An Act to amend the Canada Business Corporations Act and the Canada Cooperatives Act and to amend other Acts in consequence (S.C. 2001, c. 14)
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Assented to 2001-06-14
R.S., c. C-44; 1994, c. 24, s. 1(F)CANADA BUSINESS CORPORATIONS ACT
47. (1) Subsection 119(1) of the English version of the Act is replaced by the following:
Marginal note:Liability of directors for wages
119. (1) Directors of a corporation are jointly and severally, or solidarily, liable to employees of the corporation for all debts not exceeding six months wages payable to each such employee for services performed for the corporation while they are such directors respectively.
(2) Subsection 119(5) of the French version of the Act is replaced by the following:
Marginal note:Subrogation de l’administrateur
(5) L’administrateur qui acquitte les dettes visées au paragraphe (1), dont l’existence est établie au cours d’une procédure soit de liquidation et de dissolution, soit de faillite, a droit à toute priorité qu’aurait pu faire valoir l’employé et, le cas échéant, est subrogé aux droits constatés dans le jugement.
48. Section 120 of the Act is replaced by the following:
Marginal note:Disclosure of interest
120. (1) A director or an officer of a corporation shall disclose to the corporation, in writing or by requesting to have it entered in the minutes of meetings of directors or of meetings of committees of directors, the nature and extent of any interest that he or she has in a material contract or material transaction, whether made or proposed, with the corporation, if the director or officer
(a) is a party to the contract or transaction;
(b) is a director or an officer, or an individual acting in a similar capacity, of a party to the contract or transaction; or
(c) has a material interest in a party to the contract or transaction.
Marginal note:Time of disclosure for director
(2) The disclosure required by subsection (1) shall be made, in the case of a director,
(a) at the meeting at which a proposed contract or transaction is first considered;
(b) if the director was not, at the time of the meeting referred to in paragraph (a), interested in a proposed contract or transaction, at the first meeting after he or she becomes so interested;
(c) if the director becomes interested after a contract or transaction is made, at the first meeting after he or she becomes so interested; or
(d) if an individual who is interested in a contract or transaction later becomes a director, at the first meeting after he or she becomes a director.
Marginal note:Time of disclosure for officer
(3) The disclosure required by subsection (1) shall be made, in the case of an officer who is not a director,
(a) immediately after he or she becomes aware that the contract, transaction, proposed contract or proposed transaction is to be considered or has been considered at a meeting;
(b) if the officer becomes interested after a contract or transaction is made, immediately after he or she becomes so interested; or
(c) if an individual who is interested in a contract later becomes an officer, immediately after he or she becomes an officer.
Marginal note:Time of disclosure for director or officer
(4) If a material contract or material transaction, whether entered into or proposed, is one that, in the ordinary course of the corporation’s business, would not require approval by the directors or shareholders, a director or officer shall disclose, in writing to the corporation or request to have it entered in the minutes of meetings of directors or of meetings of committees of directors, the nature and extent of his or her interest immediately after he or she becomes aware of the contract or transaction.
Marginal note:Voting
(5) A director required to make a disclosure under subsection (1) shall not vote on any resolution to approve the contract or transaction unless the contract or transaction unless the contract or transaction
(a) relates primarily to his or her remuneration as a director, officer, employee or agent of the corporation or an affiliate;
(b) is for indemnity or insurance under section 124; or
(c) is with an affiliate.
Marginal note:Continuing disclosure
(6) For the purposes of this section, a general notice to the directors declaring that a director or an officer is to be regarded as interested, for any of the following reasons, in a contract or transaction made with a party, is a sufficient declaration of interest in relation to the contract or transaction:
(a) the director or officer is a director or officer, or acting in a similar capacity, of a party referred to in paragraph (1)(b) or (c);
(b) the director or officer has a material interest in the party; or
(c) there has been a material change in the nature of the director’s or the officer’s interest in the party.
Marginal note:Access to disclosures
(6.1) The shareholders of the corporation may examine the portions of any minutes of meetings of directors or of committees of directors that contain disclosures under this section, and any other documents that contain those disclosures, during the usual business hours of the corporation.
Marginal note:Avoidance standards
(7) A contract or transaction for which disclosure is required under subsection (1) is not invalid, and the director or officer is not accountable to the corporation or its shareholders for any profit realized from the contract or transaction, because of the director’s or officer’s interest in the contract or transaction or because the director was present or was counted to determine whether a quorum existed at the meeting of directors or committee of directors that considered the contract or transaction, if
(a) disclosure of the interest was made in accordance with subsections (1) to (6);
(b) the directors approved the contract or transaction; and
(c) the contract or transaction was reasonable and fair to the corporation when it was approved.
Marginal note:Confirmation by shareholders
(7.1) Even if the conditions of subsection (7) are not met, a director or officer, acting honestly and in good faith, is not accountable to the corporation or to its shareholders for any profit realized from a contract or transaction for which disclosure is required under subsection (1), and the contract or transaction is not invalid by reason only of the interest of the director or officer in the contract or transaction, if
(a) the contract or transaction is approved or confirmed by special resolution at a meeting of the shareholders;
(b) disclosure of the interest was made to the shareholders in a manner sufficient to indicate its nature before the contract or transaction was approved or confirmed; and
(c) the contract or transaction was reasonable and fair to the corporation when it was approved or confirmed.
Marginal note:Application to court
(8) If a director or an officer of a corporation fails to comply with this section, a court may, on application of the corporation or any of its shareholders, set aside the contract or transaction on any terms that it thinks fit, or require the director or officer to account to the corporation for any profit or gain realized on it, or do both those things.
49. Paragraph 121(a) of the French version of the Act is replaced by the following:
a) pour les administrateurs, de créer des postes de dirigeants, d’y nommer des personnes pleinement capables, de préciser leurs fonctions et de leur déléguer le pouvoir de gérer les activités commerciales et les affaires internes de la société, sauf les exceptions prévues au paragraphe 115(3);
50. Subsection 123(4) of the Act is replaced by the following:
Marginal note:Defence — reasonable diligence
(4) A director is not liable under section 118 or 119, and has complied with his or her duties under subsection 122(2), if the director exercised the care, diligence and skill that a reasonably prudent person would have exercised in comparable circumstances, including reliance in good faith on
(a) financial statements of the corporation represented to the director by an officer of the corporation or in a written report of the auditor of the corporation fairly to reflect the financial condition of the corporation; or
(b) a report of a person whose profession lends credibility to a statement made by the professional person.
Marginal note:Defence — good faith
(5) A director has complied with his or her duties under subsection 122(1) if the director relied in good faith on
(a) financial statements of the corporation represented to the director by an officer of the corporation or in a written report of the auditor of the corporation fairly to reflect the financial condition of the corporation; or
(b) a report of a person whose profession lends credibility to a statement made by the professional person.
51. Section 124 of the Act is replaced by the following:
Marginal note:Indemnification
124. (1) A corporation may indemnify a director or officer of the corporation, a former director or officer of the corporation or another individual who acts or acted at the corporation’s request as a director or officer, or an individual acting in a similar capacity, of another entity, against all costs, charges and expenses, including an amount paid to settle an action or satisfy a judgment, reasonably incurred by the individual in respect of any civil, criminal, administrative, investigative or other proceeding in which the individual is involved because of that association with the corporation or other entity.
Marginal note:Advance of costs
(2) A corporation may advance moneys to a director, officer or other individual for the costs, charges and expenses of a proceeding referred to in subsection (1). The individual shall repay the moneys if the individual does not fulfil the conditions of subsection (3).
Marginal note:Limitation
(3) A corporation may not indemnify an individual under subsection (1) unless the individual
(a) acted honestly and in good faith with a view to the best interests of the corporation, or, as the case may be, to the best interests of the other entity for which the individual acted as director or officer or in a similar capacity at the corporation’s request; and
(b) in the case of a criminal or administrative action or proceeding that is enforced by a monetary penalty, the individual had reasonable grounds for believing that the individual’s conduct was lawful.
Marginal note:Indemnification in derivative actions
(4) A corporation may with the approval of a court, indemnify an individual referred to in subsection (1), or advance moneys under subsection (2), in respect of an action by or on behalf of the corporation or other entity to procure a judgment in its favour, to which the individual is made a party because of the individual’s association with the corporation or other entity as described in subsection (1) against all costs, charges and expenses reasonably incurred by the individual in connection with such action, if the individual fulfils the conditions set out in subsection (3).
Marginal note:Right to indemnity
(5) Despite subsection (1), an individual referred to in that subsection is entitled to indemnity from the corporation in respect of all costs, charges and expenses reasonably incurred by the individual in connection with the defence of any civil, criminal, administrative, investigative or other proceeding to which the individual is subject because of the individual’s association with the corporation or other entity as described in subsection (1), if the individual seeking indemnity
(a) was not judged by the court or other competent authority to have committed any fault or omitted to do anything that the individual ought to have done; and
(b) fulfils the conditions set out in subsection (3).
Marginal note:Insurance
(6) A corporation may purchase and maintain insurance for the benefit of an individual referred to in subsection (1) against any liability incurred by the individual
(a) in the individual’s capacity as a director or officer of the corporation; or
(b) in the individual’s capacity as a director or officer, or similar capacity, of another entity, if the individual acts or acted in that capacity at the corporation’s request.
Marginal note:Application to court
(7) A corporation, an individual or an entity referred to in subsection (1) may apply to a court for an order approving an indemnity under this section and the court may so order and make any further order that it sees fit.
Marginal note:Notice to Director
(8) An applicant under subsection (7) shall give the Director notice of the application and the Director is entitled to appear and be heard in person or by counsel.
Marginal note:Other notice
(9) On an application under subsection (7) the court may order notice to be given to any interested person and the person is entitled to appear and be heard in person or by counsel.
Marginal note:1994, c. 24, s. 14(F)
52. (1) The definition “distributing corporation” in subsection 126(1) of the Act is repealed.
(2) The definitions “insider” and “officer” in subsection 126(1) of the Act are replaced by the following:
“insider”
« initié »
“insider” means, except in section 131,
(a) a director or officer of a distributing corporation;
(b) a director or officer of a subsidiary of a distributing corporation;
(c) a director or officer of a body corporate that enters into a business combination with a distributing corporation; and
(d) a person employed or retained by a distributing corporation;
“officer”
« dirigeant »
“officer” means the chairperson of the board of directors, the president, a vice-president, the secretary, the treasurer, the comptroller, the general counsel, the general manager, a managing director, of an entity, or any other individual who performs functions for an entity similar to those normally performed by an individual occupying any of those offices;
(3) Subsection 126(1) of the Act is amended by adding the following in alphabetical order:
“business combination”
« regroupement d’entreprises »
“business combination” means an acquisition of all or substantially all the property of one body corporate by another, or an amalgamation of two or more bodies corporate, or any similar reorganization between or among two or more bodies corporate;
(4) Paragraph 126(2)(a) of the Act is replaced by the following:
(a) a director or an officer of a body corporate that beneficially owns, directly or indirectly, shares of a distributing corporation, or that exercises control or direction over shares of the distributing corporation, or that has a combination of any such ownership, control and direction, carrying more than the prescribed percentage of voting rights attached to all of the outstanding shares of the distributing corporation not including shares held by the body corporate as underwriter while those shares are in the course of a distribution to the public is deemed to be an insider of the distributing corporation;
(5) Subsections 126(3) and (4) of the Act are repealed.
53. Sections 127 to 129 of the Act are repealed.
54. Sections 130 and 131 of the Act are replaced by the following:
Marginal note:Prohibition of short sale
130. (1) An insider shall not knowingly sell, directly or indirectly, a security of a distributing corporation or any of its affiliates if the insider selling the security does not own or has not fully paid for the security to be sold.
Marginal note:Calls and puts
(2) An insider shall not knowingly, directly or indirectly, sell a call or buy a put in respect of a security of the corporation or any of its affiliates.
Marginal note:Exception
(3) Despite subsection (1), an insider may sell a security they do not own if they own another security convertible into the security sold or an option or right to acquire the security sold and, within ten days after the sale, they
(a) exercise the conversion privilege, option or right and deliver the security so acquired to the purchaser; or
(b) transfer the convertible security, option or right to the purchaser.
Marginal note:Offence
(4) An insider who contravenes subsection (1) or (2) is guilty of an offence and liable on summary conviction to a fine not exceeding the greater of one million dollars and three times the profit made, or to imprisonment for a term not exceeding six months or to both.
Marginal note:Definitions
131. (1) In this section, “insider” means, with respect to a corporation,
(a) the corporation;
(b) an affiliate of the corporation;
(c) a director or an officer of the corporation or of any person described in paragraph (b), (d) or (f);
(d) a person who beneficially owns, directly or indirectly, shares of the corporation or who exercises control or direction over shares of the corporation, or who has a combination of any such ownership, control and direction, carrying more than the prescribed percentage of voting rights attached to all of the outstanding shares of the corporation not including shares held by the person as underwriter while those shares are in the course of a distribution to the public;
(e) a person, other than a person described in paragraph (f), employed or retained by the corporation or by a person described in paragraph (f);
(f) a person who engages in or proposes to engage in any business or professional activity with or on behalf of the corporation;
(g) a person who received, while they were a person described in any of paragraphs (a) to (f), material confidential information concerning the corporation;
(h) a person who receives material confidential information from a person described in this subsection or in subsection (3) or (3.1), including a person described in this paragraph, and who knows or who ought reasonably to have known that the person giving the information is a person described in this subsection or in subsection (3) or (3.1), including a person described in this paragraph; and
(i) a prescribed person.
Expanded definition of “security”
(2) For the purposes of this section, the following are deemed to be a security of the corporation:
(a) a put, call, option or other right or obligation to purchase or sell a security of the corporation; and
(b) a security of another entity, the market price of which varies materially with the market price of the securities of the corporation.
Marginal note:Deemed insiders
(3) For the purposes of this section, a person who proposes to make a take-over bid (as defined in the regulations) for securities of a corporation, or to enter into a business combination with a corporation, is an insider of the corporation with respect to material confidential information obtained from the corporation and is an insider of the corporation for the purposes of subsection (6).
Marginal note:Deemed insiders
(3.1) An insider of a person referred to in subsection (3), and an affiliate or associate of such a person, is an insider of the corporation referred to in that subsection. Paragraphs (1)(b) to (i) apply in determining whether a person is such an insider except that references to “corporation” in those paragraphs are to be read as references to “person described in subsection (3)”.
Marginal note:Insider trading — compensation to persons
(4) An insider who purchases or sells a security of the corporation with knowledge of confidential information that, if generally known, might reasonably be expected to affect materially the value of any of the securities of the corporation is liable to compensate the seller of the security or the purchaser of the security, as the case may be, for any damages suffered by the seller or purchaser as a result of the purchase or sale, unless the insider establishes that
(a) the insider reasonably believed that the information had been generally disclosed;
(b) the information was known, or ought reasonably to have been known, by the seller or purchaser; or
(c) the purchase or sale of the security took place in the prescribed circumstances.
Marginal note:Insider trading — compensation to corporation
(5) The insider is accountable to the corporation for any benefit or advantage received or receivable by the insider as a result of a purchase or sale described in subsection (4) unless the insider establishes the circumstances described in paragraph (4)(a).
Marginal note:Tipping — compensation to persons
(6) An insider of the corporation who discloses to another person confidential information with respect to the corporation that has not been generally disclosed and that, if generally known, might reasonably be expected to affect materially the value of any of the securities of the corporation is liable to compensate for damages any person who subsequently sells securities of the corporation to, or purchases securities of the corporation from, any person that received the information, unless the insider establishes
(a) that the insider reasonably believed that the information had been generally disclosed;
(b) that the information was known, or ought reasonably to have been known, by the person who alleges to have suffered the damages;
(c) that the disclosure of the information was necessary in the course of the business of the insider, except if the insider is a person described in subsection (3) or (3.1); or
(d) if the insider is a person described in subsection (3) or (3.1), that the disclosure of the information was necessary to effect the take-over bid or the business combination, as the case may be.
Marginal note:Tipping — compensation to corporation
(7) The insider is accountable to the corporation for any benefit or advantage received or receivable by the insider as a result of a disclosure of the information as described in subsection (6) unless the insider establishes the circumstances described in paragraph (6)(a), (c) or (d).
Marginal note:Measure of damages
(8) The court may assess damages under subsection (4) or (6) in accordance with any measure of damages that it considers relevant in the circumstances. However, in assessing damages in a situation involving a security of a distributing corporation, the court must consider the following:
(a) if the plaintiff is a purchaser, the price paid by the plaintiff for the security less the average market price of the security over the twenty trading days immediately following general disclosure of the information; and
(b) if the plaintiff is a seller, the average market price of the security over the twenty trading days immediately following general disclosure of the information, less the price that the plaintiff received for the security.
Marginal note:Liability
(9) If more than one insider is liable under subsection (4) or (6) with respect to the same transaction or series of transactions, their liability is joint and several, or solidary.
Marginal note:Limitation
(10) An action to enforce a right created by subsections (4) to (7) may be commenced only within two years after discovery of the facts that gave rise to the cause of action.
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