to the corporation or its agent, and

(v) publish a notice of the issuance of the certificate in a publication generally available to the public.

The correction provisions would be expanded to enable corporations or other interested persons to request a correction to articles, certificates or other documents. The Director would be permitted to correct the document provided no shareholders or creditors of the corporation are prejudiced. A new provision is included enabling the Director or any interested party to apply to the court for a correction order in the event the applicant is of the view that a correction would be prejudicial to a shareholder or creditor (s. 265). Similarly, a new cancellation provision would allow the Director to cancel the articles and related certificate of a corporation (s. 265.1).

The following amendments would also be made:

The Director would be permitted to establish the requirements for the content and fix the form of notices and documents sent to or issued by the Director pursuant to the Act (s. 258.1).

The regulation making power would be broadened to reflect amendments made elsewhere in the statute (s. 261).

A new provision would be added requiring that the requisite fee must be paid before the Director performs the service requested (s. 261.1).

The number of people authorized to sign forms 3, 6 and 22 would be expanded to those with authority and knowledge of the corporation. The execution of a document by several persons in several documents of like form would be permitted (s. 262.1(2) and (3)).

The Director would be permitted to refuse to issue a certificate of existence if the Director has knowledge that the corporation has not sent a document required to be sent under the Act or has not paid a required fee (s. 263.1(2)).

A number of consequential amendments required as a result of amendments to other parts of the Act are also included in this Part, as are several minor technical amendments, amendments to the French version and amendments designed to clarify and facilitate the efficient operation and administration of the statute.

Briefing Book
An Act to amend the Canada Business Corporations Act and the Canada Cooperatives Act

Bill Clause No. 128
CBCA Section No. new 262.1(2) and (3)
Topic General (Technical Amendments)

Sources of Proposed Law

Changes From Present Law 
Renumber s. 262.1 as s. 262.1(1) and add new subsections 262.1(2) and (3) to specify that forms 3, 6 and 22 may be signed by an individual who has knowledge of the corporation and who is authorized to do so by the directors and to provide for execution of a document by several persons in several documents of like form.

Purpose of Change
Currently, most administrative forms must be signed by a director or an authorized officer and not by a solicitor or other person acting on behalf of a director or officer. The proposed amendment would permit individuals who have the relevant knowledge of the corporation and who are authorized to do so by the directors to sign the notice of registered office or of change of address of registered office (form 3), notice of directors or change of directors (form 6) and the annual return (form 22). The extended authorization is limited to these forms because they are forms in the nature of "information" - the filing thereof does not affect the status of the corporation, as would the filing of articles of amendment.

At the present time, there is no provision which expressly states that a document that is required to be executed by more than one person will be considered properly executed even if the required signatories each signs a separate copy. Addition of a provision that expressly states this would only be a codification of the common law principle of "counterparts". This addition would clarify the existence of this concept under the CBCA and provide administrative flexibility to CBCA corporations.

Similar Provincial Laws 

Current Wording 
N/A

Proposed Wording 
262.1 (2) The notices referred to in subsections 19(2) and (4) and subsections 106(1) and 113(1), and the annual return referred to in section 263, may be signed by any individual who has the relevant knowledge of the corporation and who is authorized to do so by the directors, or, in the case of the notice referred to in subsection 106(1), the incorporators.

(3) Any articles, notice, resolution, requisition, statement or other document required or permitted to be executed or signed by more than one individual for the purposes of this Act may be executed or signed in several documents of like form, each of which is executed or signed by one or more of the individuals. The documents, when duly executed or signed by all individuals required or permitted, as the case may be, to do so, shall be deemed to constitute one document for the purposes of this Act.

Bill Clause No. 129
CBCA Section No. 263 and 263.1
Topic General (Government Administration)

Sources of Proposed Law 

Changes From Present Law 
This amendment would split the current s. 263 into two parts to clarify the intention of the current section. The first part would deal with annual returns, while the second would deal with the issuance of certificates.

Purpose of Change 
The purpose of a certificate of compliance is to act as a verification from the CBCA Director that certain basic statutory filings, such as annual returns, have been made and therefore the corporation has not been, and is not about to be, dissolved for such a failure. In some instances however, it is not possible for the Director to know if a corporation is in complete compliance with the Act. For example, a change of directors may have occurred, but no notice of change of directors has been filed.

Certificates of compliance are most often used as a tool to facilitate corporate transactions where assurances are made to a financial institution or other commercial parties that the corporation is in compliance with the statute. From this perspective, it is important to make it clear that only certain filings are being attested to in the certificate of compliance and that the issuance of the certificate does not certify complete statutory compliance. This amendment would clarify the matters which may be attested to in the certificate.

Similar Provincial Laws 

Current Wording 
263. (1) Every corporation shall, on the prescribed date, send to the Director an annual return in prescribed form and the Director shall file it.
(2) The Director may furnish any person with a certificate that a corporation has sent to the Director a document required to be sent to him under this Act.

Proposed Wording 
263. Every corporation shall, on the prescribed date, send to the Director an annual return in the form that the Director fixes and the Director shall file it.

263.1 (1) The Director may provide any person with a certificate stating that a corporation

(a) has sent to the Director a document required to be sent under this Act;

(b) has paid all required fees; or

(c) exists as of a certain date.

(2) For greater certainty, the Director may refuse to issue a certificate described in paragraph (1)(c) if the Director has knowledge that the corporation is in default of sending a document required to be sent under this Act or is in default of paying a required fee.

Bill Clause No. 130
CBCA Section No. 265
Topic General (Government Administration)

Sources of Proposed Law 

Changes From Present Law 
The change would replace the current sections 265 and 266 while providing for a new correction provision.

Similar Provincial Laws 

Purpose of Change 
The proposed new section 265 deals with the correction of a document (articles, notice, certificate) containing an error. It is not clear under the current CBCA if the only correction possible is of an error caused by the Director. This change would make explicit the Director's authority to request changes in any document which contains an error. This amendment would increase flexibility by clarifying the method of correcting the documents listed.

The new provision would require that the Director be satisfied that corrections will not prejudice the corporation's shareholders or creditors. This is designed to protect shareholders and creditors.

Also, the proposed amendment would increase flexibility by allowing corporations to request changes.

A new provision would entitle the Director, the corporation or any interested party, to apply for a court order directing the Director to make a correction to a document and determining the rights of the shareholders or creditors, when the applicant is of the view that a correction would prejudice a shareholder or creditor.

Current Wording 
265. (1) If a certificate containing an error is issued to a corporation by the Director, the directors or shareholders of the corporation shall, on the request of the Director, pass the resolutions and send to him the documents required to comply with this Act, and take such other steps as the Director may reasonably require, and the Director may demand the surrender of the certificate and issue a corrected certificate.

(2) A certificate corrected under subsection (1) shall bear the date of the certificate it replaces.

(3) If a corrected certificate issued under subsection (1) materially amends the terms of the original certificate, the Director shall forthwith give notice of the correction in the Canada Gazette or in the periodical referred to in section 129.

266. (1) A person who has paid the prescribed fee is entitled during usual business hours to examine a document required by this Act or the regulations to be sent to the Director, except a report sent to him under subsection 230(2), and to make copies of or extracts there from.

(2) The Director shall furnish any person with a copy or a certified copy of a document required by this Act or the regulations to be sent to the Director, except a report sent to him under subsection 230(2).

Proposed Wording 
265. (1) If there is an error in articles, a notice, a certificate or other document, the directors or shareholders of the corporation shall, on the request of the Director, pass the resolutions and send to the Director the documents required to comply with this Act, and take such other steps as the Director may reasonably require so that the Director may correct the document.

(2) Before proceeding under subsection (1), the Director must be satisfied that the correction would not prejudice any of the shareholders or creditors of the corporation.

(3) The Director may, at the request of the corporation or of any other interested person, accept a correction to any of the documents referred to in subsection (1) if

(a) the correction is approved by the directors of the corporation, unless the error is obvious or was made by the Director; and

(b) the Director is satisfied that the correction would not prejudice any of the shareholders or creditors of the corporation and that the correction reflects the original intention of the corporation or the incorporators, as the case may be.

(4) If, in the view of the Director, of the corporation or of any interested person who wishes a correction, a correction to any of the documents referred to in subsection (1) would prejudice any of the shareholders or creditors of a corporation, the Director, the corporation or the person, as the case may be, may apply to the court for an order that the document be corrected and for an order determining the rights of the shareholders or creditors.

(5) An applicant under subsection (4) shall give the Director notice of the application, and the Director is entitled to appear and to be heard in person or by counsel.

(6) The Director may demand the surrender of the original document, and may issue a corrected certificate or file the corrected articles, notice or other document.

(7) A corrected document shall bear the date of the document it replaces unless

(a) the correction is made with respect to the date of the document, in which case the document shall bear the corrected date; or

(b) the court decides otherwise.

(8) If a corrected certificate materially amends the terms of the original certificate, the Director shall without delay give notice of the correction in a publication generally available to the public.

Bill Clause No. 130
CBCA Section No. new 265.1
Topic  General (Government Administration)

Sources of Proposed Law 

Changes From Present Law 
The proposed amendment provides for a new cancellation provision.

Purpose of Change 
The CBCA does not have a provision that specifically allows the Director to cancel articles and related certificates. This amendment would provide an efficient way to deal with certificates that have been incorrectly issued. To add flexibility, the circumstances under which a cancellation can occur would be prescribed in the regulations.

As with correction orders (s. 265), the section includes provisions to protect shareholders and creditors. It requires that cancellations not prejudice shareholders or creditors (s. 265.1(2)). To balance the interests of shareholders and creditors with the interests of the Director and the corporation, the section allows the Director or any interested party to make an application to the court for an order canceling the articles and the certificate and determining the rights of the creditors and shareholders (s. 265.1(4)).

Similar Provincial Laws 

Current Wording 
N/A

Proposed Wording 
265.1 (1) In the prescribed circumstances, the Director may cancel the articles and related certificate of a corporation.

(2) Before proceeding under subsection (1), the Director must be satisfied that the cancellation would not prejudice any of the shareholders or creditors of the corporation.

(3) In the prescribed circumstances, the Director may, at the request of a corporation or of any other interested person, cancel the articles and related certificate of the corporation if

(a) the cancellation is approved by the directors of the corporation; and

(b) the Director is satisfied that the cancellation would not prejudice any of the shareholders or creditors of the corporation and that the cancellation reflects the original intention of the corporation or the incorporators, as the case may be.

(4) If, in the view of the Director, of the corporation or of any interested person who wishes a cancellation, a cancellation of articles and a related certificate would prejudice any of the shareholders or creditors of a corporation, the Director, the corporation or the person, as the case may be, may apply to the court for an order that the articles and certificate be cancelled and for an order determining the rights of the shareholders or creditors.

(5) An applicant under subsection (4) shall give the Director notice of the application, and the Director is entitled to appear and to be heard in person or by counsel.

(6) The Director may demand the surrender of a cancelled certificate.

Bill Clause No. 130
CBCA Section No. 266
Topic General (Government Administration)

Sources of Proposed Law 

Changes From Present Law 
Clarification that the Director shall furnish a certified extract.

Purpose of Change 
Subsection 266(1): This technical amendment makes minor wording changes.
Subsection 266(2): This subsection provides that the Director is required to furnish any person with a copy or a certified copy of a document that is required by the CBCA or the regulations to be sent to the Director. It is not possible under the current provision to obtain only an extract of a document certified to be a true copy by the Director and signed by the Director or by a Deputy Director. This amendment would correct this situation.

Similar Provincial Laws 

Current Wording 
266. (1) A person who has paid the prescribed fee is entitled during usual business hours to examine a document required by this Act or the regulations to be sent to the Director, except a report sent to him under subsection 230(2), and to make copies of or extracts there from.

(2) The Director shall furnish any person with a copy or a certified copy of a document required by this Act or the regulations to be sent to the Director, except a report sent to him under subsection 230(2).

Proposed Wording 
266. (1) A person who has paid the required fee is entitled during usual business hours to examine a document required by this Act or the regulations to be sent to the Director, except a report sent to the Director under subsection 230(2), and to make copies of or extracts from it.
(2) The Director shall furnish any person with a copy, extract, certified copy or certified extract of a document required by this Act or the regulations to be sent to the Director, except a report sent under subsection 230(2).

Bill Clause No. 131
CBCA Section No. 267(3)
Topic General (Government Administration)

Sources of Proposed Law 

Changes From Present Law 
The Director's retention period found in the CBCA is moved to the regulations.

Purpose of Change 
This will add flexibility to the Act by allowing Director's retention period to be more easily amended from time-to-time.

Similar Provincial Laws 

Current Wording 
267. (3) The Director is not required to produce any document, other than a certificate and attached articles or statement filed under section 262, after six years from the date he receives it.

Proposed Wording 
267. (3) The Director is not required to produce any document, other than a certificate and attached articles or statement filed under section 262, after the expiration of the prescribed period.

Bill Clause No. 132
CBCA Section No. 267.1
Topic General (Technical Amendments)

Sources of Proposed Law

Changes From Present Law 
Replace the word "periodical" with the words "publication generally". 

Purpose of Change 
This technical amendment will clarify the language and application of the Act.

Similar Provincial Laws 

Current Wording 
267.1 Information or notices required by this Act to be summarized in a periodical available to the public or published by the Director may be made available to the public or published by any system of mechanical or electronic data processing or by any other information storage device that is capable of reproducing any required information or notice in intelligible form within a reasonable time.

Proposed Wording 
267.1 Information or notices required by this Act to be summarized in a publication generally available to the public or published by the Director may be made available to the public or published by any system of mechanical or electronic data processing or by any other information storage device that is capable of reproducing any required information or notice in intelligible form within a reasonable time.

Bill Clause No. 133
CBCA Section No. 268(6), (7) and (11)
Topic General (Technical Amendments)

Sources of Proposed Law 

Changes From Present Law 
Full citation for the Canada Corporations Act is provided and subs. 268(11) of the English version is amended by adding the words "by or" immediately preceding the phrase "under any Special Act as defined".

Purpose of Change 
These technical amendments will clarify the language and application of the Act while reducing ambiguity. The changes to subsections 268(7) and (11) will match the wording in the English version with that found in the French version of the Statute.

Similar Provincial Laws 

Current Wording 
268. (6) The Governor in Council may, by order, require that a body corporate incorporated by or under an Act of Parliament to which Part I or II of the Canada Corporations Act does not apply, other than

(a) a bank,

(b) a company or society to which the Insurance Companies Act applies, or

(c) a company to which the Trust and Loan Companies Act applies,

shall apply for a certificate of continuance under section 187 within such period as may be prescribed.

(7) A body corporate to which Part IV of the Canada Corporations Act applies, other than a body corporate that carries on a business referred to in paragraph (6)(b) or (c), may apply for a certificate of continuance under section 187.

(11) A body corporate that is incorporated under a Special Act, as defined in section 87 of the Canada Transportation Act, may apply for a certificate of continuance under section 187.

Proposed Wording 
268. (6) The Governor in Council may, by order, require that a body corporate incorporated by or under an Act of Parliament to which Part I or II of the Canada Corporations Act, chapter C-32 of the Revised Statutes of Canada, 1970, does not apply, apply for a certificate of continuance under section 187 within such period as may be prescribed except for the following:

a) a bank;

(b) a company or society to which the Insurance Companies Act applies; and

(c) a company to which the Trust and Loan Companies Act applies.

(7) A body corporate to which Part IV of the Canada Corporations Act, chapter C-32 of the Revised Statutes of Canada, 1970, applies, other than a body corporate that carries on a business referred to in paragraph (6)(b) or (c), may apply for a certificate of continuance under section 187.

(11) A body corporate that is incorporated by or under a Special Act, as defined in section 87 of the Canada Transportation Act, may apply for a certificate of continuance under section 187.

Other Amendments (clauses 134-136)

Briefing Book
An Act to amend the Canada Business Corporations Act and the Canada Cooperatives Act

Bill Clause No. 134
CBCA Section No. 6(1)(d), 173(1)(n), 174(1)(c), 174(2), (3) and (4), 174(6), 176(1)(h), 176(3), and 190(1)(a)
Topic Technical Amendments

Sources of Proposed Law 

Changes From Present Law 
The French version of the Act is amended by replacing the word "appartenance" with the words "droit de propriété".
This change will be made in the following sections:6(1)d), 173(1)n), 174(1)c), 174(2), (3) et (4), 174(6), 176(1)h), 176(3) and 190(1)a).

Purpose of Change 
This technical change clarifies the wording and application of the Act.

Similar Provincial Laws 

Current Wording 
6. (1)d) éventuellement les restrictions imposées à l'émission, au transfert ou à l'appartenance de ses actions;

Proposed Wording 
6. (1)d) éventuellement les restrictions imposées à l'émission, au transfert ou au droit de propriété de ses actions;

Bill Clause No. 135 and Schedule
CBCA Section No. schedule
Topic Gender Neutralization (Technical Amendments)

Sources of Proposed Law 

Changes From Present Law 
Amend the English version of the CBCA, to the extent possible, to remove gender specific language and replace it with gender neutral language.

Purpose of Change 
There are over 100 references in the statute to "he", "him" and "his", particularly in relation to the CBCA Director. This amendment would remove this gender bias and incorporate language that represents both genders.

Similar Provincial Laws 

Current Wording 
N/A

Proposed Wording
N/A

Bill Clause No. 136
CBCA Section No. Unknown
Topic Review by Parliament

Sources of Proposed Law 
1996 Report of the Standing Senate Committee on Banking, Trade and Commerce on Corporate Governance

Changes From Present Law 
This amendment would require a committee of the Senate, of the House of Commons, or of both Houses of Parliament to undertake a review of the provisions and operations of the CBCA and to table a report of the findings of such a committee before both Houses of Parliament within five years of the coming into force of this section, and within ten years thereafter.

Purpose of Change 
This amendment was introduced by Senator Oliver in the Senate prior to third reading of Bill S-11. Senator Oliver was of the view that Parliament should review the CBCA on a periodic basis given the importance of the statute to Canadian corporations and the rapid pace of change in the business world, both from a domestic and international point of view.

Similar Provincial Laws 

Current Wording 
N/A

Proposed Wording 
136. A committee of the Senate, of the House of Commons or of both Houses of Parliament that is designated or established for the purpose shall, within five years after the coming into force of this section, and within every ten years thereafter, undertake a review of the provisions and operations of the Canada Business Corporations Act, and shall, within a reasonable period thereafter, cause to be laid before each House of Parliament a report thereon.

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