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Summary
Part 13 establishes what actions constitute fundamental changes to a
corporation incorporated under the Act and how such changes are approved.
These include amending the articles, amalgamations, continuance (import
and export), transactions outside the normal course of business, reorganizations
and arrangements. They must be made by special resolution. For each type
of change the Part establishes the criteria and procedures for the change,
including member voting requirements, the involvement of a court and
sending the appropriate articles to the Director. (Sections 195-197,
202-214)
Articles of amendment must be provided to the Director. The Director,
on receipt of the articles, will issue the appropriate certificate of
amendment if the requirements of the Act have been met. The change takes
effect on the date indicated on the certificate. (Section 198-201)
It is standard practice for modern corporate law instruments to identify
certain fundamental and organizational changes to a corporation that
are perceived as being of sufficient seriousness that they require approval
by a special majority of the members, as opposed to the standard simple
majority. This will provide members with a greater say over significant
changes to their corporation.
Briefing Book
An Act Respecting Not-for-Profit Corporations and
Other Corporations Without Share Capital
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Bill Clause No. 195
Section No. 195
Topic: Fundamental Changes
Proposed Wording
195. (1) A special resolution of the members – or, if section 197 applies,
of each applicable class or group of members – is required to make any
amendment to the articles or the by-laws of a corporation to
(a) change the corporation's name;
(b) change the province in which the corporation's registered office
is situated;
(c) add, change or remove any restriction on the activities that the
corporation may carry on;
(d) create a new class or group of members;
(e) change a condition required for being a member;
(f) change the designation of any class or group of members or add,
change or remove any rights and conditions of any such class or group;
(g) divide any class or group of members into two or more classes
or groups and fix the rights and conditions of each class of group;
(h) add, change or remove a provision respecting the transfer of a
membership;
(i) subject to section 134, increase or decrease the number of – or
the minimum or maximum number of – directors fixed by the articles;
(j) change the statement of the mission of the corporation;
(k) change the statement concerning the distribution of the assets
of the corporation on dissolution; or
(l) add, change or remove any other provision that is permitted
by this Act to be set out in the articles. |
(2) The directors of a corporation may, if authorized by the members
in the special resolution effecting an amendment under this section,
revoke the resolution before it is acted on without further approval
of the members.
(3) Despite subsection (1), if a corporation has a designating number
as a name, the directors may amend its articles to change that name to
a verbal name.
Rationale
Subsection 195(1) specifies that amendments to the articles and certain
amendments to the by-laws of the corporation require a special resolution
(2/3 majority)
of members. A 2/3 majority of members is required to amend these elements of
the corporation's "charter" as they are considered to be core members'rights. It should be noted that where amendments to the articles or by-laws affect
a class or group of members, they can only be made with the approval of that
class or group of members. The list is not exclusive, however, as paragraph 195(1)(l)
allows the amendment of any extraordinary provisions that may be set out in the
articles.
Subsection 195(2) permits the directors to abandon a change to the articles
of the corporation even after it was passed by the required number of members.
This could happen if there is a large number of dissenting members whose rights
may be affected. A similar provision is included for amalgamations (subsection
204(6)), for continuance (export) (subsection 211(6)) and for the sale lease
or exchange of the corporation (subsection 212(7)).
Subsection 195(3) states that the directors can change a numbered name of
the corporation to a word name without the approval of the members.
Present Law
Canada Corporations Act:
20. (1) Subject to any special rights attaching to shares of any class or
classes as set forth in the letters patent or supplementary letters patent,
a company may from time to time, when authorized by by-law sanctioned by two-thirds
of the votes cast at a special general meeting of shareholders called for the
purpose, apply for supplementary letters patent, as provided in such by-law,
(a) extending the objects of the company to such further
or other objects for which a company may be incorporated under this Part,
or
(b) reducing, limiting, amending or varying the objects or the powers
of the company or any |
of the provisions of the letters patent or supplementary letters patent issued
to the company; but no such extension, reduction, limitation, amendment or
variation may have the effect of altering or permitting the alteration of the
authorized capital of the company in any manner other than pursuant to the
issue of supplementary letters patent under sections 51 to 60 or section 134,
as the circumstances of the case may require.
(2) A company may, when authorized by by-law sanctioned by three-fourths of
the votes cast at a special general meeting of shareholders called for the
purpose, apply for supplementary letters patent converting the company from
a private company into a public company, or from a public company into a private
company, as the case may be.
(3) An application under subsection (1) or (2) may be made only within six
months after the by-law therein mentioned has been sanctioned by the shareholders.
(4) Before such supplementary letters patent are issued, the company shall
establish to the satisfaction of the Minister the due passage and sanction
of the by-law authorizing the application, and for that purpose the Minister
may take any requisite evidence in writing, by oath or affirmation, or by statutory
declaration and shall keep a record of any such evidence so taken.
(5) Upon the due sanctioning of a by-law pursuant to subsection (1) or (2),
as the case may be, being so established, the Minister may grant supplementary
letters patent
(a) extending the objects of the company;
(b) reducing, limiting, amending or varying the objects or the powers
of the company or any of the provisions of the letters patent or supplementary
letters patent of the company; or
(c) converting the company into a public or private company, as the case may
be, and as provided in such by-law; and notice thereof shall be forthwith given
by the Minister in the Canada Gazette and the supplementary letters patent
take effect from their date. |
24. (1) The company shall at all times have a head office in the place within
Canada where the head office is to be situated in accordance with the letters
patent or the provisions of this Part, which head office is the domicile of
the company in Canada; and the company may establish such other offices and
agencies elsewhere within or outside Canada, as it deems expedient.
(2) The company may, by by-law, change the place where the head office of
the company is to be situated.
(3) No by-law for the purpose of changing the place where the head office
is to be situated is valid or shall be acted upon until it is sanctioned by
at least two-thirds of the votes cast at a special general meeting of the shareholders
duly called for considering the by-law.
(4) A copy of the by-law certified under the seal of the company shall be
forthwith filed with the Minister and shall be available for inspection at
the office thereof during normal business hours.
(5) A notice of the by-law shall be forthwith published in the Canada Gazette.
28. (1) A company shall not be incorporated
(a) with a name that is the same or similar to the name under
which any other company, society, association or firm, in existence,
is carrying on business in Canada or is incorporated under the laws of
Canada or any province thereof, or that so nearly resembles that name
as to be calculated to deceive, except where the existing company, society,
association or firm is in the course of being dissolved or of changing
its name and signifies its consent in such manner as the Minister requires,
or
(b) with a name that is otherwise on public grounds objectionable. |
(2) Where a company, through inadvertence or otherwise, is without the consent
mentioned in subsection (1) incorporated with a name that is the same or similar
to the name under which any other company, society, association or firm in
existence has been previously carrying on business in Canada or has been previously
incorporated under the laws of Canada or any province thereof, or with a name
that so nearly resembles that name as to be calculated to deceive, or that
is otherwise on public grounds objectionable, the Minister, after he has given
notice to the company of intention so to do, may direct the issue of supplementary
letters patent changing the name of the company to some other name, which shall
be set forth in the supplementary letters patent.
(3) Notice of the issue of such supplementary letters patent shall be published
in the Canada Gazette.
29. (1) When a company desires to adopt another name it may, subject to confirmation
by supplementary letters patent, change its corporate name by by-law sanctioned
by at least two-thirds of the votes cast at a special general meeting of shareholders
called for the purpose.
(2) The Minister, upon application of the company and upon being satisfied
that the change desired is not objectionable, may direct the issue of supplementary
letters patent, changing the name of the company to some other name which shall
be set forth in the supplementary letters patent.
(3) Notice of the issue of such supplementary letters patent shall be published
in the Canada Gazette.
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Bill Clause No. 196
Section No. 196
Topic: Fundamental Changes
Proposed Wording
196. (1) Subject to subsection (2), a director, or a member who is entitled
to vote at an annual meeting of members, may, in accordance with section
163, propose to make an amendment referred to in subsection 195(1).
(2) Notice of a meeting of members at which a proposal to make an amendment
referred to in subsection 195(1) is to be considered shall set out the proposed
amendment.
Rationale
This section provides a right to members and directors to initiate amendments
to the articles or the by-laws of the corporation. The mechanics of making a
proposal are spelled out in section 163.
Subsection 196(1) confers on members and directors the right to propose an
amendment to the articles or the by-laws of the corporation.
Subsection 196(2) requires that the notice of a meeting include the proposal
to amend the articles or by-laws.
Present Law
None.
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Bill Clause No. 197
Section No. 197
Topic: Fundamental Changes
Proposed Wording
197. (1) The members of a class or group of members are, unless
the articles otherwise provide in the case of an amendment referred to in paragraphs
(a)
and (e), entitled to vote separately as a class or group on a
proposal to make an amendment referred to in subsection 195(1) to
(a) effect an exchange, reclassification or cancellation
of all or part of the memberships of the class or group;
(b) add, change or remove the rights or conditions attached to the memberships
of the class or group, including |
| |
(i) to reduce or remove a liquidation preference, or
(ii) to add, remove or change prejudicially voting or transfer rights of the
class or group; |
(c) increase the rights of any other class or group of
members having rights equal or superior to those of the class or group;
(d) increase the rights of a class or group of members having rights inferior
to those of the class or group to make them equal or superior to those of the
class or group;
(e) create a new class or group of members having rights equal or superior
to those of the class or group; or
(f) effect an exchange or create a right of exchange of all or part of the
memberships of another class or group into the memberships of the class or
group. |
(2) Subsection (1) applies whether or not memberships of a class or group
otherwise carry the right to vote.
(3) A proposal to make an amendment referred to in subsection (1) is adopted
when the members of each class or group entitled to vote separately on the
amendment as a class or group have approved the amendment by a special resolution.
Rationale
This section requires approval by a class or group of members where the rights
of the class or group are affected by a proposed amendment to the articles. This
provision protects the rights of class or group members. Where a corporation
has more than one class of members, an injustice or prejudice may arise if members
in general are permitted to change these rights, privileges, restrictions and
conditions of a class to which they do not belong.
Subsection 197(1) states that a member of a class whose rights are affected
has a right to vote, unless the articles otherwise provide, where any proposed
amendment that falls within subsection (1) – i.e., change the rights,
privileges, restrictions and conditions of the class. Moreover, members of
a class can vote an exchange, reclassification or cancellation of a class or
the creation of a new class of members having equal or superior rights or privileges,
unless the articles prohibit it.
Subsection 197(2) permits a member of a class or group whose rights are affected
to vote, whether or not voting rights are attached to his/her membership interest.
Subsection 197(3) stipulates that each class must vote on the proposal separately
and approval is gained through a special resolution (i.e., 2/3 majority).
Present Law
None.
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Bill Clause No. 198
Section No. 198
Topic: Fundamental Changes
Proposed Wording
198. Subject to any revocation under subsection 195(2), after an amendment
to the articles has been adopted under section 195 or 197, articles of amendment
in the form that the Director fixes shall be sent to the Director.
Rationale
This section requires that any amendment to a corporation's articles must be
sent, by the corporation, to the Director Appointed Under the Act.
Present Law
None.
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Bill Clause No. 199
Section No. 199
Topic: Fundamental Changes
Proposed Wording
199. On receipt of articles of amendment, the Director shall issue a certificate
of amendment in accordance with section 274.
Rationale
This section requires the Director to issue a certificate of amendment to the
corporation acknowledging that the corporation has changed its articles if the
amendment meets the requirements of the Act.
Present Law
None.
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Bill Clause No. 200
Section No. 200
Topic: Fundamental Changes
Proposed Wording
200. (1) An amendment to the articles becomes effective on the date shown in
the certificate of amendment and the articles are amended accordingly.
(2) No amendment to the articles affects an existing cause of action or claim
or liability to prosecution in favour of or against the corporation or its
directors or officers, or any civil, criminal or administrative action or proceeding
to which a corporation or its directors or officers is a party.
Rationale
Subsection 200(1) indicates the day on which an amendment to the corporation's
articles becomes effective. Subsection 200(2) is self-explanatory and is standard
in corporate law.
Present Law
Canada Corporations Act:
30. No alteration of name under sections 28 and 29 affects the rights or obligations
of the company; and all proceedings may be continued or commenced by or against
the company under its new name that might have been continued or commenced
by or against the company under its former name.
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Bill Clause No. 201
Section No. 201
Topic: Fundamental Changes
Proposed Wording
201. (1) The directors may at any time, and shall when so directed by the Director,
restate the articles of incorporation.
(2) Restated articles of incorporation in the form that the Director fixes
shall be sent to the Director.
(3) On receipt of restated articles of incorporation, the Director shall issue
a restated certificate of incorporation in accordance with section 274.
(4) Restated articles of incorporation are effective on the date shown in
the restated certificate of incorporation and supersede the original articles
of incorporation and all amendments to those articles.
Rationale
Subsection 201(1) permits the directors to consolidate the corporation's original
articles, and any amendments to the articles, in one document known as the restated
articles. It also gives the Director Appointed Under the Act the power to require
the directors to restate the corporation's articles. Subsections 201(2) to (4)
deal with the technical matters of sending the restated articles to the Director
and the issuing of a restated certificate of incorporation by the Director. This
section facilitates better housekeeping of the corporate records.
Present Law
None.
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Bill Clause No. 202
Section No. 202
Topic: Fundamental Changes
Proposed Wording
202. Two or more corporations may amalgamate and continue as one corporation.
Rationale
This section allows two or more corporations under the Act to be combined as
one corporation. It does not permit a corporation to be combined with a body
corporate that is not subject to the Act.
Present Law
None.
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Bill Clause No. 203
Section No. 203
Topic: Fundamental Changes
Proposed Wording
203. (1) Each corporation proposing to amalgamate shall enter
into an agreement setting out the terms and means of effecting the amalgamation
and, in particular, setting
out
(a) the provisions that are required to be included in articles
of incorporation under section 7 or in the by-laws under section 154;
(b) the name and address of each proposed director of the amalgamated
corporation;
(c) the manner in which the memberships of each amalgamating corporation
are to be converted into memberships of the amalgamated corporation;
(d) whether the by-laws of the amalgamated corporation are to be those
of one of the amalgamating corporations and, if not, a copy of the proposed
by-laws; and
(e) details of any arrangements necessary to perfect the amalgamation
and to provide for the subsequent management and operation of the amalgamated
corporation. |
(2) If a membership in an amalgamating corporation is held by or on behalf
of another amalgamating corporation, the amalgamation agreement shall provide
for the cancellation, without any repayment of capital, of the membership when
the amalgamation becomes effective. No provision shall be made in the agreement
for the conversion of the membership into membership of the amalgamated corporation.
Rationale
This section sets out in broad terms the contents of an amalgamation agreement.
An amalgamation agreement sets out the terms of an amalgamation between two
or more corporations and the means of effecting it.
Subsection 203(1) states that an amalgamation agreement must include the following
elements: the provisions required to be in the articles of incorporation; the
name and address of each proposed director; the manner in which memberships
are to be converted; the by-laws; and the details necessary to finalize the
amalgamation.
Subsection 203(2) precludes an indirect reacquisition by a corporation of
its own membership through the amalgamation process. It ensures that intercorporate
memberships among amalgamating corporations are erased in an amalgamation.
Present Law
None.
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Bill Clause No. 204
Section No. 204
Topic: Fundamental Changes
Proposed Wording
204. (1) The directors of each amalgamating corporation shall submit the amalgamation
agreement for approval to a meeting of the members of the amalgamating corporation
of which they are directors and, subject to subsection (4), to the members
of each class or group of members.
(2) Each amalgamating corporation shall give notice of a meeting of members
in accordance with section 162 to its members and shall include in the notice
a copy or summary of the amalgamation agreement.
(3) Each membership in an amalgamating corporation carries the right to vote
in respect of an amalgamation agreement whether or not it otherwise carries
the right to vote.
(4) The members of a class or group of members of each amalgamating corporation
are entitled to vote separately as a class or group in respect of an amalgamation
agreement if the amalgamation agreement contains a provision that, if contained
in a proposed amendment to the articles, would entitle the members to vote
as a class or group under section 197.
(5) Subject to subsection (4), an amalgamation agreement is adopted when the
members of each amalgamating corporation have approved the amalgamation by
special resolutions.
(6) An amalgamation agreement may provide that at any time before the issue
of a certificate of amalgamation the agreement may be terminated by the directors
of an amalgamating corporation, despite approval of the agreement by the members
of all or any of the amalgamating corporations.
Rationale
This section sets out the mechanics for the approval process of an amalgamation.
Subsection 204(1) states that the directors of each amalgamating corporation
must submit the amalgamation agreement to the members of their corporation
and if there are classes or groups of members to each class or group.
Subsection 204(2) requires that members of each amalgamating corporation receive
notice of the meeting at which the vote on the amalgamation will take place.
The notice must include a copy or a summary of the amalgamation agreement.
This ensures that members are informed of the agreement and have adequate time
to consider their vote.
Subsection 204(3) states that all members of the amalgamating corporations
have the right to vote on the amalgamation even if they belong to a class of
members which do not ordinarily have the right to vote.
Subsection 204(4) provides that each class of members has a right to vote
separately as a class only if the amalgamation agreement in some way derogates,
varies or abrogates the rights of the class to which they belong.
Subsection 204(5) provides that an amalgamation agreement is adopted when
the members of each corporation, and each class of members if any, vote to
approve the agreement. The votes are by special resolution requiring a 2/3
majority.
Subsection 204(6) states that an amalgamation agreement may permit directors
of an amalgamating corporation to terminate an agreement at any time before
it is perfected.
Present Law
None.
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Bill Clause No. 205
Section No. 205
Topic: Fundamental Changes
Proposed Wording
205. (1) A holding corporation and one or more of its subsidiary
corporations may amalgamate and continue as one corporation without complying
with sections 203 and 204
if
(a) the amalgamation is approved by a resolution of the directors
of each amalgamating corporation;
(b) all memberships in each amalgamating subsidiary corporation are
held by one or more of the other amalgamating corporations; and
(c) the resolutions provide that |
| |
(i) the memberships in each amalgamating subsidiary corporation
shall be cancelled without any repayment of capital in respect of those
memberships, and
(ii) except as may be prescribed, the articles of amalgamation shall be the
same as the articles of the amalgamating holding corporation. |
(2) Two or more wholly-owned subsidiary corporations of the same holding body
corporate may
amalgamate and continue as one corporation without complying with sections
203 and 204 if
(a) the amalgamation is approved by a resolution of the directors
of each amalgamating corporation; and
(b) the resolutions provide that |
| |
(i) the memberships in all but one of the amalgamating
subsidiary corporations shall be cancelled without any repayment of capital
in respect those memberships, and
(ii) except as may be prescribed, the articles of amalgamation shall be the
same as the articles of the amalgamating subsidiary corporation whose memberships
are not cancelled. |
Rationale
This section permits the directors, without requiring the approval of members,
to amalgamate a subsidiary corporation with a holding corporation (vertical short-form
amalgamation) or to amalgamate one wholly-owned subsidiary with another (horizontal
short-form amalgamation). In both cases, the amalgamation is approved not by
a special resolution of members but by a resolution of the directors of each
of the amalgamating corporation.
Present Law
None.
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Bill Clause No. 206
Section No. 206
Topic: Fundamental Changes
Proposed Wording
206. (1) Subject to subsection 204(6), after an amalgamation has been adopted
under section 204 or approved under section 205, articles of amalgamation
in the form that the Director fixes shall be sent to the Director together
with the documents required by sections 20 and 129.
(2) The articles of amalgamation shall have attached to them a statutory declaration
of a director or an officer of each amalgamating corporation that establishes
to the satisfaction of the Director that
(a) there are reasonable grounds for believing
that |
| |
(i) each amalgamating corporation is, and the amalgamated
corporation will be, able to pay its liabilities as they become due,
and
(ii) the realizable value of the amalgamated corporation's assets will not
be less than the aggregate of its liabilities; and |
(b) there are reasonable grounds for believing
that |
| |
(i) no creditor will be prejudiced by the amalgamation, or
(ii) adequate notice has been given to all known creditors of the amalgamating
corporations and no creditor objects to the amalgamation otherwise than
on grounds that are frivolous or vexatious. |
(3) For the purposes of subsection (2), adequate notice is given if
(a) a notice in writing is sent to each known creditor having
a claim against the corporation that exceeds the prescribed amount;
(b) a notice is published once in a newspaper published or distributed
in the place where the corporation has its registered office and reasonable
notice is given in each province where the corporation carries on activities;
and
(c) each notice states that the corporation intends to amalgamate
with one or more specified corporations in accordance with this Act and that
a creditor of the corporation may object to the amalgamation within the prescribed
period. |
(4) On receipt of articles of amalgamation, the Director shall issue a certificate
of amalgamation in accordance with section 274.
Rationale
This section deals with the documents that must be filed with the Director Appointed
Under the Act before a certificate of amalgamation can be issued.
Subsection 206(1) states that the articles of amalgamation are sent to the
Director along with a notice of registered office and a notice of directors.
Subsection 206(2) stipulates that the documents must also include a statutory
declaration from a director or an officer of each amalgamating corporation,
to the satisfaction of the Director, that the amalgamated corporation is solvent;
that no creditor will be prejudiced by the amalgamation or that adequate notice
has been given to the creditors of the amalgamating corporations and that no
creditor justifiably objects to the amalgamation.
Subsection 206(3) defines the parameters of what constitutes adequate notice
under subsection 206(2). The proposed prescribed amount under paragraph 206(3)(a)
is $1,000. The proposed prescribed time period under paragraph 206(3)(c)
is 30 days from the date of the notice.
Subsection 206(4) obliges the Director to issue a certificate of amalgamation
when the articles of amalgamation are received by the Director and meet the
requirements of the Act.
Present Law
None.
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Bill Clause No. 207
Section No. 207
Topic: Fundamental Changes
Proposed Wording
207. On the date shown in a certificate of amalgamation, the
amalgamation of the amalgamating corporations and their continuance as one
corporation become effective and
from that date
(a) the property of each amalgamating corporation continues
to be the property of the amalgamated corporation;
(b) the amalgamated corporation continues to be liable for the obligations
of each amalgamating corporation;
(c) an existing cause of action, claim or liability to prosecution
is unaffected;
(d) a civil, criminal or administrative action or proceeding pending
by or against an amalgamating corporation may be continued by or against the
amalgamated corporation;
(e) a conviction against, or ruling, order or judgment in favour of
or against, an amalgamating corporation may be enforced by or against the amalgamated
corporation; and
(f) the articles of amalgamation are deemed to be the articles of
incorporation of the amalgamated corporation and the certificate of amalgamation
is deemed to be the certificate of incorporation of the amalgamated corporation. |
Rationale
This section clarifies the effect of an amalgamation. It states that, upon the
issuance of the certificate of amalgamation by the Director Appointed Under the
Act, the amalgamating corporations are amalgamated and continue as one corporation;
the amalgamated corporation owns the property of each amalgamating corporation
and is liable for their obligations; existing claims and actions are unaffected;
civil, administrative and criminal proceedings by or against an amalgamating
corporation may be continued by or against the amalgamated corporation; and the
articles of amalgamation and the certificate of amalgamation are deemed to be
the articles of incorporation and the certificate of incorporation, respectively,
of the amalgamated corporation.
Present Law
None.
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Bill Clause No. 208
Section No. 208
Topic: Fundamental Changes
Proposed Wording
208. (1) Subject to subsection (2), a corporation may not amalgamate with one
or more bodies corporate under the Bank Act, the Cooperative
Credit Associations Act, the Insurance Companies Act or the Trust
and Loan Companies Act unless the corporation is first authorized to
do so by the members in accordance with section 204.
(2) A corporation may not amalgamate with one or more bodies corporate under
the provisions of one of the Acts referred to in subsection (1) respecting
short-form amalgamations unless the corporation is first authorized to do so
by the directors in accordance with section 205.
(3) On receipt of a notice that a corporation has amalgamated under one of
the Acts referred to in subsection (1), the Director shall issue a certificate
of discontinuance in accordance with section 274 if the Director is of the
opinion that the corporation has been amalgamated in accordance with this section.
(4) For the purposes of section 274, a notice referred to in subsection (3)
is deemed to be articles that are in the form that the Director fixes.
(5) This Act ceases to apply to the corporation on the date shown in the certificate
of discontinuance.
(6) For greater certainty, section 206 does not apply to a corporation that
amalgamates under one of the Acts referred to in subsection (1).
Rationale
This section permits the amalgamation of a federal not-for-profit corporation
with a federal financial corporation. However, once an amalgamation occurs, the
not-for-profit corporation is discontinued under this Act and the amalgamated
corporation becomes subject to the federal legislation governing the financial
corporation.
Subsection 208(1) states that the amalgamation of a federal not-for-profit
corporation with a federal financial corporation is subject to the approval
of the members of the not-for-profit corporation.
Subsection 208(2) states that a short-form amalgamation of a federal not-for-profit
corporation with a federal financial corporation if the amalgamation is subject
to the approval of directors of the not-for-profit corporation.
Subsection 208(3) states that when an amalgamation occurs between a federal
not-for-profit corporation and a financial corporation, the not-for-profit
corporation is discontinued under this Act. As a result, the amalgamated corporation
becomes subject to the federal legislation governing the financial corporation
(i.e., under either the Bank Act, the Cooperative Credit Associations
Act, the Insurance Companies Act or the Trust and Loan Companies
Act).
Subsections 208(4) to (6) are technical formalities associated with the discontinuance
pursuant to subsection 208(3).
Present Law
None.
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Bill Clause No. 209
Section No. 209
Topic: Fundamental Changes
Proposed Wording
209. (1) A body corporate incorporated otherwise than by or under an Act of
Parliament may apply to the Director for a certificate of continuance if
so authorized by the laws of the jurisdiction where it is incorporated and
if the body corporate satisfies, or by its articles of continuance would
satisfy, the requirements for incorporation under this Act.
(2) A body corporate that applies for a certificate under subsection (1) may,
without so stating in its articles of continuance, effect by those articles
any amendment to its act of incorporation, articles, letters patent or memorandum
or articles of association that a corporation incorporated under this Act may
make to its articles.
(3) If the body corporate is a body corporate with share capital, it shall
establish the terms and conditions on which it is converted to a body corporate
without share capital.
(4) If a body corporate wishes to apply for a certificate under subsection
(1), articles of continuance in the form that the Director fixes shall be sent
to the Director together with the documents required by sections 20 and 129.
(5) On receipt of articles of continuance, the Director shall issue a certificate
of continuance in accordance with section 274.
(6) From the date shown in the certificate of continuance
(a) the body corporate becomes a corporation to which this
Act applies as if it had been incorporated under this Act;
(b) the articles of continuance are deemed to be the articles of incorporation
of the continued corporation;
(c) the certificate of continuance is deemed to be the certificate
of incorporation of the continued corporation; and
(d) any shareholders or members cease to be shareholders or members
of the body corporate and become members of the continued corporation. |
(7) The Director shall immediately send a copy of the certificate of continuance
to the appropriate official or public body in the jurisdiction in which continuance
under this Act was authorized.
(8) From the date of continuance of a body corporate as a corporation under
this Act,
(a) the property of the body corporate continues to be the
property of the corporation;
(b) the corporation continues to be liable for the obligations of
the body corporate;
(c) an existing cause of action, claim or liability to prosecution
is unaffected;
(d) any civil, criminal or administrative action or proceeding pending
by or against the body corporate may be continued by or against the corporation;
and
(e) any conviction against, or ruling, order or judgment in favour
of or against, the body corporate may be enforced by or against the corporation. |
(9) A membership in a body corporate issued before the body corporate was
continued under this Act is deemed to have been issued in compliance with this
Act and the articles of continuance.
Rationale
This section permits a body corporate incorporated in a jurisdiction other than
the federal jurisdiction to file articles of continuance and, therefore, become
a federal corporation subject to this Act. It outlines the mechanics and conditions
for such a continuance and recognizes the existence of the continued corporation
as a corporation under this Act.
Subsection 209(1) allows corporations in other jurisdictions to continue under
(migrate to) this Act, if the laws in the other jurisdiction permit it to do
so and the corporation satisfies the requirements for incorporation under this
Act.
Subsection 209(2) permits the continuing corporation to make any amendments
to its articles of incorporation that would be permitted by any other corporation
incorporated under this Act.
Subsection 209(3) stipulates that any business corporation (i.e., a corporation
with share capital) must establish how it will convert its capital structure
to become a not-for-profit corporation (ie., a corporation without share capital).
Subsections 209(4) to (9) are technical formalities that follow the standard
pattern for recognizing the existence of the continued corporation as a corporation
under this Act. Of particular note is paragraph 209(6)(d), which states
that the shareholders or members cease to be shareholders or members of the
body corporate and become members of the continued corporation.
Present Law
None.
Top
Bill Clause No. 210
Section No. 210
Topic: Fundamental Changes
Proposed Wording
210. (1) In this section, "charter" includes
(a) an Act of incorporation and any amendments to that Act;
and
(b) any letters patent, supplementary letters patent, certificate
of incorporation and certificate of amendment. |
(2) In connection with a continuance under this Act, the shareholders or members
of a body corporate incorporated or continued by or under an Act of Parliament
other than this Act who are entitled to vote at annual meetings of shareholders
or members may, despite any provision in any other Act of Parliament or any
provision in the charter of the body corporate,
(a) by special resolution, authorize the directors of the
body corporate to apply under section 209 for a certificate of continuance;
and
(b) by the same resolution, make any amendment to the charter of the
body corporate that a corporation incorporated under this Act may make to its
articles. |
(3) Despite subsection (2), the members of a body corporate may not make any
amendment having an effect referred to in subsection 197(1) that affects a
class or group of members, unless
(a) the charter of the body corporate otherwise provides
in respect of an amendment of the nature referred to in paragraph 197(1)(a)
or (e); or
(b) the members of the class or group approve the amendment in accordance
with section 197. |
(4) Despite subsection (2), the shareholders of a body corporate with shares
may not make any amendment affecting a class or series of shares unless the
shareholders of the class or series approve the amendment in accordance with
section 197.
(5) The directors of a body corporate incorporated or continued by or under
an Act of Parliament other than this Act may, despite any provision in any
other Act of Parliament or any provision in the charter of the body corporate,
apply under section 209 for a certificate of continuance if the articles of
continuance do not make any amendment to the charter of the body corporate
other than an amendment required to conform to this Act.
(6) The Governor in Council may, by order, require a body corporate without
share capital incorporated by or under an Act of Parliament other than this
Act to apply for a certificate of continuance under section 209 within any
period that may be prescribed except for the following:
(a) a bank;
(b) a company or society to which the Insurance Companies Act applies;
and
(c) a company to which the Trust and Loan Companies Act applies. |
(7) A body corporate that obtains a certificate of continuance under this
section is not required to pay any fees in respect of the continuance.
(8) A body corporate referred to in subsection (6) that does not make an application
to obtain a certificate of continuance within the period prescribed is dissolved
on the expiration of that period.
Rationale
This section deals with the continuance of federally incorporated bodies corporate.
It spells out the mechanics and the conditions of a federal body corporate continuing
under this Act. The federal bodies corporate include financial institutions and
corporations created by Special Acts of Parliament.
Subsection 210(1) defines the term "charter" used in this section.
Subsection 210(2) permits shareholders or members, as the case may be, to
authorize the directors, through a special resolution (2/3 majority), to apply
for a continuance under this Act. The special resolution can also include any
changes to the body corporate's "charter" that a corporation incorporated
under this Act would be allowed to make.
Subsection 210(3) stipulates that members of a continuing body corporate can
not make changes to its charter that affect the rights of any class or group
of shareholders or members, as the case may be. However, these changes can
be made if the charter of the body corporate allows such changes or they are
approved by the affected class or group.
Subsection 210(4) prohibits shareholders from making any changes to the rights
associated with a class or series of shares unless the holders of these shares
approve the change in accordance with section 197.
Subsection 210(5) permits the directors of a body corporate to apply for a
continuance to the Act if the articles of continuance do not make any amendments
to the "charter" of the body corporate except for amendments required
to have the "charter" conform with the provisions set out in this
Act.
Subsection 210(6) provides discretionary power to allow the Governor in Council
to order a federally incorporated body corporate without share capital to continue
under this Act. This discretionary power, however, does not extend to financial
institutions which are corporations with shares.
Subsection 210(7) waives the fees associated with a continuance made under
this section.
Subsection 210(8) states that a body corporate which does not apply for a
continuance under this Act as directed under subsection 210(6) is dissolved
at the end of the prescribed period (proposed at 15 months).
Present Law
None.
Top
Bill Clause No. 211
Section No. 211
Topic: Fundamental Changes
Proposed Wording
211. (1) Subject to subsection (10), a corporation may apply to the appropriate
official or public body of another jurisdiction requesting that the corporation
be continued as if it had been incorporated under the laws of that other
jurisdiction if the corporation
(a) is authorized by the members in accordance with subsections
(3) to (5) to make the application; and
(b) establishes to the satisfaction of the Director that its proposed
continuance in the other jurisdiction will not adversely affect creditors or
members of the corporation. |
(2) A corporation that is authorized by the members in accordance with subsections
(3) to (5) may apply to the appropriate Minister or the Director for its continuance
under the Bank Act, the Canada Cooperatives Act, the Cooperative
Credit Associations Act, the Insurance Companies Act or the Trust
and Loan Companies Act.
(3) The corporation shall give members notice of a meeting of members in accordance
with section 162.
(4) Each membership in the corporation carries the right to vote in respect
of a continuance whether or not it otherwise carries the right to vote.
(5) An application for a certificate is authorized when the members have approved
of the continuance by a special resolution.
(6) The directors of a corporation may, if authorized by the members at the
time of approving an application for continuance, abandon the application without
further approval of the members.
(7) On receipt of a notice that the corporation has been continued under the
laws of another jurisdiction or an Act referred to in subsection (2), the Director
shall issue a certificate of discontinuance in accordance with section 274
if the Director is of the opinion that the corporation has been continued in
accordance with this section.
(8) For the purposes of section 274, a notice referred to in subsection (7)
is deemed to be articles that are in the form that the Director fixes.
(9) This Act ceases to apply to the corporation on the date shown in the certificate
of discontinuance.
(10) A corporation shall not be continued as a body corporate under the laws
of another jurisdiction unless those laws provide in effect that
(a) the property of the corporation continues to be the property
of the body corporate;
(b) the body corporate continues to be liable for the obligations
of the corporation;
(c) an existing cause of action, claim or liability to prosecution
is unaffected;
(d) any civil, criminal or administrative action or proceeding pending
by or against the corporation may be continued by or against the body corporate;
and
(e) any conviction against, or ruling, order or judgment in favour
of or against, the corporation may be enforced by or against the body corporate. |
Rationale
This section deals with the "export" of a corporation from this
Act. Specifically, it permits a corporation that is incorporated under this
Act to
continue its existence under the laws of another jurisdiction.
Subsection 211(1) permits a corporation to apply to migrate to another jurisdiction
and therefore become subject to the laws of another jurisdiction and discontinued
under this Act. It can do this if the members have approved the migration to
another jurisdiction and the corporation satisfies the Director that this migration
does not adversely affect the corporation's members or creditors. Moreover,
the corporation has to satisfy the conditions laid out in subsection 211(10).
Subsection 211(2) authorizes a corporation, with the approval of its members,
to apply to continue under four specific acts: the Bank Act, the Canada
Cooperatives Act, the Insurance Companies Act or the Trust
and Loan Companies Act.
Subsection 211(3) requires the corporation to notify its members of the meeting
at which the continuance to another jurisdiction is to be determined.
Subsection 211(4) permits each member to vote on the continuance to another
jurisdiction, whether or not the member is otherwise entitled to vote.
Subsection 211(5) states that the members have to approve the application
to continue under a new jurisdiction by a special resolution (2/3 majority).
Subsection 211(6) allows the directors to abandon the application to continue
under a new jurisdiction without further approval of the members, if the members
previously authorized the directors to do so.
Subsections 210(7), (8) and (9) are technical formalities which follow the
standard pattern for corporation which are discontinuing under this Act.
Subsection 211(10) stipulates that a corporation may not continue into a another
jurisdiction unless the laws of that jurisdiction provide that the property
of the corporation is retained by the corporation; the corporation's liabilities
remain the same; existing claims and actions are unaffected; civil, administrative
and criminal proceedings by or against the corporation may be continued by
or against the corporation; and a conviction against, or ruling, order or judgment
in favour of or against, the corporation may be enforced by or against the
body corporate. This is standard in corporate law.
Present Law
None.
Top
Bill Clause No. 212
Section No. 212
Topic: Fundamental Changes
Proposed Wording
212. (1) A sale, a lease or an exchange of all or substantially all of the
property of a corporation other than in the ordinary course of its activities
requires the authorization of the members in accordance with subsections
(2) to (6).
(2) The corporation shall give members notice of a meeting of members in accordance
with section 162 and shall include a copy or summary of the proposed agreement
of sale, lease or exchange.
(3) At the meeting of members, the members may authorize the sale, lease or
exchange and may fix, or authorize the directors to fix, any of the terms and
conditions of the sale, lease or exchange.
(4) Each membership in the corporation carries the right to vote in respect
of the sale, lease or exchange whether or not it otherwise carries the right
to vote.
(5) The members of a class or group of members are entitled to vote separately
as a class or group in respect of the sale, lease or exchange only if the class
or group is affected by the sale, lease or exchange in a manner different from
the members of another class or group.
(6) The sale, lease or exchange is authorized when the members of each class
or group entitled to vote on it have approved it by a special resolution.
(7) The directors of a corporation may, if authorized by the members approving
a proposed sale, lease or exchange, and subject to the rights of third parties,
abandon the sale, lease or exchange without further approval of the members.
Rationale
This section deals with the sale, lease or exchange of all or a large portion
of the corporation's assets. In such cases, the approval of members through a
vote is required. The safeguards provided for members are the same as the ones
provided for an amalgamation.
Subsection 212(1) requires that members approve the sale, lease or exchange
of all or substantially all the assets of the corporation.
Subsection 212(2) states that members are to receive notice of a meeting from
the corporation and that the notice shall include a copy or summary of the
proposed sale, lease or exchange agreement. This provision ensures that members
are informed of the proposed transaction.
Subsection 212(3) provides members the right to approve the proposed transaction
or to direct the directors to attach conditions to it.
Subsection 212(4) allows each member of the corporation to vote on the proposed
transaction, even if his/her membership is otherwise non-voting.
Subsection 212(5) provides that each class of members has a right to vote
separately provided that the class is affected differently by the proposed
transaction relative to any other class of members.
Subsection 212(6) provides that the proposed transaction is approved when
each class of members votes in favour of it. The vote is by special resolution
requiring a 2/3 majority.
Subsection 212(7) permits directors, if authorized by the members at the time
they approved the proposed transaction and subject to the rights of third parties,
to abandon the proposed transaction without further approval by the members.
Present Law
None.
Top
Bill Clause No. 213
Section No. 213
Topic: Fundamental Changes
Proposed Wording
213. (1) In this section, "reorganization" means a reorganization
pursuant to
(a) a court order made under section 251;
(b) a court order made under the Bankruptcy and Insolvency Act approving
a proposal; or
(c) a court order made under any other Act of Parliament that affects the rights
among a corporation and its members and creditors. |
(2) If a corporation is subject to an order referred to in subsection (1),
the order may also require any amendment of the articles or by-laws to effect
any change that might be made under section 195.
(3) If a court makes an order referred to in subsection (1), the court may
also
(a) authorize the issue of debt obligations of the corporation
and fix their terms; and
(b) appoint directors in place of or in addition to all or any of
the directors then in office. |
(4) After an order referred to in subsection (1) has been made, articles of
reorganization in the form that the Director fixes shall be sent to the Director
together with the documents required by section 20 and subsection 135(1), if
applicable.
(5) On receipt of articles of reorganization, the Director shall issue a certificate
of amendment in accordance with section 274.
(6) A reorganization becomes effective on the date shown in the certificate
of amendment and the articles are amended accordingly.
Rationale
This section enables the courts to effect any necessary amendment of the corporation's
articles or by-laws in order to achieve the reorganization of the corporation
without having to go through the formality of members approving the amended articles.
Subsection 213(1) defines the term "reorganization".
Subsection 213(2) provides the court with broad powers to order the corporation
to amend its articles or by-laws.
Subsection 213(3) provides that the court may also order the corporation to
issue debt obligations to raise capital and to reconstitute the corporation's
board (e.g., by appointing representatives of creditors of the corporation
to the board).
Subsections 213(4) to (6) are technical provisions which follow the registration
approach to incorporation. They ensure that the corporation sends to the Director
Appointed Under the Act its newly amended articles, that the Director issues
a certificate of amendment and that the effective date of the reorganization
is the date shown on the certificate of amendment as issued by the Director.
Present Law
None.
Top
Bill Clause No. 214
Section No. 214
Topic: Fundamental Changes
Proposed Wording
214. (1) In this section, "arrangement" includes
(a) an amendment to the articles of a corporation;
(b) an amalgamation of two or more corporations;
(c) an amalgamation of a body corporate with a corporation that results
in an amalgamated corporation subject to this Act;
(d) a division of the activities carried on by a corporation;
(e) a transfer of all or substantially all of the property of a corporation
to another body corporate in exchange for money or other property, shares,
memberships or debt obligations of the body corporate;
(f) an exchange of debt obligations or memberships of a corporation
for money or other property or other memberships or debt obligations of the
corporation or money or other property, shares, memberships or debt obligations
of another body corporate;
(g) a liquidation and dissolution of a corporation; and
(h) any combination of operations referred to in paragraphs (a)
to (g). |
(2) If it is not practicable for a corporation to effect a fundamental change
in the nature of an arrangement under any other provision of this Act, the
corporation may apply to a court for an order approving an arrangement proposed
by the corporation.
(3) On an application under this section, the court may make any interim or
final order that it thinks fit, including
(a) an order determining the notice to be given to any interested
person or dispensing with notice to any person other than the Director;
(b) an order appointing counsel, at the expense of the corporation,
to represent the interests of the members;
(c) an order requiring a corporation to call, hold and conduct a meeting
of members or holders of debt obligations issued by the corporation in any
manner that the court directs; and
(d) an order approving an arrangement as proposed by the corporation
or as amended in any manner that the court directs. |
(4) An applicant for any interim or final order under this section shall give
the Director notice of the application and the Director is entitled to appear
and be heard in person or by counsel.
(5) After an order referred to in paragraph (3)(d) has been made,
articles of arrangement in the form that the Director fixes shall be sent to
the Director together with the documents required by section 20 and subsection
135(1), if applicable.
(6) On receipt of articles of arrangement, the Director shall issue a certificate
of arrangement in accordance with section 274.
(7) An arrangement becomes effective on the date shown in the certificate
of arrangement.
Rationale
This section empowers a corporation to apply to the court to approve a proposed "arrangement" if
it finds that it can not practicably undergo a fundamental change under any
other provision of the Act.
Subsection 214(1) defines the term "arrangement".
Subsection 214(2) allows a corporation to apply to the court for an order
approving a proposed arrangement.
Subsection 214(3) gives broad powers to the court to make any order it thinks
fit regarding the proposed arrangement.
Subsection 214(4) requires that a corporation applying to the court for an
order send a notice to the Director Appointed Under the Act. It also allows
the Director to appear and be heard at the hearing in person or to be represented
by counsel.
Subsections 214(5) to (7) are technical provisions which follow the registration
approach to incorporation. They ensure that the corporation sends to the Director
Appointed Under the Act the articles of arrangement and any other documents
as may be required (registered office location and directors'names and addresses),
that the Director issues a certificate of arrangement and that the effective
date of the arrangement is the date shown on the certificate of arrangement
as issued by the Director.
Present Law
None.
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Corporate and Insolvency Law Policy
