This document was prepared by the staff of the Parliamentary
Research Branch to provide Canadian Parliamentarians with plain language background and
analysis of proposed government legislation. Legislative summaries are not government
documents. They have no official legal status and do not constitute legal advice or
opinion. Please note, the Legislative Summary describes the bill as of the date shown at
the beginning of the document. For the latest published version of the bill, please
consult the parliamentary internet site at www.parl.gc.ca.
LS-366E
BILL S-19: AN ACT TO AMEND THE
CANADA BUSINESS
CORPORATIONS ACT AND THE CANADA COOPERATIVES
ACT AND TO AMEND OTHER ACTS IN CONSEQUENCE
Prepared by:
Gérald Lafrenière
Law and Government Division
26 April 2000
LEGISLATIVE HISTORY OF
BILL S-19
HOUSE
OF COMMONS |
SENATE |
Bill
Stage |
Date |
Bill
Stage |
Date |
First Reading: |
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First Reading: |
21 March
2000 |
Second Reading: |
|
Second Reading: |
6 April
2000 |
Committee Report: |
|
Committee Report: |
|
Report Stage: |
|
Report Stage: |
|
Third Reading: |
|
Third Reading: |
|
Royal Assent:
Statutes of Canada
N.B. Any substantive changes in this Legislative Summary which have
been made since the preceding issue are indicated in bold print.
|
|
|
|
TABLE OF CONTENTS
BACKGROUND
CBCA
A. Financial
Assistance
B. Directors' Residency Requirement
C. Directors'
Liability
D. Insider Trading
1.
Requirement to File Reports
2. Speculative Trading
3. Civil Liability
E. Unanimous Shareholder Agreements
F.
Shareholder Communications
1. Proxy
Solicitation Rules
2. Shareholder
Proposals
3.
Electronic Communications
G. Take-over Bids and Going
Private Transactions
H. Modified Proportionate Liability
I. Other Amendments
1. Miscellaneous
2. Part 1 - Interpretation and
Application
3. Part 2 -
Incorporation
4. Part 4 - Registered Office and
Records
5. Part 5
- Corporate Finance
6. Part 10 - Directors and Officers
7. Part 12 -
Shareholders
8. Part 13 - Proxies
9.
Part 14 - Financial Disclosure
10.
Part 15 - Fundamental Changes
11. Part 18 - Liquidation and
Dissolution
12. Part 20 - Remedies,
Offences and Punishment
13. Part 21 - General
J. Technical
Amendments
CCA
A. Shareholder
Proposals
B. Financial
Assistance
C. Insider Trading
1. Prohibition against Speculative
Trading
2. Civil Liability
D. Modified Proportionate Liability
E. Other Amendments
F. Technical
Amendments
COMING INTO FORCE
COMMENTARY
BILL S-19: AN ACT TO AMEND THE
CANADA BUSINESS
CORPORATIONS ACT AND THE CANADA COOPERATIVES
ACT AND TO AMEND OTHER ACTS IN CONSEQUENCE
BACKGROUND
Bill S-19, An Act to amend the Canada
Business Corporations Act (CBCA) and the Canada Cooperatives Act (CCA) and to amend other
Acts in consequence, was introduced and read the first time in the Senate on 21 March 2000
by the Minister of Industry. The two Acts named regulate federally incorporated companies
and cooperatives and the proposed amendments are designed to enhance corporate governance,
improve the ability of Canadian corporations to compete in the marketplace and reduce
costs for businesses.
Bill S-19 is the result of a process that
began as early as 1994 when consultations were held across the country in order to
determine what changes should be made to the CBCA. A set of discussion papers was then
released in order to obtain comments from stakeholders.(1)
Afterwards, more consultations were held to develop a consensus on reform proposals. The
Standing Senate Committee on Banking, Trade and Commerce also played a key role with the
presentation of its report on corporate governance(2) and
its interim and final reports on modified proportionate liability.(3)
The CBCA, which has not been substantially
amended since 1975, sets out the legal and regulatory framework for corporations in
Canada, including the basic rules for corporate governance. The approximately 155,000
companies incorporated under this Act include large as well as small and medium-sized
businesses. In Canada, corporations have the option of incorporating at the federal or the
provincial level and the CBCA operates in parallel with the corporate laws of the
provinces and territories. The main goals of the over 300 amendments now proposed are:
to expand the rights of
shareholders to participate in the major decisions of their corporation for
example, by allowing non-registered shareholders to submit proposals and by modifying the
grounds for rejecting a shareholder proposal; by allowing increased communication between
shareholders; by expanding the means for shareholders to solicit proxies; and by allowing
electronic communication between a corporation and shareholders;
The CCA sets out the legal and regulatory
framework for the establishment of non-financial cooperatives. The main objective of the
proposed amendments to that Act is to harmonize its provisions for corporate governance
with the proposed amendments to the CBCA. This would complete the reform process that led
to the new CCA, which received Royal Assent in 1998 and came into force on 31 December
1999. Because of its recent passage, the CCA already contains a number of amendments now
proposed for the CBCA.(4) Certain issues, however, were
set aside pending the results of consultations on the CBCA; these are addressed in the
proposed amendments to both the CCA and the CBCA.
The Acts will be supplemented by a set of
regulations dealing with a wide range of issues such as minimum ownership and length of
ownership requirements with respect to eligibility to make shareholder proposals, the
investment threshold defining a small investor for the purpose of the modified
proportionate liability regime, and detailed rules for electronic communications between
the corporations and shareholders.
Due to the length of this amending
legislation and because many of the proposed amendments would make technical changes, this
legislative summary will not follow the normal clause-by-clause approach. Certain of the
amendments are grouped according to theme, while more general amendments are grouped
together.
CBCA
A. Financial
Assistance (5)
Section 44 of the CBCA restricts the
provision of loans, guarantees and other kinds of financial assistance by a CBCA
corporation to directors, officers, employees and shareholders. More specifically, this
type of financial assistance is restricted "where the directors have reasonable
grounds for believing that, as a result, the corporation either is or would become
insolvent or the corporations assets either are or would be less than all of its
liabilities and stated capital."(6) Directors who
approve financial assistance contrary to section 44 are personally liable to the
corporation for the amount. They can, however, rely on a "good faith reliance"
defence.
Clause 26 would repeal the financial
assistance provision. The rationale is that directors dealing with such transactions are
subject to statutory fiduciary duties to act in the best interest of the corporation and
can be sued for failing to do so. It is argued that this provides adequate safeguards.
B. Directors Residency Requirement
(7)
The CBCA currently sets out the following
residency requirements for corporate directors:
An exception to the residency requirements
is provided for holding corporations that earn less than 5% of gross revenues in Canada.
Only one-third of the directors of such corporations must be resident Canadians (section
105(4)). One of the purposes of the residency requirements was "to specifically
promote a Canadian viewpoint at meetings of directors of corporations controlled by
non-resident Canadians."(9)
The following amendments are proposed:
These changes are designed to allow for
stronger international representation on boards of directors. The stated goal is to
provide Canadian corporations with more flexibility as they become global players and
perhaps to encourage global corporations to incorporate and locate their headquarters in
Canada.
C.
Directors Liability (13)
Section 123(4) of the CBCA currently
provides a "good faith reliance" defence to certain of the liabilities for which
directors are subject under the Act.(14) The director
is not liable if he or she relies in good faith on:
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 fairly to reflect the financial conditions of the
corporation; or
a report of a lawyer,
accountant, engineer, appraiser or other person whose profession lends credibility to a
statement made by him.
The scope of this defence is limited:
"It allows directors to point to a reliable source of information as justification
for their actions, but it does not permit them, in absence of that specific justification,
to show that they acted reasonably in the circumstances."(15)
Clause 50 would replace the "good
faith reliance" defence with a "due diligence" defence with respect to the
liabilities and duties set out in sections 118, 119 and 122(2). It is specified that due
diligence would include reliance in good faith on the above-mentioned documents. It is
thus clear that such action would continue to be part of what constitutes acting with due
diligence. A due diligence defence allows a court to determine that the directors are not
liable if they "exercised the care, diligence and skill that a reasonably prudent
person would exercise in comparable circumstances." This test is set out in several
other pieces of legislation, including the CCA. The "good faith reliance"
defence would still be applicable with respect to the duties set out in section 122(1).
The proposed inclusion of a due diligence defence reflects the recommendations of the 1996
report Corporate Governance issued by the Standing Senate Committee on Banking,
Trade and Commerce.
Clause 110 would amend section 222 to
provide a due diligence defence for liquidators rather than the current "good faith
reliance" defence. Thus, they would be able to rely on the same defence as is
proposed for directors.
Currently, the CBCA is not clear on
whether or not defence costs can be advanced and whether directors or officers should be
indemnified for all legal proceedings, including investigations. Clause 51 would amend
section 124 to broaden the statutory indemnification rules. For example, a corporation
would be expressly allowed to advance defence costs and the indemnification provision
would be applicable to investigations. The indemnification rules would continue not to
apply to directors who engage in fraudulent or otherwise illegal activity.
It is hoped that these amendments would
support creativity and calculated risk taking.
D. Insider Trading (16)
Both the CBCA and provincial securities
laws require that insiders periodically file trading reports with the respective
authorities. "Insider trading has been described as the purchase and sale of
securities of a corporation by a person with access to confidential information about the
corporation that can materially affect the value of its securities and that is not known
by other shareholders or the general public."(17)
The following sets out the general rules
regarding insider trading: "Trading by insiders per se is not illegal; most
laws governing the issue allow insiders to trade in the securities of corporations with
which they have a connection, provided they do not possess material confidential
information about the corporation. Insider trading is proscribed, however, when the
insider possesses material confidential information or uses such information for his or
her benefit when trading in the securities of the corporation."(18)
There are three main components to the
insider trading provisions: requirement to file reports, speculative trading prohibitions,
and civil liability.
1.
Requirement to File Reports
The CBCA currently sets out the rules
governing when a person must send a report to the Director: within 10 days after the end
of the month in which he or she becomes an insider of a distributing corporation, and
within 10 days following the end of the month in which there is any change in the
persons interest in the securities of a distributing corporation (section 127).
Clause 53 would repeal the insider
reporting requirements. Insiders would, however, still be required to report under
provincial securities legislation, which contains prohibitions and penal remedies to deal
with non-compliance.
2. Speculative Trading
The current rules regarding speculative
trading are as follows: "The CBCA prohibits insiders from selling shares that they do
not own or have a right to own (short selling) and from buying or selling a call option or
put option in respect of a share of a distributing corporation of which they are insiders
(section 130). Insiders can sell shares they do not own, however, provided they own other
shares that are convertible into the shares sold, or they own an option or right to
acquire the shares sold."(19)
Clause 54 would replace the word
"share" with the word "security" in section 130 to cover more
fully types of transactions that could give rise to a conflict of interest (for example,
trading in debt obligations issued by the corporations). In addition, insiders would no
longer be prohibited from selling a put option or purchasing a call option since they
would profit only if the value of the corporations stock increased, meaning that
there would be no direct conflict with the interest of the corporation and its
shareholders.(20) The purchase of put options and the
sale of call options would still be prohibited, however. Clause 52 would amend the
definitions of "insider," "officer," and "business
combination" for the purposes of speculative trading provisions.
Clause 54 would increase the fine for a
contravention of the speculative trading prohibitions from $5,000 to $1,000,000; or three
times the profit made or loss avoided, whichever was greater.
3. Civil Liability
Following are the current rules regarding
civil liability for insider trading: "Under subsection 131(4) of the CBCA, insiders
(as defined in section 131(1)) who make use of specific confidential information for their
own benefit in connection with a transaction in the securities of a corporation (whether
distributing or non-distributing) are liable to compensate anyone who suffers a direct
loss as a result. They are also accountable to the corporation for any direct benefit or
advantage they receive."(21)
Clause 54 would clarify and expand the
scope of civil liability provisions. This would be accomplished in part by expanding the
definition of "insider" and "security" for the purpose of the civil
liability provisions. Among other things, clause 54 would define an insider as a person
who beneficially owns shares carrying more than the "prescribed percentage of voting
rights." The CBCA at present defines an insider as a person who beneficially owns
more than 10% per cent of the shares of a corporation. This amendment would allow the CBCA
standard to be changed by regulation when required. In addition, the civil liability
provision would be re-worded to expand its scope. Liability could be avoided if the
insider established that he or she had reasonably believed that the information had been
generally disclosed or if the information was known, or ought reasonably to have been
known, by the person alleged to have suffered damages.
A new element in the civil liability
provisions would impose civil liability on a person who communicated undisclosed
confidential information (the "tipper"); it would also set out applicable
defences.
A new provision would also be added to
help guide the courts in their assessment of the damages. In the case of distributing
corporations, when the plaintiff was a purchaser, the court would have to consider the
price paid by the plaintiff less the average market price over the 20 trading days
immediately following general disclosure of the information. When the plaintiff was a
seller, the court would have to consider the average market price over the 20 trading days
immediately following general disclosure of the information, less the price received by
the plaintiff.
E. Unanimous Shareholder Agreements (22)
A unanimous shareholder agreement is an
agreement by all shareholders in relation to the management of the corporation whereby
some or all of the powers of directors are transferred to shareholders. Currently, the
CBCA does not expressly state that when the "rights, powers and duties" are
transferred, the shareholders also assume the liabilities and associated defences of
directors.
Clause 66 would amend section 146 to
permit more than one person who was not a shareholder to participate in a unanimous
shareholder agreement. In addition, the provision would clarify that parties to a
unanimous shareholder agreement who were given the power to manage or supervise the
management of the corporation would have all "the rights, powers, duties and liabilities"
of a director, whether they arose under the CBCA or otherwise, including any defence
available to the directors.
Under a new provision, new shareholders
who had not been informed of the existence of a unanimous shareholder agreement at the
time of acquisition would be able to cancel the transaction no later than 30 days after
they had become aware of such an agreement.
F.
Shareholder Communications (23)
The CBCA provides shareholders with the
opportunity to participate in major decisions of a corporation in which they have an
interest. This is done in part by providing access to corporate information and by
granting shareholders the right to vote. Certain of the proposed amendments to the CBCA
are intended to facilitate shareholder participation in corporate governance.
1. Proxy
Solicitation Rules
Some are concerned that the current proxy
solicitation rules impede communication among shareholders. This is a significant drawback
since communications among shareholders can be an important instrument for monitoring and
influencing corporate performance.
Section 147 of the CBCA defines proxy
solicitation to include:
a request for a proxy,
whether or not accompanied by or included in a form of proxy;
a request to execute or not
to execute a form of proxy or to revoke a proxy;
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; [emphasis added]
and
the sending of a form of
proxy to a shareholder under section 149.
A Discussion Paper prepared by Industry
Canada "points out that, according to this definition, many views expressed by
shareholders, including informal discussions or personal letters criticizing management,
may be deemed to be solicitation under section 147. Violations of section 147 carry a fine
as well as a term of imprisonment."(24) There is
no violation when a proxy circular is sent to all shareholders.
The bill would amend the legislation to
facilitate communication among shareholders. Clause 67 would amend the definition of
"solicit" or "solicitation" in section 147 to exclude: a public
announcement, as prescribed, by a shareholder of how he or she intends to vote and the
reasons for that decision;(25) a communication for the
purpose of obtaining the number of shares required for a shareholder proposal; a
communication, other than a solicitation by or on behalf of the management, made to
shareholders in any prescribed circumstance.(26) These
communications would be exempted from the proxy circular delivery requirements.
In addition, clause 68 would amend section
149 to exempt management of a non-distributing corporation with fewer than 50 shareholders
(rather than the current 15) from having to send a form of proxy to each shareholder
entitled to receive notice of a meeting of shareholders.
Clause 69 would add a new provision to
allow persons to commence a solicitation provided they had filed a preliminary proxy
circular with the corporation and the Director, provided the form of proxy was not sent
before the proxy circular in final form was sent, and provided all prescribed conditions
were met. In addition, a person could commence a solicitation without sending a proxy
circular if the solicitation was conveyed by public broadcast, speech or publication in
the prescribed circumstances.(27)
It is hoped that these changes would
"eliminate unnecessary obstacles to the exchange of views and opinions by
shareholders and others concerning management performance and initiatives presented for a
vote of shareholders."(28)
2. Shareholder
Proposals
Section 137 of the CBCA allows
shareholders to add items to the agenda of shareholder meetings by means of shareholder
proposals. The shareholder proposal must be included with the management proxy circular if
the corporation is required to send one out. The Act sets out five circumstances in which
the corporation is not required to circulate the proposal.
Clause 59 would make changes to the
eligibility requirements for making shareholder proposals. It would permit beneficial
shareholders to make shareholder proposals, rather than only registered shareholders, as
is the case at present. Beneficial shareholders are persons who have purchased shares and
are entitled to dividends and capital gains but are not "registered" on the
corporations records.
In addition, clause 59 would set minimum
ownership and length of ownership requirements with respect to eligibility to make
shareholder proposals (currently, any shareholder entitled to vote may do so). These new
requirements would be set out in the regulations. Under the draft regulations, to be
eligible the person would have to be, for at least six months, the registered owner or
beneficial owner of 1% of the total number of outstanding voting shares or of outstanding
voting shares whose fair market value was $2,000. The goal is to limit abuse and to
"ensure that proposals are founded on a genuine stake and interest in the affairs of
the corporation."(29) Shareholders would, however,
be permitted to pool their shares to meet the minimum requirements. Thus, a shareholder
who had the required support of other shareholders would not have to acquire more shares
to be eligible. In certain circumstances, acquiring more shares could have raised an
economic barrier to shareholder proposals. Shareholders submitting proposals would be
required to provide the corporation with their name, address, number of registered or
beneficial shares owned and the date acquired, and would have to continue to hold or own
the required number of shares up to and including the day of the meeting.
If requested by the shareholder, the
corporation would still have to include a statement by the shareholder supporting the
proposal in its management proxy. The maximum length of the statement and proposal would
be prescribed by regulation. The draft regulations provide that it would not be able to
exceed 500 words (currently, the CBCA has a limit of 200 words).
In addition, the proposed amendments aim
to limit the scope for a corporations rejection of shareholder proposals related to
economic, political, racial, religious, social or similar causes. The corporation would be
given more time to give notice of its refusal to include a proposal.(30) A corporation would still be able to reject a proposal whose primary
purpose was to promote general economic, political, racial, religious, social or similar
causes, unless the person who submitted it demonstrated that the proposal related in a
significant way to the business or affairs of the corporation. Thus, while the scope for
rejection would seem to be reduced, it remains to be seen whether or not this will prove
to be the case in practice. Interestingly, the burden of proving that the proposal related
significantly to the affairs of the corporation would be left to the shareholder.
The time frame for resubmitting a
substantially similar proposal would be increased from two years to five years. A proposal
that received a prescribed minimum amount of support at the meeting could not, however, be
rejected.(31)
3.
Electronic Communications
The CBCA does not allow electronic
communications between a corporation and its shareholders. Clause 121 would allow
corporations to use emerging technologies to communicate with shareholders.(32) This would be permitted only where the shareholder
consented and designated an information system for receipt of the electronic documents.
Thus, the shareholder would retain the right to insist on paper-based communications.
Conversely, the corporation could not be forced to communicate electronically. While the
CBCA contains many provisions explicitly requiring that documents be in writing or be
provided to the intended recipient in written form, such requirements would be satisfied
by the creation or provision of electronic documents, provided the conditions set out in
the legislation were satisfied. The proposed amendments also set out other rules with
respect to electronic documents which would be supplemented by detailed rules for
electronic communications in the regulations.
G. Take-over Bids and Going
Private Transactions (33)
Industry Canada describes a take-over bid
as "an offer to all or most shareholders to purchase shares of a corporation, where
the offeror, if successful, will obtain enough shares to control the target
corporation." (34) In the CBCA, it is
defined as:
. . . 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 an associate of the
offeror on the date of the take-over bid, would exceed ten percent 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.(35)
The primary goal of take-over bid
provisions is to protect the rights and interests of the various parties involved in a
take-over bid the offeror, shareholders and the target corporation. The CBCA
provisions apply to all CBCA corporations whose shares are publicly traded or that have
more than 15 shareholders. It is important to point out that provincial securities
legislation also contains take-over bid provisions that apply to publicly traded
corporations. Clause 98 would repeal the CBCA take-over bid provisions, leaving the area
to be regulated by provincial securities laws.
Industry Canada describes
"going-private" transactions as a variety of corporate transactions relating to
distributing corporations "that result in termination of shareholder interest with
compensation but without consent and without a replacement of equivalent value in a
participating security."(36) For non-distributing
corporations, a "squeeze-out" is a similar type of transaction.
The CBCA currently sets out rules for one
type of going-private transaction (compulsory acquisition). "Under section 206(2) of
the CBCA, an offeror who acquires 90% of the outstanding shares of a particular class of
shares has the right to acquire the remaining 10%. This compels non-tendering shareholders
to sell their shares and permits the majority shareholder to take the corporation
private."(37) The CBCA does not, however,
address other forms of going-private transactions or whether they are permitted.
Clause 1(5) would add a new definition to
the CBCA to provide that the definition of "going private transactions"
(relating to distributing corporations) would be set in the regulations. Clause 97
specifies that going-private transactions would be allowed, subject to prescribed
requirements (which, according to Industry Canada, would have to comply with prescribed
fairness criteria set out in the applicable rules or policy statements issued by the
Ontario and Quebec Securities Commissions). These requirements would be incorporated by
reference in the regulations. The Director would be able to grant individual and blanket
exemptions of the prescribed requirements in certain circumstances.
Clause 1(5) would also define
"squeeze out transaction" (relating to non-distributing corporations). Under
proposed amendments, the majority of minority shareholders would have to approve such
transactions.(38) Thus, the standard of fairness would
not be the same for squeeze-out transactions, in recognition of the fact that different
circumstances are involved in distributing and non-distributing corporations.
Clause 99 would also make changes to the
compulsory acquisition provision. As explained above, an offeror who acquires 90% of the
outstanding shares of a particular class of shares has the right to acquire the remaining
10%. Certain aspects of the provision would be clarified and amendments to the definitions
would be needed to take into account the proposed repeal of the take-over bid provisions.
The obligation on the dissenting offeree to elect to transfer shares on the terms of the
take-over bid or to demand payment of fair value would be expressly set out, as would be
the consequences for the dissenting offeree of not having elected to demand such payment
(i.e., the offeree would be deemed to have elected to transfer the shares at the take-over
bid price.)
Clause 100 would add a new provision
providing a right of compelled acquisition, thereby giving shareholders the right to
compel acquisition of their shares by the offeror within a certain time frame, and at the
take-over bid price, where a take-over had been accepted by 90% of shares or shares of a
class. The compulsory and compelled acquisition provisions would apply only to
distributing corporations.
H. Modified Proportionate Liability
Currently, those who are involved in the
preparation of financial information required by the Act are subject to joint and several
liability with respect to a financial loss resulting from an error, omission or
misstatement. This means that a defendant can be sued and held liable for the entire loss,
notwithstanding the defendants degree of fault, and then has to recover the amounts
from the other negligent parties. The Standing Senate Committee on Banking, Trade and
Commerce stated that the current regime could have adverse implications for the financial
reporting system and capital markets and recommended a regime of modified proportionate
liability.(39)
Clause 115 would set out a regime of
modified proportionate liability in relation to claims for financial loss arising out of
an error, omission or misstatement in respect of financial information required by the
CBCA. The regime would apply after a court had found more than one defendant responsible
for the financial loss. Thus, a defendant would be liable only for the portion of the
damages corresponding to the defendants degree of fault. If damages awarded against
a defendant proved to be uncollectable (for example, because of a defendants
insolvency), the plaintiff could apply to the court for a reallocation of the
uncollectable amount amongst the other responsible defendants. The reallocated amount
would be calculated by multiplying the uncollectable amount by the defendants degree
of fault, with a 50% cap on reallocated liability (the amount would be limited to 50% of
the defendants original proportionate liability). This procedure could result in
cases where the plaintiff was unable to recover full damages.
A defendant would continue to be subject
to joint and several liability in case of fraud or dishonesty and this regime would also
continue to apply to certain categories of plaintiffs: the Crown, charitable
organizations, unsecured trade creditors, individual plaintiffs and personal bodies
corporate whose financial interest in the corporation was below a prescribed threshold.(40) In addition, a court that considered it was just and
reasonable to do so would be permitted to apply joint and several liability in the case of
individual plaintiffs whose financial interest in the corporation was above the prescribed
threshold. A provision would be added to establish how a persons financial interest
would be calculated.
Clause 217 would provide that the modified
proportionate liability regime would not apply to any proceedings that had been commenced
before the coming into force of the section setting out the regime.
I. Other Amendments
Some other proposed amendments are set out
below; the parts of the CBCA to which the amendments relate and the relevant section of
the CBCA are identified where appropriate.
1. Miscellaneous
A series of changes would be
made to move the requirements for specific time periods (for example, fixing the date for
determining which shareholders are entitled to receive a notice of shareholder meetings)
and fees from the CBCA to the regulations.
References in the CBCA to
the word "in prescribed form" would be replaced with "in the form that the
Director fixes." This would require changes to several sections in the CBCA. The
result would be a much less formal process and the removal of the need for the form of
documents to be prescribed in regulations. Thus, no notice of changes would have to be
given in the Canada Gazette, although the regulations would require that the forms
be published in a "publication generally available to the public."(41) It is argued that this change would add flexibility
to the Act.
Certain notices that must be
given by the Director would no longer need to be given in the Canada Gazette but
rather "in a publication generally available to the public."
2. Part 1 - Interpretation and
Application
Clause 1(5) would add the
following new definitions to the CBCA: "distributing corporation," "going
private transactions," "entity," "officer," "personal
representative," and "squeeze out transaction" (section 2).
Clause 1(5) would provide
that, subject to the Directors exemption power, a distributing corporation would be
defined in the regulations(42) (section 2).
Clause 1(7) would broaden
the Directors power to exempt a corporation from being a distributing corporation. A
new element would also allow the Director to exempt a class of corporations from being
distributing corporations. The Director would no longer need to be satisfied that the
exemption "would not prejudice any security holder of the corporation" but
rather that the exemption "would not be prejudicial to the public interest"
(section 2).
3. Part 2 -
Incorporation
Clause 4 would give the
Director discretion to refuse to issue a certificate of incorporation where a corporation,
if it came into existence, would not be in compliance with the Act (section 8).
Clause 5 would set out how
the articles should refer to the names of corporations in separate or combined forms of
English and French (section 10 (3)).
Clause 7 would clarify that
section 14(1) applies to contracts purported to be entered into (and not only those
actually entered into) with a corporation prior to its inception. Section 14(1) provides
that the person who enters into a written contract prior to incorporation is personally
liable under the contract.
4. Part 4 - Registered Office and
Records
Currently, the place (city)
where the registered office is to be situated must be set out in the articles; an
amendment to the articles is required if this place is changed. Clause 9 would permit
directors to change the place and address of the registered office as long as these
continued to be within the province specified in the articles. Thus, no amendment to the
articles would be necessary in such a case (section 19).
The CBCA requires that
certain corporate records be kept in Canada. Clause 10 would permit a corporation to keep
specified corporate and accounting records at a place outside Canada if they were
available electronically at the registered office or other designated place in Canada.
This right would be subject to restrictions imposed by other federal legislation
administered by the Minister of National Revenue. If a corporations accounting
records were kept outside of Canada, however, records adequate to allow the directors to
determine the financial position of the corporation would have to be kept in Canada.
Corporations would be required to provide technical assistance to examine such corporate
records, which would have to be available for inspection during regular office hours
(section 20).
Clause 11 would require an
affidavit to be sworn before shareholders (and others) were authorized to have access to
the securities register of a distributing corporation and would allow a reasonable fee to
be charged for extracts from the securities register. The affidavit would have to state
that the list of shareholders would not be used other than for the purposes specified in
the legislation (section 21).
Clause 12 would clarify the
rules regarding corporate seals (section 23).
5. Part 5
- Corporate Finance
Clause 14 would add
flexibility in the adjustment of the stated capital account (section 26).
Section 30 of the CBCA
provides that, subject to certain exceptions, a corporation cannot hold shares in itself
or in its holding corporation. Clauses 17 and 18 would provide an exception whereby a
subsidiary corporation could purchase and hold shares in the corporation in the capacity
of a legal representative or by way of security. This exception already exists with
respect to corporations holding shares in themselves or a holding corporation (section
31).
Clause 19 would add a new
provision to prohibit a corporation from allowing a subsidiary body corporate that held
shares in the corporation to vote, or allowing the shares to be voted, unless the
subsidiary satisfied the same requirements as are applicable to voting by the corporation
of its own shares or shares of a holding corporation (section 33).
Clause 25 would clarify the
rules regarding the priority of holders of redeemable shares where the corporation could
not make payment for such shares because it did not meet the solvency tests set out under
section 36 (i.e., they would be treated in the same manner as other shareholders who had
contracted with the corporation for the purchase of shares). In addition, the rights of
shareholders who had contracted with the corporation for the purchase of shares would be
subordinated to the rights of creditors and to the rights of shareholders that were in
priority to the rights given to the holders of the class of shares being purchased
(currently, they are in priority to all other shareholders and are subject only to the
rights of creditors) (section 40).
6. Part 10 - Directors and Officers
Clause 35 would specify that
it would be the directors responsibility to manage, or supervise the
management of, the business and affairs of a corporation. This is to take into account the
reality that in certain circumstances the directors do not manage the day-to-day affairs
of the corporation but rather supervise its management. This would also harmonize the CBCA
with the similar provisions found in a number of provincial corporations statutes (section
102).
Under clause 38, an election
or appointment as a director would be valid only if the person consented in writing. This
written consent would not be required when the person was present at the meeting at which
he or she was elected or appointed and did not refuse to act as a director. This change
has been proposed to avoid the election or appointment of a director without the
persons consent or knowledge (section 106).
Clause 40 would provide that
where all of the directors had resigned or been removed without replacement, any person
who managed or supervised the management of the business and affairs of the corporation
would be deemed to be a director, and would be subject to directors liability. The
rationale is that this should encourage the person to ask shareholders to nominate new
directors. The deeming provision would not apply to officers acting under the direction or
control of a shareholder or other person, professionals who participate in the management
of the corporation for the purposes of providing professional services, and receivers
(section 109).
Other changes would be made
to the provisions governing the appointment and removal of directors to clarify their
application (clauses 38, 39, 41, 42) (sections 106, 107, 111, 113).
Clause 44(2) and (3) would
clarify the limits on the power of the full board of directors to delegate their powers
(section 115).
Clause 45 and 62 would
provide that, in the specified circumstances, an entry into the minutes of a corporation
of a vote taken or a resolution made would be, in the absence of evidence to the contrary,
proof of the outcome of the vote or resolution (section 117) (Part 12 Shareholders
- section 142).
Clause 47 would codify the
Supreme Court of Canada decision in Barrette v. Heirs of the Late H. Roy
Crabtree(43) and would specify that a director is
not liable under the wage liability provision for any amount in respect of statutory or
contractual termination of employment or for severance pay.
Clause 48 would make several
amendments to the interested director and officer contracts provision. The provision would
apply to transactions (in addition to contracts); the right of interested directors to be
present for a vote or to vote on a contract or transaction in which they have an interest
would be disallowed; a director would be required to make an new declaration when there
was a material change in the nature of his or her interest; it would be clarified that the
director or officer would not be accountable to the corporation for profits made from the
contract or transaction if the conditions in the CBCA had been satisfied; a new provision
would be added providing for shareholder approval of interested director or officer
contracts or transactions where the conditions had not been satisfied; broader grounds
would be provided for a court application to set aside an interested director or officer
contract or transaction; and, the courts would be given the power to order the director to
account to the corporation for any profits or gains (section 120).
7. Part 12 -
Shareholders
Under the CBCA, shareholder
meetings must be held within Canada unless all the shareholders entitled to vote at the
meeting agree otherwise. Clause 55 would also allow meetings of shareholders to be held at
a place outside Canada, if the place was specified in the articles. In addition, a
shareholder would be permitted to participate in the meeting by electronic means if
certain conditions were met and if the by-laws so provided (section 132).
According to clause 56,
shareholder meetings would have to be held no later than six months after the end of the
financial year(44) and a corporation could apply to a
court for an order extending the time for calling an annual meeting (section 133).
Clauses 57 and 58 deal with
the record date for determining the shareholders entitled to receive notice of meetings
and other record dates, the period within which notice of annual meetings would have to be
sent to shareholders, etc. The clauses would move the identification of specific time
periods to the regulations. Clause 57 would also add a record date for determining the
shareholders entitled to vote at a meeting of shareholders (sections 134 and 135).
Clauses 60 would amend
section 138 of the CBCA to clarify the rules relating to the preparation of lists of
shareholders entitled to receive notice of shareholder meetings and lists of shareholders
entitled to vote. It would also provide that shareholders whose names appeared on a voting
list would be entitled to vote the shares shown on the list. Clause 61 would amend section
140 of the CBCA to provide that a borrower would be entitled to vote a loaned share unless
otherwise specified.
8. Part 13 - Proxies
9.
Part 14 - Financial Disclosure
Clause 80 would require the
corporation to prepare a statement setting out the reason for replacing an auditor; the
new auditor would have to be provided with the opportunity to comment on these reasons
(section 168).
Clause 81 provides that
persons who in good faith made an oral or written communication to the auditor of a
corporation, as required by the CBCA, would not be liable in any civil proceeding that
arose as a result.
10.
Part 15 - Fundamental Changes
Section 190 of the CBCA sets
out the circumstances in which a shareholder has the right to dissent from a fundamental
change initiated by a corporation. Under clause 94, the right to dissent under section 190
would also be available to shareholders of a corporation carrying out a going-private
transaction or a squeeze-out transaction. The proposed amendments would also specify that
the right to dissent under section 190(2) would be available even if there was one class
of shares (section 190). Section 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.
Clause 96 would add
going-private transactions and squeeze-out transactions to the definition of
"arrangement" in section 192; thus, a corporation would be able to make an
application to a court for approval of such a transaction where it was not practical for
it to do so under any other provision of the CBCA. The court would be able to set the
terms and conditions of such an arrangement (section 192).
11. Part 18 - Liquidation and
Dissolution
Clause 101 would make
sections 209 and 212 applicable to insolvent or bankrupt corporations. The Director could
dissolve such corporations if the conditions set out in section 212 applied and revive
them when appropriate (section 208).
Clause 102 would clarify the
revival provision in the CBCA, for example, by making clear that revival would be
retroactive and by establishing who would be entitled to apply to revive a corporation.
The Director would be able to attach terms and conditions to the revival that he or she
considered reasonable (section 209).
Clause 104 would remove the
requirements for a corporation to publish notice of its intention to liquidate or dissolve
in a newspaper and in the province where the corporation has its head office if it does
not carry on business there. The corporation would still have to give notice in each
province where it was carrying on business (section 211).
Clause 105 would give the
Director the power to dissolve a corporation that did not have any directors and remove
the requirement for the Director to wait for one year before dissolving a corporation that
fails to pay its incorporation fees (section 212).
12. Part 20 - Remedies, Offences
and Punishment
Clause 119 would clarify the
decisions made by the Director that might be appealed, and would add new types of
decisions to that list (section 246).
Clause 120 would clarify
that only final court orders are appealable as of right to the court of appeal. An interim
order would be appealable only with leave from the court of appeal (section 246).
13. Part 21 - General
Clause 125 would clarify and
broaden the regulations-making power to reflect the other proposed amendments. The
regulations would be able to incorporate by reference any material, regardless of its
source and either as it existed on a particular date or as amended from time to time
(section 261).
Through a new correction
provision in the CBCA proposed in clause 130, the Director would be expressly authorized
to request changes in any document that contained an error. The Director would have to be
satisfied that the correction would not prejudice any of the shareholders or creditors of
the corporation. In addition, any corporation or interested person would be permitted to
request changes. The Director, the corporation or interested person who believed the
correction would prejudice a shareholder or creditor would be entitled to apply to a court
for an order directing the Director to make a correction and determining the rights of
shareholders and creditors.
A new cancellation provision
mirroring the correction provision would be added to the CBCA.
J. Technical
Amendments
The bill would also make a series of
technical amendments to the CBCA with the intention of clarifying ambiguous language,
updating terminology, and eliminating regulatory and paper burdens.
CCA
As stated above, many of the proposed
amendments to the CCA are intended to harmonize the legislation with the proposed
amendments to the CBCA. Thus, many of the same themes are repeated.
A. Shareholder
Proposals
An element added to the CCA in 1998 was
the power of cooperatives to issue investment shares and thereby obtain additional sources
of capital. The degree of shareholders power is decided upon by the members, subject
to strict upper limits imposed by the CCA. Shareholders do have a role in cooperative
decision making and are allowed to make proposals at annual meetings. The eligibility
requirement for persons other than members to submit shareholder proposals in the CCA
would be harmonized with the proposed CBCA amendments. Clause 150 would amend section 58
to set minimum share ownership and length of ownership requirements for submitting a
proposal. The provisions would also allow for the pooling of shareholdings to meet the
minimum requirement. Other elements proposed in the CBCA amendments are repeated here.
Section 58(2) of the CCA provides for no
restrictions on members submitting a proposal to amend the articles of the cooperative. No
amendments are proposed to the provisions dealing with proposals submitted by members.
B. Financial
Assistance
The CCA restricts the loans, guarantees
and other kinds of financial assistance that can be given by a cooperative to members,
shareholders, directors, offices or employees where the directors have reasonable grounds
for believing that, as a result, the cooperative either would be or would become insolvent
or the cooperatives assets either would be or would become less than all of its
liabilities and stated capital.
Clause 174 would repeal the provision on
financial assistance. The rationale is that directors dealing with such transactions are
subject to statutory fiduciary duties to act in the best interest of the cooperative, and
they can be sued for failing to do so. It is argued that this provides adequate
safeguards.
C. Insider Trading
The proposed amendment would harmonize the
CCA provisions with the proposed amendments to the CBCA (clauses 179, 180, 181).
1. Prohibition against Speculative
Trading
The proposed amendments would replace the
word "share" with the word "security" in section 130 to cover more
fully those transactions that could give rise to a conflict of interest. The proposed
amendments would also change the definitions of "insider," "officer,"
and "business combination" for the purposes of speculative trading provisions.
2. Civil Liability
The proposed amendments would clarify and
expand the scope of the civil liability provisions. This would be accomplished in part by
expanding the definition of "insider" and "security" for the purpose
of such provisions. In addition, the civil liability provision would be re-worded to
expand its scope. Liability could be avoided if the insider established that he or she had
reasonably believed the information to have been generally disclosed.
A new element to the civil liability
provisions would impose civil liability on person who communicated undisclosed
confidential information (the tipper) and would set out applicable defences.
Another new provision would guide the
courts in their assessment of the damages. In the case of a distributing cooperative, when
the plaintiff was a purchaser the court would have to consider the price paid by the
plaintiff, less the average market price over the 20 trading days immediately
following general disclosure of the information. When the plaintiff was a seller, the
court would have to consider the average market price over the 20 trading days
immediately following general disclosure of the information, less the price that the
plaintiff had received.
D. Modified Proportionate Liability
Clause 203 would set out a regime of
modified proportionate liability in relation to the preparation of financial information
required by the CCA. Currently, those who are involved in the preparation of financial
information are subject to joint and several liability. The amendment would harmonize the
CCA with the proposed amendments to the CBCA (above) and the same rules would apply.
According to clause 218, the modified
proportionate liability regime would not apply to any proceedings commenced before the
coming into force of the section setting out this regime.
E. Other Amendments
Several proposed amendments
deal with "unanimous agreements." This term was referenced in certain sections
of the CCA, even though a unanimous agreement could not include a provision dealing with
the subject matter of the section. Thus, the reference to "unanimous agreements"
would be removed from these sections (miscellaneous).
Clause 136 would provide
that, subject to the Directors exemption power, a distributing cooperative would be
defined in the regulations (section 2: Interpretation and Application).
Clause 137 would broaden the
Directors power to exempt a cooperative from being a distributing cooperative. A new
element would also allow the Director to exempt a class of cooperatives from being
distributing cooperatives. The Director would no longer have to be satisfied that the
exemption "would not prejudice any security holder of the cooperative" but
rather that the exemption "would not be prejudicial to the public interest"
(sections 2 and 4: Interpretation and Application).
Clause 138 would give the
Director discretion to refuse to issue a certificate of incorporation where the
cooperative, if it came into existence, would not be in compliance with the Act (section
12: Incorporation, Structure and Organization).
Clause 141 would set out how
the articles should refer to the names of cooperatives in separate or combined forms of
French and English (section 20: Incorporation, Structure and Organization).
Clause 143 would permit a
cooperative to keep specified records at a place outside Canada, provided they were
available electronically at the registered office or other designated place in Canada.
This right would be subject to restrictions imposed by other federal legislation
administered by the Minister of National Revenue. Cooperatives would be required to
provide technical assistance to examine such records and they would have to be available
for inspection during regular office hours (section 31: Registered Office and Records).
Clause 146 would clarify the
rules allowing a member or shareholder to participate in the meeting by electronic means
(section 48: Corporate Governance).
Clause 147 would allow a
cooperative to apply to a court for an order extending the time for calling an annual
meeting (Corporate Governance).
Clause 148 and 149 would
move certain specific time periods (for example, fixing a date for determining which
members and shareholders were entitled to receive notice of meetings) from the legislation
and allow them to be made by regulation (section 51: Corporate Governance).
Clause 152 would clarify the
voting rights in respect to a loaned investment share (Corporate Governance).
Clause 156 would provide
that, where a cooperative had four directors, at least two would have to be resident in
Canada (section 78: Directors and Officers).
Clause 161 would specify
that a director or officer would not be accountable to the cooperative with respect to an
interested director or officer contract or transaction, if the director or officer had
acted honestly and in good faith and the other specified conditions were satisfied
(section 106: Directors and Officers).
Clause 162 would modify the
provision dealing with powers that might be delegated by directors (section 109: Directors
and Officers).
Clause 165 would clarify the
rules regarding unanimous agreements under the CCA (section 115: Directors and
Officers).
Clause 172 would add
flexibility in the adjustment of the stated capital account with respect to arms
length transactions (Capital Structure).
Clause 175 would, among
other things, amend the definition of "solicit" or "solicitation" to
exclude a communication for the purpose of obtaining the number of shares required for a
shareholder proposal (section 163: Proxies).
Clause 188 would ensure that
cooperatives submitted specified documents to the Director in a timely fashion (section
252: Financial Disclosure).
Clause 194 would make
sections 308 and 311 applicable to insolvent or bankrupt cooperatives. The Director could
dissolve such cooperatives if the conditions set out in section 311 applied, and could
revive them when appropriate (section 307: Liquidation and Dissolution).
Clause 196 would give the
Director the power to dissolve a cooperative that had no directors. In addition, the
Director would no longer have to wait for one year before dissolving a cooperative that
failed to pay its incorporation fees (section 31: Liquidation and Dissolution).
Clause 207 would clarify the
decisions made by the Director that could be appealed, for example by adding new types of
decisions to that list (section 345: Remedies, Offences and Punishment).
Clause 211 would broaden the
regulations-making power to reflect the other proposed amendments. In addition, the
proposed amendments would allow the regulations to incorporate by reference any material,
regardless of its source and either as it existed on a particular date or as amended from
time to time (section 372: General).
Clause 213 would allow for
fees to be set either under the CCA or the Department of Industry Act (section 373:
General).
Clause 214 would set out a
new correction provision in the CCA. The Director would be expressly authorized to request
changes to any document that contained an error. The Director would have to be satisfied
that the correction would not prejudice any of the members, shareholders or creditors of
the cooperative. In addition, any cooperative or interested person would be permitted to
request changes. The Director, the cooperative or the interested person who believed the
correction would prejudice a member, shareholder or creditor would be entitled to apply to
a court for an order directing the Director to make a correction and determining the
rights of shareholders and creditors (General).
A new cancellation provision
mirroring the correction provision would be added to the CCA (General).
F. Technical
Amendments
A series of technical amendments are also
being proposed to update terminology.
COMING INTO FORCE
The amendments proposed to both the CBCA
and the CCA would come into force at a date set by Governor in Council.
COMMENTARY
Most of the amendments proposed in Bill
S-19 are unlikely to engender a great deal of debate. The extensive consultation process
conducted by the Department of Industry prior to the introduction of the bill was designed
to obtain stakeholder input into the amendment process. Despite the consultations, some of
the proposals are likely to raise concerns.
The directors residency requirements
may be a controversial issue. The bill would require only 25% of the board of directors of
a CBCA corporation to be resident Canadians (rather than a majority, as at present) and
would eliminate the residency requirement for committees of the board. Some argue that
residency requirements are outmoded and inhibit Canadian corporations from moving into
foreign markets and obtaining the best directors. Others contend that they promote
Canadian participation in corporate decision-making, foster compliance with legal
obligations, and allay concerns about the amount of foreign investment in Canada.
The scope of a corporation to reject
shareholder proposals may be the subject of some debate. Under the bill, a corporation
would still be able to reject a shareholder proposal whose primary purpose was to promote
general economic, political, racial, religious, social or similar causes; however, the
shareholder would have the opportunity to overcome a rejection on these grounds by
demonstrating that the proposal related to the business and affairs of the corporation.
Shareholders rights groups may object to having to bear the burden of proof in these
circumstances.
In addition, having to meet minimum share
ownership and length of ownership requirements before being able to make shareholder
proposal, although likely to be popular with corporate management, may not sit well with
shareholder rights advocates.
The introduction of a modified
proportionate liability regime in relation to financial loss for claims arising out of
errors, omissions or misstatements in connection with financial information required by
the CBCA would break new ground. While various forms of modified proportionate liability
are common in the United States, the proposals in Bill S-19, if implemented, would be a
first for corporations law regimes in Canada.
(1) In 1995 and 1996, Industry Canada released nine discussion papers
on various issues in relation to the CBCA.
(2)
Senate of Canada, Standing Senate Committee on Banking, Trade and Commerce, Corporate
Governance, August 1996.
(3)
Senate of Canada, Standing Senate Committee on Banking, Trade and Commerce, Modified
Proportionate Liability, September 1998 and Joint and Several Liability and
Professional Defendants, March 1998.
(4)
This would include a due diligence defence for directors, relaxed proxy solicitation
rules, allowing beneficial shareholders to submit proposals, the repeal of insider
reporting requirements and enhanced electronic communication.
(5)
For a more detailed discussion of the financial assistance provision, see Margaret
Smith, PRB 99-41, Financial Assistance under the Canada Business Corporations Act, 26 January 2000.
(6)
Ibid., p. 1.
(7)
For a more detailed discussion of the residency requirements, see Margaret Smith, PRB 99-31, Canada Business Corporations Act: Directors Residency Requirements and Other Residency Issues, 7 December 1999.
(8)
While committees of the board have a residency requirement, there is no requirement that
the quorum needed at meetings of committees of the board must be composed of a majority of
resident Canadian members or even that any Canadian be present.
(9)
Industry Canada, Briefing book, Clause-by-Clause, Bill S-19, Canada Business
Corporations Act.
(10)
It is worth pointing out that this reduction in the residency requirement would not apply
to sectors where federal legislation or policy imposes ownership restrictions. Some of
these sectors are to be listed in the Regulations. See section 14 of the draft regulations
for a list of prescribed business sectors. In these cases, the current requirement that a
majority of directors be resident Canadians would continue to apply and the proposed
amendments would clarify that where there were only two directors, only one of the two
would have to be a resident Canadian. Once again, an exception would be provided for
holding corporations that earned less than 5% of gross revenues in Canada. Only one-third
of the directors of these corporations would have to be resident Canadians.
(11)
The requirement for a majority of resident Canadians would be kept for certain sectors.
See footnote 10 for further details.
(12)
This was recommended by the Standing Senate Committee on Banking, Trade and Commerce, Corporate
Governance, Recommendation 16.
(13)
For a more detailed discussion of directors liability, see Margaret Smith, PRB 99-44, Directors
Liability, 29 February 2000.
(14)
These include improper share issuances or payments (s. 118), unpaid wages (s. 119) or
breach of fiduciary duty and the duty of care (s. 122).
(15)
Directors Liability (2000), p. 4.
(16)
For a more detailed discussion of insider trading, see Margaret Smith, PRB 99-38, Insider Trading, 22 December 1999.
(17)
Ibid., p. 1.
(18)
Ibid.
(19)
Ibid., p. 4.
(20)
The civil liability provision would still apply if an insider completed such a transaction
with knowledge of material confidential information.
(21)
Insider Trading (1999) p. 4.
(22)
For a more detailed discussion of unanimous shareholder agreements, see Margaret Smith, PRB 99-32, Canada Business Corporations Act: Unanimous Shareholder Agreements, 20 January 2000.
(23)
For a more detailed discussion of shareholder communications, see Margaret Smith, PRB 99-33, Canada Business Corporations Act: Shareholder Communications, 18 January 2000.
(24)
Ibid., p. 6.
(25)
Under the draft regulations, a public announcement would include a speech in a public
forum, a press release, a published or broadcast opinion or a statement or advertising
appearing in a broadcast medium or a newspaper, a magazine or other recognized publication
dissemination on a regular basis.
(26)
Under the draft regulations, a prescribed circumstance would be a communication made to
fewer than 16 shareholders.
(27)
Section 63 of the draft regulations would set out the information that would have to be
contained in the communication.
(28)
Industry Canada, Backgrounder, Summary of Amendments to the Canada Business
Corporations Act, p. 2.
(29)
Ibid., p. 2.
(30)
Section 47 of the draft regulations would give the corporation 21 days instead of the
current 10 days.
(31)
See section 45 of the draft regulations.
(32)
Part XX.1, Documents in Electronic or Other Form, would not apply to any information sent
to or issued by the CBCA Director.
(33)
For a more detailed discussion of take-over bids and going-private transactions, see
Margaret Smith, PRB 99-40, Take-over Bids, 25 January 2000.
(34)
Industry Canada, Discussion Paper, Take-over Bids, February 1996, p. 2.
(35)
Canada Business Corporations Act, R.S.C. 1985, s. 194.
(36)
Industry Canada, Take-over Bids, Executive Summary, 1996.
(37)
Margaret Smith, Take-over Bids, p. 6.
(38)
The rules relating to squeeze-out transactions can be avoided if all shareholders consent
in writing.
(39)
The Standing Senate Committee on Banking, Trade and Commerce, Joint and Several
Liability and Professional Defendants, March 1998.
(40)
The draft regulations (section 89) prescribe the financial interest at a net value less
than $20,000.
(41)
See section 3 of the draft regulations.
(42)
See section 2(1) of the draft regulations.
(43)
(1993) 1 S.C.R. 1027.
(44)
Section 133 does set out other time limits for holding shareholder meetings.
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