Summary of Modifications Made to the Canada Business Corporations Act

2002-01-01

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SUMMARYOFMODIFICATIONSMADETOTHECANADABUSINESS
CORPORATIONSACT

Marie-ÈveCôté*
LEGERROBICRICHARD
,L.L.P.
Lawyers,PatentandTrademarkAgents
CentreCDPCapital
1001Square-Victoria–BlocE–8thFloor
Montreal,Quebec,CanadaH2Z2B7
Tel.(514)9876242–Fax(514)8457874
www.robic.ca–info@robic.com

Afterextensiveconsultationandinaprocessthatbeganafewyearsago,the
federalgovernmenthasmodifiedtheCanadaBusinessCorporationsAct
(“CBCA”).TheCBCAhadnotbeenamendedinanysignificantfashionsinceit
wasfirstadoptedin1975.Concernbythegovernmentaboutthecommercial
efficiencyoftheCBCAledittoconsiderchangesasearlyas1994.
InMarch2000,BillS-19wastabledintheSenate.ThisBillwasreplacedbyBillS-
11,whichreceivedroyalsanctiononJune14,2001andcameintoforceon
November24,2001tobecomeAnActtoAmendtheCanadaBusiness
CorporationsActandtheCanadaCooperativesActandtoAmendother
ActsinConsequence.
TheprincipalobjectiveofthislegislativeupdatewastomodernisetheCBCA
inordertoimprovetheinternationalcompetitivenessofCanadian
corporations.
ItisinterestingtonotethattheCBCA,asamended,frequentlyreferstothe
CanadaBusinessCorporationsRegulations(the”Regulations”)whichgivesthe
CBCAmoreflexibilitysincetheRegulationsareeasiertomodify.Thiswill
facilitateamoreregularupdatingoftheCBCA.
ThefollowingisabriefsummaryofmodificationsmadetotheCBCA.
DIRECTORSRESIDENCY

©CIPS,2002.*OfLEGERROBICRICHARD,L.L.P.,amultidisciplinaryfirmoflawyers,andpatentand
trademarkagents.PublishedintheWinter2002issue(Vol.6,No.1)issueofourNewsletter.
Publication068.043E.

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Subjecttoanyexceptions,therequirementthatthemajorityofdirectorson
theboardofacorporationbe”Canadianresidents”hasbeenreducedto
25%.Thesameruleappliestothequorumsoughtbytheboardofdirectorsin
ordertoconductbusinessataboardmeeting.Moreover,thecommittee’s
requirementofresidencyhasbeenabolished.Theby-lawsofacorporation
mustthereforebemodifiedaccordingly.
ACCEPTANCEOFOFFICEBYDIRECTORS
Fromnowon,anelecteddirectormustconsenttohisofficeeither(i)tacitly,if
heispresentatthemeetingelectinghimasdirector,(ii)expressly,inwriting
beforethemeetingorwithinten(10)daysafterhiselectionor(iii)implicitly,by
fulfillingthedutiesofdirector.
NOTICEOFCHANGEOFADDRESSOFDIRECTORS
Itisnowmandatorythatadirectorinformthecorporationofanychangeof
addressandthecorporationmustadviseIndustryCanadaofsuchchange
within15daysofthereceiptofanynoticetothateffect.
MEETINGOFDIRECTORS
Directorsmaynowattendmeetingsoftheboardofdirectorsbywayof
electronicmeans.
MEETINGOFSHAREHOLDERS
Itisnowpossibletoholdashareholders’meetinginaforeignplacewithout
havingtoobtaintheunanimousconsentoftheshareholdersaslongasthe
articlesofthecorporationprovideforsuchpossibility.
Shareholdersmayattendorparticipateinmeetingsbywayofelectronic
meansandcanalsovoteatsuchmeetingsifthispossibilityisprovidedforin
thecorporation’sby-laws.
Moreover,non-distributingcorporationscannowreducethetimelimitfor
receivinganoticeofameetingofshareholderswhichisfixedatbetween21
and60daysbeforethemeeting.

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Toconclude,thecorporationmayhenceforthsetareferencedateto
determinewhichshareholderswillhavetherighttovoteatthemeeting.
ELECTRONICCOMMUNICATIONS
Inordertofacilitatecommunicationswithitsshareholders,corporationsmay
fromnowonadoptanelectroniccommunicationsystemfortheforwarding
andreceivingofdocuments.Thecorporationmusthowevermodifyitsby-
laws,elaborateapolicyandobtaintheconsentofitsshareholdersforsuch
system.
SHAREHOLDERS’PROPOSALS
Newrequirementshavebeenimposedonthefilingofshareholderproposals
whichfromnowoncan,subjecttocertainconditions,befiledbythe
beneficialownerofsharesaswellastheregisteredholder.
Moreover,thedeadlineforthefilingofaproposalhasbeenincreasedto90
dayspriortotheanniversaryofthedateofthenoticeforthelastannual
meeting.
Thegroundsforrefusaltocirculateaproposalhavebeenamendedandthe
deadlinetorefusesuchproposalhasbeenincreasedfrom10to21daysfrom
receiptoftheproposal.
PROXY
Certainchangesweremadetotherulesregardingthesolicitationofproxies.
Theseincludethemodificationofthedefinitionof”solicitation”asdefinedby
theCBCAandanincreaseinthethreshold,from15to50shareholders,under
whichthecorporationmaysolicitproxieswithouttheneedtosendouta
circular.
PROTECTIONOFMINORITYSHAREHOLDERS
TheCBCAhaschangedcertaincriteriainthelawinordertograntminority
shareholdersadditionalprotection.
UNANIMOUSSHAREHOLDERS’AGREEMENTS

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Fromnowonshareholderswhohavepurchasedshareswithoutknowledgeof
theexistenceofaunanimousshareholders’agreementmaycancelthe
purchasewithinaspecifictimelimit.
DEFENCEOFDUEDILIGENCE
Asfortheliabilitiesofdirectorsandofficers,thedefenceofgoodfaithhas
beenreplacedbyadefenceof”reasonablediligence”particularlyincasesof
statutoryresponsibilities,employeewagesandthegeneraldutytocomply
withlawsandregulations.
INDEMNIFICATIONOFDIRECTORSANDOFFICERS
TheCBCAnowallowsthecorporationtoadvancecostsanddisbursements
relatedtothedefenceandindemnificationofdirectorsandofficersfor
certaintypesoflawsuits.Consequently,theinternalby-lawsofcorporations
willhavetobeamendedaccordingly.
MODIFIEDPROPORTIONATELIABILITY
Incertaincases,itwillnowbepossibletorefertotheregimeofmodified
proportionateliabilityinsteadofjointandseveralliabilitywithrespectto
claimsforfinanciallossarisingoutofanerrororomissionregardingfinancial
informationthathadtobeprovidedforundertheCBCA.
FINANCIALASSISTANCE
Acorporationisnolongerrequiredtopassasolvabilitytestinordertohave
therighttoprovideshareholderswithfinancialassistance.
REGISTEREDOFFICE
TheprovisionsoftheCBCAhavebeenmodifiedsothatthearticlesofthe
corporationmaynowindicatetheprovinceinwhichtheheadofficeofthe
corporationwillbesituatedinsteadofthejudicialdistrict.Thedirectorswill
thereforebefreetochangetheregisteredofficewithinthelimitsofthe
chosenprovince.

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CONCLUSION
Notwithstandingcertaindeficienciesanditsconservativeapproach,this
reformrepresentsapositiveupdatebringingCanadiancorporationsmorein
linewithnewcommercialtrendsandinternationalrequirements.
TheamendmentsmadetotheCBCAwillrequirecorporationstoensurethat
theirarticlesandby-lawscomplywiththechangesoutlinedabove.

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