PART VCapital Structure (continued)
Security Certificates and Transfers (continued)
Marginal note:Notice of defect
100 (1) Even against a purchaser for value and without notice of a defect going to the validity of a security, the terms of the security include those stated on the security and those incorporated therein by reference to another instrument, statute, rule, regulation or order to the extent that the terms so referred to do not conflict with the stated terms, but such a reference is not of itself notice to a purchaser for value of a defect going to the validity of the security, notwithstanding that the security expressly states that a person accepting it admits the notice.
Marginal note:Purchaser for value
(2) A security is valid in the hands of a purchaser for value without notice of any defect going to its validity.
Marginal note:Lack of genuineness
(3) Except as provided in section 101, the fact that a security is not genuine is a complete defence even against a purchaser for value and without notice.
Marginal note:Ineffective defences
(4) All defences of an issuer, including non-delivery and conditional delivery of a security but not including lack of genuineness, are ineffective against a purchaser for value without notice of the particular defence.
Marginal note:Staleness as defect notice
(5) After an event that creates a right to immediate performance of the principal obligation evidenced by a security, or that sets a date on or after which a security is to be presented or surrendered for redemption or exchange, a purchaser is deemed to have notice of any defect in its issue or of any defence of the issuer
(a) if the event requires the payment of money or the delivery of securities, or both, on presentation or surrender of the security, and the funds or securities are available on the date set for payment or exchange, and the purchaser takes the security more than one year after that date; or
(b) if the purchaser takes the security more than two years after the date set for presentation or surrender or the date on which the performance became due.
Marginal note:Unauthorized signature
101 An unauthorized signature on a security before or in the course of issue is ineffective, except that the signature is effective in favour of a purchaser for value and without notice of the lack of authority, if the signing has been done by
(a) an authenticating trustee, registrar, transfer agent or other person entrusted by the issuer with the signing of the security, or of similar securities, or their immediate preparation for signing; or
(b) an employee of the issuer or of a person referred to in paragraph (a) who, in the ordinary course of the employee’s duties, handles the security.
Marginal note:Completion or alteration
102 (1) Where a security contains the signatures necessary to its issue or transfer but is incomplete in any other respect,
(a) any person may complete it by filling in the blanks in accordance with the person’s authority; and
(b) notwithstanding that the blanks are incorrectly filled in, the security as completed is enforceable by a purchaser who took it for value and without notice of the incorrectness.
(2) A completed security that has been improperly altered, even if fraudulently altered, remains enforceable, but only according to its original terms.
Marginal note:Warranties of agents
103 (1) A person signing a security, as authenticating trustee, registrar, transfer agent or other person entrusted by the issuer with the signing of the security, warrants to a purchaser for value without notice that
(a) the security is genuine;
(b) the person’s acts in connection with the issue of the security are within the person’s authority; and
(c) the person has reasonable grounds for believing that the security is in the form and within the amount the issuer is authorized to issue.
Marginal note:Limitation of liability
(2) Unless otherwise agreed, a person referred to in subsection (1) does not assume any further liability for the validity of a security.
Marginal note:Title of purchaser
104 (1) Subject to Part VII, on delivery of a security the purchaser acquires the rights in the security that the purchaser’s transferor had or had authority to convey, except that the position of a purchaser who has been a party to any fraud or illegality affecting the security or who as a prior holder had notice of an adverse claim is not improved by taking from a later bona fide purchaser.
Marginal note:Title of bona fide purchaser
(2) A bona fide purchaser, in addition to acquiring the rights of a purchaser, also acquires the security free from any adverse claim.
Marginal note:Limited interest purchaser
(3) A purchaser of a limited interest acquires rights only to the extent of the interest purchased.
Marginal note:Deemed notice of adverse claim
105 A purchaser of a security, or any securities broker for a seller or purchaser, is deemed to have notice of an adverse claim if
(a) the security, whether in bearer form or registered form, has been endorsed “for collection” or “for surrender” or for some other purpose not involving transfer; or
(b) the security is in bearer form and has on it a statement that it is the property of a person other than the transferor, except that the mere writing of a name on a security is not such a statement.
Marginal note:Notice of fiduciary duty
106 Notwithstanding that a purchaser, or any securities broker for a seller or purchaser, has notice that a security is held for a third person by, or is registered in the name of or endorsed by, a fiduciary, neither the purchaser nor the securities broker has any duty to inquire into the rightfulness of the transfer or any notice of an adverse claim, except that if the purchaser or securities broker for the seller or purchaser knows that the consideration is to be used for, or that the transaction is for, the personal benefit of the fiduciary or is otherwise in breach of the fiduciary’s duty, the purchaser or securities broker is deemed to have notice of an adverse claim.
Marginal note:Staleness as notice
107 An event that creates a right to immediate performance of the principal obligation evidenced by a security or that sets a date on or after which the security is to be presented or surrendered for redemption or exchange is not of itself notice of an adverse claim, except in the case of a purchase
(a) made more than one year after any date set for such a presentation or surrender; or
(b) made more than six months after any date set for payment of money against such a presentation or surrender if funds are available for payment on that date.
Marginal note:Warranties to issuer
108 (1) A person who presents a security for registration of transfer or for payment or exchange warrants to the issuer that the person is entitled to the registration, payment or exchange, except that a purchaser for value without notice of an adverse claim who receives a new, reissued or re-registered security on registration of transfer warrants only that the purchaser has no knowledge of any unauthorized signature in a necessary endorsement.
Marginal note:Warranties to purchaser
(2) A person by transferring a security to a purchaser for value warrants only that
(a) the transfer is effective and rightful;
(b) the security is genuine and has not been materially altered; and
(c) the person knows of nothing that might impair the validity of the security.
Marginal note:Warranties of intermediary
(3) Where a security is delivered by an intermediary known by the purchaser to be entrusted with delivery of the security on behalf of another or with collection of a draft or other claim to be collected against that delivery, the intermediary by that delivery warrants only the intermediary’s own good faith and authority even if the intermediary has purchased or made advances against the draft or other claim to be collected against the delivery.
Marginal note:Warranties of pledgee
(4) A pledgee or other holder for purposes of security who redelivers a security received, or after payment and on order of the debtor delivers that security to a third person, gives only the warranties of an intermediary under subsection (3).
Marginal note:Warranties of securities broker
(5) A securities broker gives to the broker’s customer, to the issuer and to a purchaser, as the case may be, the warranties provided in subsections (1) to (4) and has the rights and privileges of a purchaser under those subsections, and those warranties of and in favour of the broker acting as an agent are in addition to warranties given by the broker’s customer and warranties given in favour of the broker’s customer.
Marginal note:Right to compel endorsement
109 Where a security in registered form is delivered to a purchaser without a necessary endorsement, the purchaser may become a bona fide purchaser only as of the time the endorsement is supplied, but against the transferor the transfer is complete on delivery and the purchaser has a specifically enforceable right to have any necessary endorsement supplied.
Definition of appropriate person
110 (1) In this section, section 111, subsections 118(1), 121(4) and 126(1) and section 130, appropriate person means
(a) the person specified by the security or by special endorsement to be entitled to the security;
(b) if a person described in paragraph (a) is described as a fiduciary but is no longer serving in the described capacity, either that person or that person’s successor;
(c) if the security or endorsement mentioned in paragraph (a) specifies more than one person as fiduciaries and one or more of those persons are no longer serving in the described capacity, the remaining fiduciary or fiduciaries, whether or not a successor has been appointed;
(d) if a person described in paragraph (a) is a natural person and is without capacity to act by reason of death, incompetence, minority or other reason, the person’s fiduciary;
(e) if the security or endorsement mentioned in paragraph (a) specifies more than one person with right of survivorship and by reason of death not all of the persons can sign, the survivor or survivors;
(f) a person having power to sign under any applicable law or a power of attorney; or
(g) to the extent that a person described in any of paragraphs (a) to (f) may act through an agent, the person’s authorized agent.
Marginal note:Determining an “appropriate person”
(2) Whether the person signing is an appropriate person is determined as of the time of signing, and an endorsement by such a person does not become unauthorized for the purposes of this Part by reason of any subsequent change of circumstances.
111 (1) An endorsement of a security in registered form is made when an appropriate person signs, either on the security or on a separate document, an assignment or transfer of the security or a power to assign or transfer it, or when the signature of an appropriate person is written without more on the back of the security.
Marginal note:Special or blank
(2) An endorsement may be special or in blank.
Marginal note:Blank endorsement
(3) An endorsement in blank includes an endorsement to bearer.
Marginal note:Special endorsement
(4) A special endorsement specifies the person to whom the security is to be transferred, or who has power to transfer it.
Marginal note:Right of holder
(5) A holder may convert an endorsement in blank into a special endorsement.
Marginal note:Immunity of endorser
112 Unless otherwise agreed, the endorser by the endorsement assumes no obligation that the security will be honoured by the issuer.
Marginal note:Partial endorsement
113 An endorsement purporting to be an endorsement of only part of a security representing units intended by the issuer to be separately transferable is effective to the extent of the endorsement.
Marginal note:Effect of failure by fiduciary to comply
114 Failure of a fiduciary to comply with a controlling instrument or with the law of the jurisdiction governing the fiduciary relationship, including any law requiring the fiduciary to obtain court approval of a transfer, does not render the fiduciary’s endorsement unauthorized for the purposes of this Part.
Marginal note:Effect of endorsement without delivery
115 An endorsement of a security, whether special or in blank, does not constitute a transfer until delivery of the security on which it appears or, if the endorsement is on a separate document, until delivery of both the security and that document.
Marginal note:Endorsement in bearer form
116 An endorsement of a security in bearer form may give notice of an adverse claim under section 105 but does not otherwise affect any of the holder’s rights.
Marginal note:Effect of unauthorized endorsement
117 (1) The owner of a security may assert the ineffectiveness of an endorsement against the issuer or any purchaser, other than a purchaser for value and without notice of an adverse claim, who has in good faith received a new, reissued or re-registered security on registration of transfer, unless the owner
(a) has ratified an unauthorized endorsement of the security; or
(b) is otherwise precluded from impugning the effectiveness of an unauthorized endorsement.
Marginal note:Liability of issuer
(2) An issuer who registers the transfer of a security on an unauthorized endorsement is liable for improper registration.
Marginal note:Warranties of guarantor of signature
118 (1) A person who guarantees the signature of an endorser of a security warrants that, at the time of signing,
(a) the signature was genuine;
(b) the signer was an appropriate person to endorse; and
(c) the signer had legal capacity to sign.
Marginal note:Limitation of liability
(2) A person who guarantees the signature of an endorser does not otherwise warrant the rightfulness of the transfer to which the signature relates.
Marginal note:Warranties of guarantor of endorsement
(3) A person who guarantees the endorsement of a security warrants both the signature and the rightfulness, in all respects, of the transfer to which the signature relates, but an issuer may not require a guarantee of endorsement as a condition to registration of transfer.
Marginal note:Extent of warrantor’s liability
(4) The warranties referred to in subsections (1) to (3) are made to any person who, relying on the guarantee, takes or deals with the security, and the guarantor is liable to such a person for any loss resulting from breach of warranty.
Marginal note:Constructive delivery of a security
119 Delivery to a purchaser occurs when
(a) the purchaser or a person designated by the purchaser acquires possession of a security;
(b) the purchaser’s securities broker acquires possession of a security specially endorsed to or issued in the name of the purchaser;
(c) the purchaser’s securities broker sends the purchaser confirmation of the purchase and the broker in the broker’s records identifies a specific security as belonging to the purchaser; or
(d) in respect of an identified security to be delivered while still in the possession of a third person, that person acknowledges that it is held for the purchaser.
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