PART VCapital Structure (continued)
Security Certificates and Transfers (continued)
Marginal note:Right to compel endorsement
112 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
(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.
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.
114 (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
115 Unless otherwise agreed, the endorser by the endorsement assumes no obligation that the security will be honoured by the issuer.
Marginal note:Partial endorsement
116 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
117 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
118 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
119 An endorsement of a security in bearer form may give notice of an adverse claim under section 108 but does not otherwise affect any of the holder’s rights.
Marginal note:Effect of unauthorized endorsement
120 (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
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
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
122 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.
Marginal note:Constructive ownership of security
Marginal note:Ownership of part of fungible bulk
(2) If a security is part of a fungible bulk, a purchaser of the security is the owner of the proportionate interest in the fungible bulk.
Marginal note:Notice to securities broker of adverse claim
(3) Notice of an adverse claim received by a securities broker or by a purchaser after the broker takes delivery as a holder for value is not effective against the broker or the purchaser, except that, as between the broker and the purchaser, the purchaser may demand delivery of an equivalent security in respect of which no notice of an adverse claim has been received.
Marginal note:Delivery of security
(a) the selling customer fulfils the customer’s duty to deliver when the customer delivers the security to the selling securities broker or to a person designated by the selling securities broker or causes an acknowledgement to be made to the selling securities broker that it is held for the selling securities broker; and
(b) the selling securities broker, including a correspondent broker, acting for a selling customer fulfils the securities broker’s duty to deliver by delivering the security or a like security to the buying securities broker or to a person designated by the buying securities broker or by effecting clearance of the sale in accordance with the rules of the exchange on which the transaction took place.
Marginal note:Duty to deliver
(2) Except as otherwise provided in this section and unless otherwise agreed, a transferor’s duty to deliver a security under a contract of purchase is not fulfilled until the transferor delivers the security in negotiable form to the purchaser or to a person designated by the purchaser, or causes an acknowledgement to be made to the purchaser that the security is held for the purchaser.
Marginal note:Delivery to securities broker
(3) A sale to a securities broker purchasing for the securities broker’s own account is subject to subsection (2) and not subsection (1), unless the sale is made on a stock exchange.
Marginal note:Transfer through clearing agency
(4) If a security shown in the records of a clearing agency is evidenced by
(a) a security certificate in the custody of the clearing agency or a custodian, or a nominee of either, subject to the instructions of the clearing agency, and is in bearer form or endorsed in blank by an appropriate person or registered in the name of the clearing agency or a custodian, or of a nominee of either, or
(b) an uncertificated security registered or recorded in records maintained by or on behalf of the company in the name of the clearing agency or a custodian, or of a nominee of either, subject to the instructions of the clearing agency,
then, in addition to other methods, a transfer or pledge of the security or any interest therein may be effected by the making of an appropriate entry in the records of the clearing agency.
Marginal note:Interest in fungible bulk
(5) Under subsections (4) to (10), entries may be in respect of like securities or interests therein as part of a fungible bulk and may refer merely to a quantity of a particular security without reference to the name of the registered owner, certificate or bond number or the like and, in appropriate cases, may be on a net basis taking into account other transfers or pledges of the same security.
Marginal note:Constructive endorsement and delivery
(6) A transfer or pledge under subsections (4) to (10) has the effect of a delivery of a security in bearer form or duly endorsed in blank representing the amount of the obligation or the number of shares or rights transferred or pledged.
(7) If a pledge or the creation of a security interest is intended, the making of entries has the effect of a taking of delivery by the pledgee or a secured party and the pledgee or secured party shall be deemed to have taken possession for all purposes.
(8) A person depositing a security certificate or an uncertificated security with a clearing agency, or a transferee or pledgee of a security under subsections (4) to (10), is a holder of the security and shall be deemed to have possession of the security so deposited, transferred or pledged, as the case may be, for all purposes.
Marginal note:Not registration
(9) A transfer or pledge under subsections (4) to (10) does not constitute a registration of transfer under sections 129 to 136.
Marginal note:Error in records
(10) That entries made in the records of the clearing agency as provided in subsection (4) are not appropriate does not affect the validity or effect of the entries nor the liabilities or obligations of the clearing agency to any person adversely affected thereby.
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