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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)
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.
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