Canada Business Corporations Act (R.S.C., 1985, c. C-44)

Marginal note:Deemed notice of adverse claim

• 61 (1) A purchaser of a security, or any broker for a seller or purchaser, is deemed to have notice of an adverse claim if

  • (a) the security, whether in bearer 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

  (2) Notwithstanding that a purchaser, or any broker for a seller or purchaser, has notice that a security is held for a third person or is registered in the name of or endorsed by a fiduciary, they have no duty to inquire into the rightfulness of the transfer and have no notice of an adverse claim, except that where they know 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 broker is deemed to have notice of an adverse claim.

Marginal note:Staleness as notice of adverse claim

62 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) after one year from any date set for such presentation or surrender for redemption or exchange; or

• (b) after six months from any date set for payment of money against presentation or surrender of the security if funds are available for payment on that date.

Marginal note:Warranties to issuer

• 63 (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 such delivery, the intermediary by such delivery warrants only the intermediary’s 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 broker

  (5) A broker gives to a customer, to the issuer or to a purchaser, as the case may be, the warranties provided in this section and has the rights and privileges of a purchaser under this section, and those warranties of and in favour of the broker acting as an agent or mandatary are in addition to warranties given by the customer and warranties given in favour of the customer.

Marginal note:Right to compel endorsement

64 When 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.

Marginal note:Definition of appropriate person

• 65 (1) In this section, 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 the person’s successor;

  • (c) if the security or endorsement mentioned in paragraph (a) specifies more than one person as fiduciaries and one or more are no longer serving in the described capacity, the remaining fiduciary or fiduciaries, whether or not a successor has been appointed or qualified;

  • (d) if a person described in paragraph (a) is an individual and is without capacity to act by reason of death, minority or incapability, 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 all cannot sign, the survivor or survivors;

  • (f) a person having power to sign under applicable law or a power of attorney; or

  • (g) to the extent that a person described in paragraphs (a) to (f) may act through an agent or mandatary, the authorized agent or mandatary.

• Marginal note:Determining 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.

• Marginal note:Endorsement

  (3) 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

  (4) An endorsement may be special or in blank.

• Marginal note:Blank endorsement

  (5) An endorsement in blank includes an endorsement to bearer.

• Marginal note:Special endorsement

  (6) 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

  (7) A holder may convert an endorsement in blank into a special endorsement.

• Marginal note:Immunity of endorser

  (8) Unless otherwise agreed, the endorser assumes no obligation that the security will be honoured by the issuer.

• Marginal note:Partial endorsement

  (9) An endorsement purporting to be only of part of a security representing units intended by the issuer to be separately transferable is effective to the extent of the endorsement.

• Marginal note:Failure of fiduciary to comply

  (10) Failure of a fiduciary to comply with a controlling instrument or act 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

66 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

67 An endorsement of a security in bearer form may give notice of an adverse claim under section 61 but does not otherwise affect any right to registration that the holder has.

Marginal note:Effect of unauthorized endorsement

• 68 (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 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

• 69 (1) A person who guarantees a 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 as defined in section 65 to endorse; and

  • (c) the signer had legal capacity to sign.

• Marginal note:Limitation of liability

  (2) A person who guarantees a signature of an endorser does not otherwise warrant the rightfulness of the particular transfer.

• Marginal note:Warranties of guarantor of endorsement

  (3) A person who guarantees an endorsement of a security warrants both the signature and the rightfulness of the transfer in all respects, but an issuer may not require a guarantee of endorsement as a condition to registration of transfer.

• Marginal note:Extent of liability

  (4) The warranties referred to in this section are made to any person taking or dealing with the security relying on the guarantee and the guarantor is liable to such person for any loss resulting from breach of warranty.

Marginal note:Constructive delivery of a security

• 70 (1) Delivery to a purchaser occurs when

  • (a) the purchaser or a person designated by the purchaser acquires possession of a security;

  • (b) the broker of the purchaser acquires possession of a security specially endorsed to or issued in the name of the purchaser;

  • (c) the broker of the purchaser sends the purchaser confirmation of the purchase and identifies in a record a specific security as belonging to the purchaser; or

  • (d) with respect to an identified security to be delivered while still in the possession of a third person, that person acknowledges holding it for the purchaser.

• Marginal note:Constructive ownership

  (2) A purchaser is the owner of a security that a broker holds for the purchaser, but is not a holder except in the cases referred to in paragraphs (1)(b) and (c).

• Marginal note:Ownership of part of fungible bulk

  (3) If a security is part of a fungible bulk, a purchaser of the security is the owner of a proportionate share in the fungible bulk.

• Marginal note:Notice to broker

  (4) Notice of an adverse claim received by a 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 as to which no notice of an adverse claim has been received.

Marginal note:Delivery of security

• 71 (1) Unless otherwise agreed, if a sale of a security is made on an exchange or otherwise through brokers,

  • (a) the selling customer fulfils their duty to deliver by delivering the security to the selling broker or to a person designated by the selling broker or by causing an acknowledgment to be made to the selling broker that it is held for the selling broker; and

  • (b) the selling broker, including a correspondent broker, acting for a selling customer fulfils their duty to deliver by delivering the security or a like security to the buying broker or to a person designated by the buying 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) Subject to 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 acknowledgment to be made to the purchaser that the security is held for the purchaser.

• Marginal note:Delivery to broker

  (3) A sale to a broker purchasing for the broker’s own account is subject to subsection (2) and not subsection (1), unless the sale is made on a stock exchange.

Marginal note:Right to reclaim possession

• 72 (1) A person against whom the transfer of a security is wrongful for any reason, including incapacity, may against anyone except a bona fide purchaser reclaim possession of the security or obtain possession of any new security evidencing all or part of the same rights or claim damages.

• Marginal note:Recovery if unauthorized endorsement

  (2) If the transfer of a security is wrongful by reason of an unauthorized endorsement, the owner may reclaim possession of the security or a new security even from a bona fide purchaser if the ineffectiveness of the purported endorsement may be asserted against such purchaser under section 68.

• Marginal note:Remedies

  (3) The right to reclaim possession of a security may be specifically enforced, its transfer may be restrained and the security may be impounded or, in Quebec, sequestrated pending litigation.

Marginal note:Right to requisites for registration

• 73 (1) Unless otherwise agreed, a transferor shall on demand supply a purchaser with proof of authority to transfer or with any other requisite that is necessary to obtain registration of the transfer of a security, but if the transfer is not for value a transferor need not do so unless the purchaser pays the reasonable and necessary costs of the proof and transfer.

• Marginal note:Rescission of transfer

  (2) If the transferor fails to comply with a demand under subsection (1) within a reasonable time, the purchaser may reject or rescind the transfer.