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BCA, ss. 422 & 423: Dissolutions/Cancellation of registrations 7
AGENCY: Clarkson Co. Ltd. v. Zhelka ...................................... 8
FRAUDULENT PUPROSE: Gilford Motor Company v. HolmesUK .............................................................................................. 8
REGULATORY/TAX EVASION: De Salaberry Realties Ltd. v.
MNR........................................................................................... 8
3.) The Process of Incorporation ........................................................ 9
A.) The Place of Incorporation ....................................................... 9
General ...................................................................................... 9
The Delaware Effect .................................................................. 9
B.) Extra-Provincial Licensing ........................................................ 9
Common Features of Extra Provincial Licensing Requirements9
“Carrying On Business” @ Common Law- Weight Watchers ... 9
BCA, s. 1, Definitions ................................................................. 9
BCA- Part II- S. 374-399- Extra Provincial Licensing ................ 9
C.) Widely Held & Closely Held Corporations ............................. 10
One Person Corporations ........................................................ 10
Public Company Special Requirements .................................. 10
Constrained Share Corporations ............................................. 10
BCA, s. 1, Definitions ............................................................... 10
Securities Act, s. 1, Definitions ................................................ 11
D.) Special Act Corporations ....................................................... 11
BCA ......................................................................................... 11
E.) Incorporation Techniques ....................................................... 11
General .................................................................................... 11
F.) Corporate Names ................................................................... 11
General .................................................................................... 11
Name Protection Options ........................................................ 11
BCA, Division 2- Corporate Names- ss. 21-29 ........................ 11
4.) The Nature of the Corporate Constitution ................................... 11
A.) General ................................................................................... 11
BCA, ss. 10-19 ........................................................................ 11
B.) The Concept of Restrictions ................................................... 12
Ultra Vires Acts ........................................................................ 12
BCA- ........................................................................................ 12
5.) Pre-Incorporation Contracts ........................................................ 12
A.) Common Law ......................................................................... 12
CORPORATIONS I: FALL 2009
Professor: Paterson
Prepared by: Kate Phipps
CORPORATIONS I: FALL 2009 ........................................................ 1
Professor: Paterson ........................................................................... 1
Prepared by: Kate Phipps .................................................................. 1
1.) Introduction to Canadian Business Corporations ......................... 3
A.) History ...................................................................................... 3
British Origins ............................................................................ 3
19th Century Canadian Developments ...................................... 4
20th Century Developments ....................................................... 4
Development of Securities Legislation ...................................... 4
Canada v. US Corporate Law ................................................... 4
B.) Constitutional Law .................................................................... 5
Provincial/Federal jurisdiction .................................................... 5
C.) Incorporation and its Consequences ....................................... 5
BCA ........................................................................................... 5
D.) Other Modes of Business Operations ...................................... 5
Non-Businesses; No profit aims ................................................ 5
Sole Proprietors ......................................................................... 6
Partnerships .............................................................................. 6
Corporations v. Partnerships ..................................................... 6
New Entities ............................................................................... 6
2.) Corporate Entity ............................................................................ 6
A.) Introduction............................................................................... 6
Characteristics & Advantages of Incorporation ......................... 6
Shareholders ............................................................................. 6
Directors .................................................................................... 7
Salomon v. Salomon [1897] ...................................................... 7
Kosmopolous v. Const. Ins. Co. ................................................ 7
B.) Lifting the Corporate Veil .......................................................... 7
General ...................................................................................... 7
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Kelner v. Baxter (1866) ........................................................... 12
Black v. Smallwood (1966) ...................................................... 13
B.) Statutory Reform .................................................................... 13
General .................................................................................... 13
BCA, s. 20- Pre-Incorporation Contracts- Agent/Corp liability 13
6.) Management and Control of the Corporation ............................. 13
A.) Introduction............................................................................. 13
The Challenge of Berle & Means ............................................ 13
Roles of the Parties ................................................................. 14
Automatic Self-Cleansing Filter Syndicate v. Cuninghame ..... 14
BCA ......................................................................................... 14
Deadlock Doctrine ................................................................... 14
B.) The Audit Committee ............................................................. 15
General .................................................................................... 15
Auditors ................................................................................... 15
BCA- Audit Committee Requirements ..................................... 15
C.) Sale of Undertaking ............................................................... 15
General .................................................................................... 15
BCA ......................................................................................... 15
What Constitutes All or Substantially All? Katz v. Bergman (US
Case in CBC) ........................................................................... 16
CBC Pension Plan v. BF Realty Holdings ............................... 16
Considerations @ Qualitative Stage: ...................................... 16
7.) Shareholders’ Rights ................................................................... 16
General: ................................................................................... 16
Preferred v. Common Shares .................................................. 17
A.) Voting Rights .......................................................................... 17
General .................................................................................... 17
BCA ......................................................................................... 17
B.) Shareholder’s Meetings ......................................................... 18
General .................................................................................... 18
AGMs ....................................................................................... 18
Special/extraordinary meetings ............................................... 18
BCA part 5, MGMT, Div. 6, Meetings of SHs .......................... 18
Requisitioned Meetings ........................................................... 20
Air Industry Revitalization Co. v. Air Canada .......................... 20
SH Proposals: General ............................................................ 21
SH Proposals: BCA ................................................................. 21
Exceptions: Varity Corp. v. Jesuit Fathers of Upper Canada .. 22
Exceptions: Greenpeace Foundation of Canada v. Inco Ltd ... 22
Removal of Directors: BCA...................................................... 22
8.) Enforcement of Duties Owed by Directors and Officers to the
Corporation: The Derivative Action .................................................. 22
A.) The Rule in Foss v. Harbottle ................................................. 22
The Rule .................................................................................. 22
General: ................................................................................... 22
B.) The Statutory Derivative Action .............................................. 23
General .................................................................................... 23
BCA ......................................................................................... 23
Re Northwest Forest Products Ltd .......................................... 23
Re Bellman and Western Approaches Ltd .............................. 23
Litigation Committee Reports and the Corporation’s Best
Interest ..................................................................................... 24
C) Costs ....................................................................................... 24
General .................................................................................... 24
9.) Duties of Directors and Officers .................................................. 24
A.) Care and Skill (Negligence) ................................................... 24
i.) common law ............................................................................. 24
Re City Equitable Fire Insurance Co. Ltd ................................ 24
Notes on the Test .................................................................... 25
ii.) statutory reform ....................................................................... 25
BCA- Negligence ..................................................................... 25
Re People’s Dept. Stores Ltd. ................................................. 26
BCE Inc. v. 1976 Debentureholders (2008) ............................ 26
B.) Fiduciary Duties ...................................................................... 26
BCA- Fiduciary duties .............................................................. 26
Introduction: ............................................................................. 26
i.) Self-Dealing (contracting with the corporation) ........................ 26
General .................................................................................... 26
Common Law: Aberdeen Railway Co. v. Blaikie Bros ............ 27
Common Law: Northwest Transportation Co v. Beatty ........... 27
Legislative Responses: General .............................................. 27
Legislative Responses: BCA: (D’s and Senior Officers Only) . 27
Differences btw Statute and Common Law ............................. 28
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ii.) Corporate Opportunities .......................................................... 28
Reasons it isn’t Codified: ......................................................... 28
Cook v. Deeks ......................................................................... 28
Regal Hastings v. Gulliver ....................................................... 29
Peso Silver Mines Ltd. v. Cropper ........................................... 29
Canadian Aero Services (Canaero) v. O’Malley ..................... 29
US Case Law........................................................................... 30
iii.) Competition ............................................................................ 30
BCA: ........................................................................................ 30
iv.) Hostile Takeovers and Defensive Management Tactics ....... 30
Takeover Bids .......................................................................... 30
Proper Purpose Doctrine ......................................................... 30
Common Law/proper purpose: Bonisteel v. Collis Leather Co.
................................................................................................. 31
Poison Pills .............................................................................. 31
Teck Corp. Ltd. v. Millar .......................................................... 31
C.) Relief from Liability ................................................................. 31
i.) ratification................................................................................. 31
BCA ......................................................................................... 31
North-West Trans Co. v. Beatty (p.528-533) ........................... 31
ii.) Statute ..................................................................................... 32
BCA ......................................................................................... 32
iii.) Indemnification and Insurance ............................................... 32
BCA ......................................................................................... 32
10.) Shareholder’s Remedies........................................................... 33
A.) Shareholder Agreements (private contracts) ......................... 33
General .................................................................................... 33
BCA, Pooling Agreements: ...................................................... 33
B.) The Personal Action (Standing to Sue) .................................. 33
General: ................................................................................... 33
Farnham v. Fingold- Derivative action..................................... 33
Perlman v. Feldman (USA) ..................................................... 33
Goldex Mines Ltd. v. Revill ...................................................... 33
C.) The Statutory Oppression Remedy ....................................... 34
General .................................................................................... 34
BCA-Oppression Remedy ....................................................... 34
BELL: Roadmap for bringing oppression remedy ................... 35
Who may bring an action? ....................................................... 35
First Edmonton Place Ltd. v. 315888 Alberta Ltd.- STANDING
................................................................................................. 35
Re: Daon Development Corp .................................................. 35
Ferguson v. Imax Systems Corp. ............................................ 35
Ebrahimi v. Westbourne Galleries Ltd ..................................... 36
Diligenti v. RWMD Operations Kelowna Ltd- Difference
between Oppression and Unfair prejudice .............................. 36
Scottish Co-op Wholesale Soc. Ltd v. Meyer—What constitutes
oppression? ............................................................................. 36
Differences between oppression remedy and breach of
fiduciary duty ........................................................................... 36
D.) Other Statutory Remedies ..................................................... 37
Compliance and Restraining Orders and Rectification: BCA .. 37
Dissent Proceedings (the appraisal Remedy) ......................... 37
Domglas: 3 approaches to valuing Shares .............................. 38
Winding Up, BCA ..................................................................... 38
1.) Introduction to Canadian Business
Corporations
A.) History
British Origins
 CL recognizes 2 principle forms of incorporation: incorporation by
royal prerogative; and incorporation by a private or general act of
the legislature. Royal charter, or letters patent, was the most
common.
 Turn of 18th Century: lively trade in royal charters and share
speculation leads to Bubble Act in 1720, which froze the
development of British Company Law for a century.
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 1825- Bubble Act repealed and replace by Joint Stock
Companies Act in 1844. Introduced incorporation by registration,
the standard model of incorporation in most of the
commonwealth.
 1855- Limited Liability Act introduced Limited liability. Ltd must be
in company’s name
 1975- Federal act follows Ontario, but goes further in protection of
minority SH rights.
 BC- 2002- Retains the contract model of incorporation and has
enhanced flexibility, and did not adopt the CBCA model.
Development of Securities Legislation
 Canadian legislation regquirs full and continuous disclosure of all
relevant info, and imposes a comprehensive regime of
supervision and registration of securities and members of the
industry.
 The seller must provide a prospectus to indicate what, exactly, is
being bought into
 High level of investor protection via the securities commission
 Public companies are governed by securities legislation, whereas
private companies are not
 Applies to corporations regardless of where the issuer was
incorporated.
 1965- Strengthened disclosure and reporting requirements, and
legislation re: proxies and proxy solicitations, insider trading, and
takeover bids. New in BC in 1985.
 2003- report supports the establishment of a national securities
commission. As of publishing, not enacted.
19th Century Canadian Developments
 Prior to 19th century- incorporation by private act was the common
procedure.
 1849- 2 acts for incorporation of stock companies for road/bridge
construction- one for upper and lower Canada respectively.
Incorporation by registration of appropriate documents with the
registrar of the counties through which the road/work would pass
 1850- General act for incorporation of companies for
manufacturing, mining, etc. Registration act modelled on a NY
statute.
 1860- Act for registration of commercial companies by judicial
decree.
 1864- Incorporation by letters patent issued under the seal of the
governor in council
 1869- First federal general incorporation act. Model for
subsequent incorporation legislation of NB, Man, & PEI. 2 camps
for a time between methods of incorporation. Rift now healed with
reintroduction of incorporation by registration.
Canada v. US Corporate Law
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20th Century Developments
 1970- New Era- OBCA replaces incorporation by letters patent
with incorporation by registration, allows one person corps,
immunized 3rd parties from the effects of ultra vires doctrine,
regularized pre-incorporation contracts, new regulatory framework
for the issuance and transfer of investment securities, partially
codified the duties of directors and officers, regulated insider
trading, permitted derivative actions, and improved minority SH
protection.
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More public corps in US than Canada
US market for shares is deeper than Canada
Concentration of share ownership is higher in Canada
Canadian market has more interconnected corporate
relationships.
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B.) Constitutional Law
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Provincial/Federal jurisdiction
 Parson’s Case: Jurisdiction over federally incorporated
companies falls under POGG clause of s.91.
 Provinces- s. 92(11)- jurisdiction over incorporation of companies
with provincial objects
 Multiple Access: If provincial legislation is solely of a corporate
character, it won’t apply to fed incorporated companies, but if it
has a double character, it will be valid so long as it does not
conflict with federal legislation.
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C.) Incorporation and its Consequences
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BCA
 S. 3(1): A company is recognized when it is (a) incorporated
under the act; (b)if the company results from a conversion, when
the conversion occurs; (c) If the company results from an
amalgamation of corporations under the Act, or if the company is
continued into BC.
 S. 3(2): A company was recognized under a former company’s
act in the same situations as in (1)
 S. 10(1): One or more people may form a company by (a)
entering into an incorporation agreement, (2) filing with the
registrar an incorporation application, and (c) complying with this
part of the Act.
 S. 10(2): An incorporation agreement must (a) contain an
agreement of each incorporator to take 1+ shares in their name,
and (b) signature of each incorporator over their printed name,
the date, and the number of shares he/she is taking, and (c) be
signed.
 S. 10(3): An incorporation application must be in an established
form, contain a completing party statement, set out the names
and addresses of the incoporators, set out the company’s name
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and reservation number, and a notice of articles that reflects the
info that will apply to the corp.
S. 13(1): A corporation is incorporated on the date that the
application is filed, or on the date specified by the people which is
later than when the incorporation application is filed
S. 13(2): After a corp is incorporated, the registrar must issue a
certificate of incorporation
S. 17: Effect of Incorporation: SH are a company with the name
set out in the notice of articles, capable of exercising the functions
of an incorporated company with the powers and liability provided
for in the Act.
S. 18: Evidence of Incorporation: a notation in the corporate
register that a company has been incorporated is conclusive
evidence that the company has been duly incorporated at the
date and time indicated.
S. 30: Capacity and Powers of Company: Capacity, rights,
powers, and privileges of an individual of full capacity.
S. 87 (1): No SH is personally liable for debts, obligations,
defaults or acts of the company.
S. 87(2): SH liability is limited to unpaid portion of the issue price
of their shares, and the unpaid portion of the amount actually
agreed to be paid for those shares
D.) Other Modes of Business Operations
Non-Businesses; No profit aims
 At CL, referred to as Clubs
 Charities are governed by special rules (as trusts)
 Can choose to incorporate under the “society act” to clarify that
your operation doesn’t mean to generate a profit
o Society Act operates under the same mode as the
corporations act. They’re based on similar
provisions, and have similar requirements (Board,
etc.)
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 Partners can’t transfer shares to third parties without agreement
by other parties. With corporations, an interest can be transferred
without interference.
 Partnerships require multiple parties, whereas a corporation can
be a one person corporation
Sole Proprietors
 1 person carrying on a business for their own benefit
Partnerships
 2 + people carry on a business in common with a view of profit; a
contract of agency
 Arose to allow courts to apportion liability when an action is
brought against one person in a partnership
 Partners have a fiduciary duty to one another; therefore, no party
can embezzle, etc.
 Partners set out the term of their arrangement in a deed of
partnership. If there’s no contract, then s. 27 of the partnership
act sets out the rules
 Not legal persons
 Governed by the CL and Partnership Act, but you don’t need to
register under the Act to be a corporation
 Post 2004’s- Partnership Act breaks partnerships into two
categories—limited Partnerships and Limited Liability
partnerships (s.37 of Partnership Act).
o LLPs- Not liable beyond the money you contribute to
the partnership. The negligence of one partner won’t
count against another.
 Issues:
o Unclear whether partnerships are to be continuous,
and I so, to what extent
New Entities
 Conglomerates- multiple profit centres
 Syndicates- temporary businesses
 Joint Ventures- Canada has yet to confirm whether it’s an actual
entity
2.) Corporate Entity
A.) Introduction
Characteristics & Advantages of Incorporation
 Separate legal entities (Salomon)
 Tax Advantages- Income doesn’t belong to the SH; it counts
against the company
 Limited Liability: Statutory privilege of the SHs. The corporation is
liable, NOT the shareholders
 Allows for “fundraising” by selling shares
 Company exists in perpetuity, even upon the passing of an
owner, etc.
Corporations v. Partnerships
 Corporations are separate legal persons; partnerships have no
existence beyond that of a contract
 In a partnership, all partners take part in management. In a
corporation, the formal demarcation between management
(directors) and ownership (SHs) prevents this.
 In a partnership, change occurs via unanimity. In a corporation,
directors have unlimited rights, subject to any restriction in the
articles of the company
Shareholders
 Right to dividends, if they’re declared
 Right to a proportionate share of the wealth upon winding up of
corporation
 Right to vote
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Directors
 Shareholders delegate management duties to the directors
 Have the sole say in all matters regarding business operations
 Control the agenda of shareholder meetings
Salomon v. Salomon [1897]
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 F: S ran a business as a sole proprietor, who transferred the
assets of his sole proprietorship to a trustee, and then formed a
corporation with those assets. Took cash, debentures, and a
majority of shares in return for assets. Had 3 directors and 7 SHs
as required, but it was a private corporation, and S basically ran
the business, had majority of shares. Corporation went into
liquidation. S had sold debenture to B. Not enough money left to
pay back the debentures
 I: Is Mr. Salomon personally liable to pay the debentures? NO
 R: The corporation is a legal person capable of contracting on its
own. Mr. Salomon was a separate legal person, and the
corporation was not S’s agent or trustee, nor was he the
corporation’s. Not to hold as much would undermine the business
judgment rule. A duly incorporated company is a distinct legal
person, even if one person possesses an overwhelming
influence who is entitled to practically all the profits.
has no legal rights with respect to it. This latter rule
shouldn’t be applied rigidly to the sole owner of a
limited company who might have an insurable
interest, so long as there was no misstatement
material to the risk made to allow the person to
avoid liability.
SCC: This is not a good case for lifting the corporate
veil. Having chosen incorporation for its benefits, K
should not be able to escape its burdens. Lifting the
veil would create an arbitrary distinction between
companies with multiple v. 1 shareholder. Instead,
she holds that an SH does have an insurable
interest in the corporation’s property, despite
precedent to the contrary. Even though K had no
ownership in the corp’s assets, his interest as
the sole SH in the residual value of the C’s
assets gave him such a substantial stake in
those assets that it could amount to an insurable
interest.
B.) Lifting the Corporate Veil
General
 In some cases, the ordinary consequences of limited liability
because of incorporation will not apply
 Examples of when:
o Corporation operates as the SH’s agent
o Evasion of tax or regulatory legislation
o Fraudulent purpose for setting up the corporation
o Inactive corporation
Kosmopolous v. Const. Ins. Co.
 F: K owned a leather store; lawyer advised him to incorporate to
protect personal assets. K was sole SH and director. Lease of the
business premises was in K’s name and never assigned to the
corporation. C sells an insurance plan for K as agent of spring
leather goods. Store catches fire
 I: Does Mr. K have an insurable interest in the store? YES
 R:
o Ontario CA: K was “so circumstanced” with the
assets of his company that he had benefit from its
existence, prejudice from its destruction. However, a
corporation is a distinct legal person, and an owner
BCA, ss. 422 & 423: Dissolutions/Cancellation of
registrations
 422(1): A corporation may be struck from the register if it (a) fails
to file an annual report for 2 years; (b) failed to file a record the
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Act requires for 2 years; (c) fails to comply with an order of the
registrar; (d) fails to return a record to the registrar within 21 days
of a request; (e) tenders a cheque required by the act that doesn’t
clear, or doesn’t pay up
422(2): Registrar may send a letter informing that the corp may
be struck from the register
422(3): Company has right to respond
422(4): If no adequate response is received, registrar can then
tell company forcibly that they’re going to be removed
422(5): Company then has 1 month to respond, or the registrar
can cancel the registration
422(6): The company is dissolved on the date recorded in the
corporate register
423: Lieutenant governor in council can also cancel the
incorporation of a company
NOTE: US courts are more open to piercing the veil
in an agency situation. In Canada, the argument has
never been successful.
FRAUDULENT PUPROSE: Gilford Motor
Company v. Holmes- UK
 F: D contracted with former employer, P, not to solicit their
customers. D forms corporation to solicit on his behalf.
 I: Is the corporation bound by the non-competition clause? YES
 R: The corporation was a cloak or sham, and P was entitled to an
injunction against both person and company notwithstanding that
the company wasn’t party to the covenant. A corporation may
not be used to permit a D to avoid contractual obligations.
REGULATORY/TAX EVASION: De Salaberry
Realties Ltd. v. MNR
AGENCY: Clarkson Co. Ltd. v. Zhelka
 F: S’s company, Industrial, transferred property to Z, his sister, in
return for a promissory note. S went bankrupt, and C was
appointed trustee. C sought a declaration that the land was held
by Z or I as a trustee for S, alleging that Industrial was an agent
and alter ego of S, directed by S, to the prejudice and confusion
of his personal creditors.
 I: Was I S’s agent, meaning that the corporate veil should be
lifted and I’s land be taken to pay off S’s debts? NO
 R: Thompson: Z held the land in trust for I, as S transferred the
land without consideration to protect the lands against I’s
creditors. S also retained complete control and benefit over his
companies, and he received personal advantage to the detriment
of the corporation’s creditors. However, he in no way defrauded
his personal creditors via the company, ie, he didn’t transfer his
own property to the corp, and the corp wasn’t formed for a
wrongful purpose, ie, to defraud the creditors. The land is
therefore out of the trustee’s reach.
 F: High number of companies created that each sold one or very
few parcels of land, whereas the group as a whole sold many.
 I: What was the corporation’s purpose for acquiring property
through holding/subsidiary/sub-subsidiary companies?
 R: Very few subsidiaries had $ to operate without going to
affiliates for loans. Subsidiaries relied on parent corporations for
directions, and deferred to their decision making authority. Boards
of directors were nominated by the holding companies. As such,
this was a group enterprise designed to avoid tax liability, and
should be taxed as such.
o Courts more likely to disregard separate
personality if doing so results in liability being
imposed on another corporation as the SH rather
than on an individual
o When one disregards the separate existence of
the corporation and it becomes clear that the
sale was part of a business of buying and selling
land, it will be treated as such.
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3.) The Process of Incorporation
 Extra-provincial corporations are usually required to make annual
filings of pertinent info, just like domestic corps
A.) The Place of Incorporation
“Carrying On Business” @ Common Law- Weight
Watchers
General
 Continuation of business is key. One off agencies will not suffice
for “carrying on business” in another jurisdiction.
 Federal government, provinces, and territories have concurrent
jurisdiction over incorporation.
 Corporations can choose whatever province they want
BCA, s. 1, Definitions
 Company: A corporation, recognized as such under this act or a
former companies act, that hasn’t ceased to be a company
 Extra-provincial company: A foreign company registered under
s.377 as an extraprovincial company or under s. 379 as an
amalgamated company.
 Foreign entity: A foreign corporation; an LL company; or an
extraprovincial society under the society Act
 Foreign corporation: A corporation that isn’t a company, has
issued shares, isn’t required to be registered; and was
incorporated otherwise than by or under an Act, or continued, etc.
 Limited liability company: A business entity organized outside
of BC, recognized as a legal entity in that jurisdiction, is not a
corporation, and is not a partnership
The Delaware Effect
 Competition to attract new incorporations by offering flexible
corporations acts favourable to management was won by
Delaware
 Delaware government claims that more than ½ of all public corps
in the US are incorporated in the state
 Often described as a “race to the Bottom”
 Forum shopping has never been a prominent feature in Canada,
nor have the provinces actively competed for incorporations.
Canadian tradition is towards greater uniformity
 General Canadian practice is to incorporate provincially in the
province where the corporation expects to carry on its business if
no significant exstra provincial operations are envisaged
BCA- Part II- S. 374-399- Extra Provincial
Licensing
B.) Extra-Provincial Licensing
 Rules relating to entities that aren’t corporations under that Act,
but are acting within the province, and the province takes an
interest in what they’re doing (ie- legal dispute, and BC wants
jurisdiction)
 For these rules to apply, must establish that the corporation has
presence:
o Where the “seat of their operation” is
o Where they’re incorporated
Common Features of Extra Provincial Licensing
Requirements
 Offence to carry on business without a licence
 Unlicensed extra-provincial corps can’t maintain an action before
a provincial court in respect of a contract made by it
 Granting of a licence is discretionary with the designated official,
and conditions may be attached
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If they carry on business in the province, and are
statutory obliged to register as an extra
provincial entity
S. 375: (1) Foreign entities must register within 2 months; (2)
You’re a foreign entity carrying on business in BC if its name
is in a BC telephone directory; if it advertises with a BC
address or telephone number; it has a BC agent or
warehouse/office/place of business; or it otherwise carries
on business in BC. (3) Banks, railway companies, or an interest
as a limiter partner don’t count as carrying on business. (4) don’t
need to register if you’re operating ships, or you don’t have a
place of business here.
S. 376: To apply for registration, you need to provide records and
reserve its name, appoint an attorney, and file a registration
statement and other required records, in a prescribed form, etc,
etc.
S. 377: After filing, etc, the registrar will issue a certificate
S. 378: Registration certificate is conclusive evidence the extraprovincial entity has been registered, etc.
S. 379: amalgamation of extraprovincial company
S. 380: Extra-provincial companies to file annual report
S. 381: Extra-provincial companies to notify registrar of changes
S. 382: Change of name of extraprovincial companies
S. 383: Cancellation or change of assumed name of
extraprovincial company
S. 384: Liability if name of extraprovincial company isn’t displayed
S. 385: Enforcement of duty to file records
S. 426: Offence not to register as an extraprovincial company
(NOTE- it’s not that bad. Penalty used to be that you couldn’t sue
to enforce contracts)
S. 302: Must file a continuation application, provide records,
have directors sign articles, etc, for continuation.
o Need parallel continuation legislation in both places.
Essentially, dissolve in one place and reformulate in
another jurisdiction.
C.) Widely Held & Closely Held Corporations
One Person Corporations
 1 person can constitute a meeting if there’s a one person
corporation
Public Company Special Requirements
 S.210: Public companies must be audited. An auditor must be
appointed by shareholder votes
o If it’s a small corporation with few shareholders, and
all unanimously agree, the auditing requirement can
be waived.
 S. 233: Audit committee requirements. Formalized system to
ensure due diligence. Gives outside directors the chance to
monitor inside directors.
 Public Companies must have 3+ directors; otherwise, one director
is OK
Constrained Share Corporations
 No one person can own more than 10% of the shares
 No foreign ownership of 25% or more
 Banks, media, insurance, etc.
BCA, s. 1, Definitions
 Public company: A company that is a reporting issuer (or
equivalent), has registered securities under a Securities Act
(SOMEONE WHO MUST COMPLY WITH SECURITIES ACT
ALSO)
 Reporting issuer: Same meaning as in securities act
 Reporting issuer equivalent: A corporation that is a reporting
issuer under other than BC laws
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the use of descriptive and generic terms, and the time and mode
of use of a name which may have stamped it with a particular
identity.
Securities Act, s. 1, Definitions
 Reporting Issuer:
D.) Special Act Corporations
Name Protection Options
BCA
 Register the name under the trademark act
 Sue for the tort of “passing off”
 Incorporation!
 S. 1, Definitions, Special act corporation: An incorporation
incorporated by an Act that isn’t the BC Act (ie- Crown
corporations, etc)
 S. 4(1): Unless the special act says otherwise, then the BCA
applies to special act corporations
BCA, Division 2- Corporate Names- ss. 21-29
 S. 21: Name of company is the one shown on the application
 S. 22: Can reserve a name for 56 days by applying to the
registrar
 S. 23: Must use Ltd, inc, corp, etc, as part of and at the end of a
name
 S. 24: Can’t use ltd, etc, unless you’re a corporation; Cant use
VC in name unless you’re in the employee investment act
 S. 25: Name must be in English or French, or both
 S. 26: Assumed names
 S. 27: Companies must display their name
 S. 28: Registrar may order a change of name if the name
contravenes prescribed requirements
 S. 29: Other reasons to change name
E.) Incorporation Techniques
General
 2 major ways:
o Western Canada, filing notice of articles with the
registrar (actual articles are kept with the
corporation). Registrar ensures that everything is in
keeping with the statute, company has no illegal
objects, and no objection to the use of the name.
Then registrar is bound to accept the documents
and issue a certificate—S.10, BCA
o Ontario, applying for letters patent. Letters patent
was an act of the executive, at their discretion. Over
time, moved away from unbridled discretion.
4.) The Nature of the Corporate
Constitution
F.) Corporate Names
A.) General
General
BCA, ss. 10-19
 Must satisfy the registrar that the chosen name will not cause
confusion. Consideration is given to the nature of the business,
class of person affected, visual and auditory impact of the names,
 S. 1, Definitions, Articles: Means the record described in s. 12,
and includes, the articles of association of a pre-existing
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 S. 154(1)(a): If a D does an ultra vires act under s.33 that
requires money being paid out, then the director has to pay the
money back to the corporation
 S. 228(3)(c): If a D does an ultra vires act, an SH (or other
appropriate complainant) has the right to complain to the court,
and the court can require the corporation stop doing the restricted
act, and order that compensation be paid to the company or any
other party to the contract.
 S. 259: A company may alter its articles via special resolution. If
that change would make the notice of articles false, then the
company must indicate the vote won’t take affect until the articles
are changed, and then change the articles.
 S. 260: SHs have right to dissent to special resolution
 S. 378(2): Extra-provincial companies acting in BC may exercise
whatever acts are permitted by its own charter/articles or similar
document
 S. 378(4): No act of a foreign entity is invalid merely because
they weren’t registered
 S. 249: court appointed inspectors
corporation; the bylaws of a company; or any other record that
constitutes the articles of a company
 S. 11: Requirement for notice of articles- prescribed form, name,
addres of directors, address, translation of the company’s name
that it intends to use outside Canada, the share structure of the
company, types of shares, etc,
 S. 12: A company must have articles that sets rules for its
conduct; are mechanically produced; and are divided into
consecutively numbered or lettered paragraphs. The articles must
set out every restriction, if any, on the business that may be
carried out, and the powers the company may exercise
 S. 19: A company is bound by its articles
B.) The Concept of Restrictions
Ultra Vires Acts
 Memorandum jurisdictions- b/c memo would specify what acts C
could carry on, these were much more common.
 Registration Jursidictions- common not to restrict corporation’s
acts .
 @CL- per se breach of fiduciary duty to the corporation. Not clear
if the provisions of the Act negate that.
 Personal right of action for ultra vires acts have likely replaced the
common law
5.) Pre-Incorporation Contracts
A.) Common Law
Kelner v. Baxter (1866)
BCA-
 F: K contracts to buy supplies for a hotel company from B. K
receives product, but doesn’t pay. Company dissolves. Facilitator
(K) and third party (B) knew the corporation did not yet exist when
the contract was entered into. Directors of inoperative company
attempted to ratify.
 I: Is K personally liable to fulfill the terms of the contract (pay the
purchase price)? YES
 R: If the company had been formed, K would have been signing
as the company’s agent. But as there was no company in
existence at the time, the agreement would be inoperative unless
 S. 30: A corporation has the capacity and the rights, powers, and
privileges of an individual of full capacity
 S. 31: A corporation can hold property in joint tenancy just like a
normal person
 S. 32: Each corporation has the capacity to carry on business, etc
 S. 33: A company must not carry on business that is restricted by
its memorandum or articles, or exercise its power in a manner
inconsistent with those restrictions; but no act is invalid because it
was contrary to the articles.
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 (3) The company may adopt the pre-incorporation contract by any
act or conduct signifying its intention to be bound by the contract
 (4): On adoption of the contract, the new company is bound by
and is entitled to the benefits of the contract as if the company
had been incorporated at the date of the pre-incorporation
contract and had been a party to it, and the facilitator has no
more liability.
 (5): If the company doesn’t adopt the contract within a
reasonable time, the facilitator can apply for an order that the
company restore the applicant with whatever benefit they
received from the contract
 (6): Whether or not the company adopts the contract, a party can
apply for a court order setting the obligations of the new company
and the facilitator under the contract, and apportion liability
between the new company and the facilitator.
 (8): No facilitator liability if the arties expressly agree as much.
it were binding on the defendant personally. Where a contract is
signed by one who professes to be signing as an agent, but
who has no principle existing at the time, then the “agent”
will be bound thereby, as it’s presumed he meant to be
personally bound. Ratification by a stranger cannot
subsequently relieve that responsibility.
Black v. Smallwood (1966)
 F: B contracted to buy property from S as an agent of a
corporation. Both B and S thought that the company existed, and
that the property was being bought from the corporation. S sought
specific performance
 I: Is a promoter, who genuinely believes a corporation exists,
liable to fulfill a contract if the corporation doesn’t exist? NO
 R: Given that the parties didn’t realize the corporation existed, it
is impossible to regard them as having intended to incur personal
liability.
B.) Statutory Reform
6.) Management and Control of the
Corporation
General
A.) Introduction
 These provisions only apply if the company is actually
incorporated. If the company isn’t incorporated or is incorporated
elsewhere, the CL or extra-provincial statutes will apply
 Effect of (5) and (6) is to create NEW CIVIL REMEDIES
The Challenge of Berle & Means
 1920’s-30s- Berle & Means: Division of ownership and control
led to unfettered management discretion. Growing dispersion of
share ownership was to dull the incentive for any particular SH to
assume responsibility for controlling the C’s affairs. SHs became
passive principals of the C’s they owned. Managerial elite filled
the vacuum, but they had only minor ownership interests, and
were less motivated to advance the welfare of the corporation
and its owners This SUBMERGED PROFIT MOTIVE AS THE
PRIMARY FOCE MOTIVATING CORPORATE ACTION.
 Law & Economics Scholars: 1970s: Corporation is a nexu of
contractual relationships among SHs, creditors, managers,
BCA, s. 20- Pre-Incorporation ContractsAgent/Corp liability
 S. 20: (2) if a person contracts in the name of the company
before its incorporated, the person is deemed to warrant to the
other parties to the contract that the company will come into
existence in a reasonable time, and the person is liable to the
other parties for damages for any breach of that warranty.
Resulting breach = breach of warranty of authority
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 I: Are the directors obliged to comply with a special resolution?
NO
 R: The Board of the company via the charter had exclusive
jurisdiction to exercise all the company’s powers, subject to
special resolution. It is not competent for the majority of the SHs
at an ordinary meeting to affect or alter the mandate originally
given to the D’s by the articles of association. SHs cannot, by
ordinary resolution, vary the mandate of the D’s or fetter heir
discretion. Amendment of the articles is required. SHs have
no management rights.
employees, and suppliers. Implicit in these relationships is the
delegation from principal to agent of functional authority over
corporate affairs. This allows for specialization of tasks, and
entails the danger that the delegates will use their delegated
authority to pursuer their own goals at the expense of the goals
favoured by the delegators. This creates “agency conflicts” hat
arise naturally from the delegation of authority
o Owner manager: no scope for agency conflicts
o The more attenuated the link becomes, the higher
the likelihood of agency conflicts.
o Corporations will avoid agency costs b/c there are
incentives for private actors to choose a corporate
framework that provides investors with assurance
that managerial agency problems will be costeffectively minimized. Also, legal and market
mechanisms will discipline managers
 Ie-VOTING: If SHS are unhappy, they can
vote D’s out or vote against special
changes, etc.
BCA
 S. 1(3): An individual is appointed director if the person is
appointed in accordance with the act or articles; designated as a
director on the notice of articles that applies to the company; or is
declared to be so by the court.
 S. 135: If there are no directors in office, SHs (1/2 of voting
shares required), incoporators, or subscribers may call a meeting
to elect directors; and appoint a quorum of ppl to be directors until
the vacancies are filled at that meeting.
 S. 136: Directors must manage or supervise the management
of the business and affairs of the company. IF this is limited,
the limit isn’t effective unless there’s actual notice.
 S. 143: An act of a director or officer isn’t invalid merely because
of an irregularity in their election or appointment.
Roles of the Parties
 Directors manage, or supervise the management of the business
and the affairs of the corp
 Officers exercise the power to manage delegated to them by
directors, and serve at the pleasure of the Board
 SH’s are the residual claimants to the assets of the corporation,
but their only power is to vote for the election of directors and
proposals made to them.
Deadlock Doctrine
 Barron v. Potter: If the Board can’t function because of a
deadlock, residual power formerly vested in the Board can be
exercised by Shareholders in a general meeting.
Automatic Self-Cleansing Filter Syndicate v.
Cuninghame
 F: A’s articles provide that mgmt of business is vested in
directors, subject to regulations via special resolution. SHs pass a
resolution by simple majority approving sale of the company’s
assets, and the directors don’t carry the transaction into effect.
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has right to appear before and be heard at each audit committee
meeting, and must appear if requested to do so (6) if the auditor
asks for one, the audit committee must meet to consider a matter
the auditor brings before it.
 S. 225: Audit committee must review and report to the directors
on the company’s financial statements, and the auditor’s report,
before they are published
 S. 226: Ds must provide the audit committee with the financial
statements and the auditor’s report so they can comment before
publication.
B.) The Audit Committee
General
 Requirements only apply to public companies.
 A majority of the committee can’t be officers or employeesdemarcates inside/outside directors
 Forces public companies to have audit committees and give the
committee responsibility to present/analyze financial statements.
 Directors aren’t required to be financially literate, so there’s no
guarantee that the committee will be able to fix any issues.
C.) Sale of Undertaking
Auditors
General
Arms length evaluation comes from an auditor, who is professionally
required to carry out independent spot checks of the company’s
financial statements
o If the auditor doesn’t carry out the task, he may be
liable to the company for negligence.
 Are auditors liable to SHs?
o Courts have recently held that auditors owe a duty of
care to SHs
o Courts reluctant to find liability when SHs sue
claiming prejudice because they bought shares in a
company without realizing the auditor had been
negligent.
 Auditor has the right to address the committee if requested, and
vice versa, but there is no requirement that this actually happens.
 Constitutes a fundamental change that can lead to the appraisal
remedy (s.301(5))
 CL: Failure of the substratum was a grounds for the winding up of
a corporation; if everything was sold, then an SH could ask for the
winding up of the company. Now replaced by s. 301
 Sale must be approved by special resolution (301(1)(b))
 Doesn’t allow SHs to force directors to sell the undertaking; the
special resolution isn’t binding on the directors (301(4)
 Sale of undertaking isn’t invalid if it’s for valuable consideration,
even if it isn’t approved by special resolution (301(3)(a))—
protection for 3rd party rights.
 Court has the broad discretion to sort out the equities (s.301(2))
BCA
BCA- Audit Committee Requirements
 S. 301(1): A company must not sell, lease, or otherwise dispose
of all or substantially all of its undertaking unless
o (a) It does so in the ordinary course of business or
o (b) it has been authorized to do so by special
resolution
 S. 301(2): If the company contravenes (1), the court, on the
application of any SH, D, or Creditor, may
 S. 223: Audit committee provisions only apply to PUBLIC
COMPANIES
 S. 224: (1) D’s must elect once per year an audit committee, (2)
made up of at least 3 directors, and a majority must be outside
directors, (3) quorum is a majority of the committee (4) members
must elect a chair and can determine own procedure (5) auditor
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o
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(a) enjoin (prohibit by injunction) the proposed
disposition
o (b) set aside the disposition
o (c) make any other appropriate order
S. 301(3): The disposition of all or substantially all of the
undertaking isn’t invalid because of a (1) contravention if the
disposition is
o (a) for valuable consideration to a person dealing
with the company in good faith
o (b) ratified by special resolution
S. 301(4): Even if the sale is ratified by the SHs, the directors can
abandon the sale if they want to.
S. 301(5): Notice of dissent to the special resolution is cool.
S. 301(6): Prohibition in (1) doesn’t apply if the disposition is
o (a) a security interest
o (b) by a lease if the lease isn’t longer than 3 years,
and renewal option doesn’t exceed 3 years
o (c) to a wholly owned subsidiary
o (d) to a company of which the company is a wholly
owned subsidiary
o (e) To other affiliated companies
o (f) To a person who holds all the shares of the
company, or a holding company.
CBC Pension Plan v. BF Realty Holdings
 F: CBC owned 25% of the debentures issued by BCE. IF all or
substantially all of the assets were sold, it would trigger an
obligation of the buyer to pay off the debentures because of a
protective provision. 18% of assets sold.
 I: Did a series of transactions trigger this obligation? Was there a
sale of substantially all of the undertaking (NOTE- this isn’t a true
301 situation, but the same language is used, so it’s similar)? NO
 R: Canadian courts have adopted the Kantz test. The qualitative
and quantitative test must work together because the
quantitative test alone isn’t sufficiently nuanced. QualitativeIs the transferred property integral to the business, so that the
transfer strikes at the core of the business. Here, this wasn’t a
quick decision; there was a depression of the real estate market,
and the selling was strategic to prevent the company from
imploding. This was done to protect SHs. Quantitatively, only
18% was sold off, which isn’t much. The sale here was unusual,
but was reasonable given the corporation’s financial situation.
Considerations @ Qualitative Stage:
 What was a reasonable act on the part of the D’s (CBC)
 If a corp has shifted industries in the past (s. 301(1)(a))
What Constitutes All or Substantially All? Katz v.
Bergman (US Case in CBC)
7.) Shareholders’ Rights
 F: US corporation with assets in Canada sold all of the Canadian
Assets- 51% of the assets generating 45% of their profits
 I: Were those assets all or substantially all of the undertaking?
 R: 2 prong test: Quantitative and qualitative terms.
Quantitatively, will look at the % of assets sold. Qualitatively, look
at the qualitative significant of the sale. Even though the assets
were underperforming, and generating less profits than their
actual worth, this was substantially all of the undertaking.
General:
 General assumption that an SH is an owner of a corporation, but
what does ownership mean here? SH don’t have right to assets
of the corporation.
 S. 1: Shareholder: A person whose name is entered in a
securities register of a company as a registered owner of a share
 Shares: Choses inaction- intangible property (bundles of rights)
 3 Common Rights:
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SHs will rarely be able to attend a SHs’s meeting,
and vote by proxy instead.
o Beyond reach of most SHs to nominate candidates
for Directorships
o Rational SH Apathy: For the average SH, not worth
it to educate themselves on voting ramifications.
Many don’t return proxy forms, or just endorse
management without considering it themselves. One
vote won’t make much difference in that situation…
diminishing returns
o Considerable costs of SH voting
o Most SHs will just sell their shares if they’re unhappy
 Should voting be done away with? NO. Can serve as a powerful
check on the nearly inevitable tendency of management to depart
from their assigned role of maximizing corporate profits
o SHs with large share blocks (institutional investors)
will have much better incentives to use their voting
power to ensure directors are competent
o Voting class of security holder facilitates
replacement of inefficient management through
hostile takeover bids
o Facilitates the replacement of inefficient
management by means of a proxy battle
o
o
Voting: At corporate meetings. Some shares have
enhanced voting rights (different classes of shares);
non-voting shares may have voting rights in special
circumstances (sale of undertaking)
o Dividends: Directors declare dividends at their
discretion based on the corporation’s best interest.
In US, courts have ordered dividend payments, but
not in Canada. Preferred shares usually get
payment first if dividends are declared
o Distribution on winding up: Preferred shares are paid
first after creditors
 Sources of Rights:
o Corporate constitution/articles can set out rights of
specific classes of shares
o CL: Gives rights including that D’s do not exercise
power in any way that breaches a fiduciary duty
o Statute: Includes remedies such as oppression &
appraisal
o 4.) SH agreement (if any)
Preferred v. Common Shares
 Preferred Shares: Class of shares that usually don’t have the
right to vote, but have a higher priority for dividends, and on
winding up. Often bought back after a set time. Part way between
a loan and buying shares.
 Common Shares: Ordinary. Lower rights to dividends, etc, but
have the right to vote.
BCA
 S. 173(1): Unless memorandum or articles say otherwise, an SH
has one vote/share and is entitled to vote in person or by proxy.
 S. 173(2): Unless memorandum or articles says otherwise, voting
at a meeting must (a) if ppl are voting by telephone, etc, be by
poll (b) if a poll is demanded by a SH or D, must vote by poll, (c)
or in any other case, by show of hands.
 S. 173(4): If a resolution is submitted, an SH can, either right
before or after a vote taken by show of hands, demand a poll
 S. 173(5): A company must keep a record of ballots case on a
poll for at least 3 months
 S. 173(6): SH or proxy holder is entitled to inspect ballots
A.) Voting Rights
General
 A device for controlling managerial diversion, slack, and riskshifting, and registering SH preferences relating to important
business decisions
 Efficacy often questioned because…
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 S. 173(9): If a SH’s shares normally don’t carry voting rights is
given the right to vote on a matter by the act, the SH has, on that
matter, the greatest of (i) one vote/share; (ii) same # of
votes/share as are attached to shares with the least amount of
votes per share via the memorandum or articles; or (iii) the
number of votes per share as are attached to those hares in
relation to the matter via the charter
 S. 174(1): Voting by telephone is OK unless the articles say no
 S. 174(2): But a corporation isn’t bound to provide that
opportunity
 S. 174(3): If someone participates/votes by telephone, the person
is deemed present, and the meeting is deemed to be held at the
location in the notice of the meeting.
AGMs
B.) Shareholder’s Meetings
Special/extraordinary meetings
 Statutory requirement (s.166)
 C’s can establish a reference date by which to determine, and
must hold the AGM within three months of that date (s.171)
 Board membership to be approved on a rotating basis at AGM;
financial reports received (s.185)
 Corps can dispense of AGM requirement by unanimous
resolution (s. 182)
 Quorum = 2 SHs, unless it’s a 1 person corporation (s.172)
 Election of Chair (178)
 Minutes (179)
 Consent Resolutions (180)
 Any SH meeting besides an AGM
 AGM rules will apply (s.181)
General
 Companies obliged to have one annual meeting each year for
election of directors, appointment of auditors, and the
presentation of financial statements/auditor’s report
 Directors can call a special meeting of SHs (usually when
management is contemplating a fundamental change in the
corporation that requires SH approval
 Designed to have a form for SH to provide a forum for SHs to
discuss matters relating to the business and affairs of the
corporation
 4 Types of Meetings:
o AGM
o Extraordinary/special general meeting: any meeting
of SHs called outside of AGM (s.181)
o Court-ordered meetings SH asks court to order D’s
to hold general meeting (s. 186)
o Requisitioned meetings (certain % of SHs
agree/request that D’s convene meeting (usually
5%)
BCA part 5, MGMT, Div. 6, Meetings of SHs
 S. 166: Location of General Meetings: An AGM must be held in
BC, unless the articles say so, or the location is approved by the
registrar before the meeting.
 S. 167: Requisitions for General Meetings:
o (1)- SHs may requisition a general meeting.
o (2) Need to hold 1/20th of voting shares to make
requisition
o (3) A requisition must state the business, including
special resolutions, be signed by requisitioners, may
be one or multiple records in form, and must be
delivered to he registered office of the company.
o (5) On receiving the requisition, the D’s must call a
general meeting within no more than 4 months of
requisition, and must send a notice of the date to
each SH and D
o (7) No need to schedule a meeting if
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(a) the D’s have called a gen. meeting
already,
 (b) they just had a meeting about the same
thing,
 (c) the business doesn’t relate to the
company’s affairs in a significant way,
 (d) the primary purpose for the requisition is
publicity or dealing with personal business,
 (e) the business has already been
implemented,
 (f), the business would cause the company
to commit an offence, or
 (g) it’s beyond the company’s power to
implement the business.
o (8) If the D’s don’t send a notice of a meeting within
21 days, the SHs, or any of them holding more than
1/40 of the C’s voting shares, may send notice of a
meeting themselves
o (9) SHs calling meeting themselves must do so in
accordance with (5) and hold it like a regular
meetings
o (10) Companies must reimburse SHs for the cost of
the meeting if they hold it themselves.
S. 169: Notice of General Meetings: (1) A company must send
notice of the date, time and location of a general meeting at least
the prescribed # of days before, but not more than 2 months
before the meeting to each SH and each D. (2) Accidental
omission to send notice doesn’t invalidate the proceedings at that
meeting
S. 170: Waiver of Notice: An SH can waive the requirement of
notice
S. 171: Setting Record Dates: D’s can set a date as the record
date to determine when dividends can be paid, notice of meeting,
etc.
S. 172: Quorum of SH meetings: (1) Whatever’s set in articles;
or 2 SHs; or, if the number of SHs is less than 2, all of the SHs.
(2) Can’t do any business besides setting a new meeting date if
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no quorum. (3) One person can be quorum if only 1 person is
entitled to vote
S. 173: Voting: SEE ABOVE SECTION ON VOTING FOR
DETAILS ON THIS PROVISION
S. 174: Participation at meetings of SHs: SEE ABOVE
S. 175: Pooling Agreements: 2+ SHs can, in a written
agreement, agree that they’ll vote along with the terms of the
agreement
S. 176: Date of Resolution: A resolution passed at an SH
meeting is passed on the date and time it was in fact passed,
even if the resolution is passed at a continuation of an adjourned
meeting
S. 177: Subsidiaries not to vote
S. 178: Election of Chair: SHs present at a meeting can elect an
Sh a a chair, unless memo/articles say otherwise
S. 179: Minutes: Have to keep minutes, and have chair sign
them, which creates a rebuttable presumption the meeting was
actually held
S. 181: Rules Applicable to General Meetings apply to other
SH meetings
S. 182: AGMS
o (1) Company must hold an AGM (a) for the first time,
not more than 18 months after the date on which the
C was first recognized, (b) and thereafter, at least
once in each calendar year
o (2) All of the voting SHs may, by unanimous
resolution, defer the holding of an AGM, consent to
all of the business, or waive the holding of an AGM
o (3) If a (2) resolution is passed, the SHs must select
a new annual reference date
o (4) If a unanimous resolution isn’t passed under (2),
the registrar may allow the company to hold an AGM
on a date later than the required date
o (5) No need to hold an AGM if a (2) resolution is
passed.
S. 185: Information for SHs at AGM:
o (1) D’s must put before the SHs:
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
o
o
(a) & (b) annual financial statements
required by Securities Act or other statutes
(public companies)
 (c) In other cases, the financial statements,
if any, tht the D’s are required to produce &
publish on or before the annual reference
date that relates to the AGM
 (d) any auditor’s report on the financial
statements
o (2) D’s must provide a copy of the financial
statements and auditor’s report to a SH or proxy
holder upon request
o (3) D’s must promptly send SH a copy of financial
statements if an Sh requests a copy within 6 months
of the annual reference date
 S. 186: Powers of Court (note- technical power. Won’t use as
a defacto oppression remedy
o (1) Court may, on its own motion or on the
application of the company, D, or SH, order that a
meeting be called, and give directions it considers
necessary to the call (holding & conduct of meeting)
o (2) The court may make an order under (1), if it’s
impracticable for the C to call the meeting in
accordance with the Act, if the C fails to hold a
meeting in accordance with the regulations, or for
any other reason
o (3) The court may order that the quorum or notice
requirement be varied or dispensed with in respect
of a meeting.
Meeting must be convened within 4 months
No need for judicial support, and corp must bear
financial burden of holding/calling the meeting
o If corp doesn’t call meeting, 2.5% of voting shares
can convene meeting with right to reimnursement
(167(8))
o Exceptions in 167(7)
o SHs often try to force C to consider social issues,
which often fail b/c of proxy system (voting with
mgmt).
o SHs also technically not allowed to tell D’s how to
mg business. Resolutions passed are not binding,
unless it’s a charter amendment allowing SH mgmt
with respect to that issue.
o Useful because it can embarrass management
 In case of conflict, the court may order a meeting of the SHs
(s.186)
o Helps to deal with negligent directors
o It’s a mild but effective nudge from the SHs
o Helps to do this first if you’re looking to seek another
remedy down the line. Shows SHs are attempting to
resolve a conflict
Air Industry Revitalization Co. v. Air Canada
 F: Airco sought to take over Air Canada. Air Canada called a
special Sh meeting. Next day, Airco requisitioned a meting as
SHs
 I: Was the requisition within the list of specified exceptions (ie- a
meeting date had been set)? NO
 R: The record date set exception only applies if the business the
SHs wanted to discuss would be on the agenda. As it wasn’t clear
the TO bid would be discussed, the exception won’t apply
 I: Is an SH entitled to amend articles by way of requisitioned
meeting? YES
Requisitioned Meetings
 S. 167 & 168 gives SHs the power to force the Board to hold a
meeting
o Need 5%+ of voting shares
o 167(3)- need a statement of purpose, ID or
requisitioners, and delivery to corp
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 R: Nothing in the statute to say this. SH’s can vote on charter
amendments at an AGM, why shouldn’t they be able to do so at a
special meeting?
 I: Should the court call the meeting? NO
 R: Airco has its own remedy; they can call the meeting
themselves because none of the listed exceptions apply

SH Proposals: General

 4 categories of proposals:
o Amendment to articles
o Enactment of a by-law
o SHs with 5%+ voting shares may nominate directors
o Residual proposals relating to affairs of the business
 Only public companies; only relating to AGM
 Must have 1%+ of voting shares and have been an SH for 2
years (s.187)
 Must send 3 months in advance, and must make declarations
(who you are, how many shares (s.188)
 MGMT must give proponents right to speak (189 (3)); C must
send to SHs proposal and supportive statement as part of AGM
notice (189 1 & 2).
 Can seek a compliance order
 D’s can deny items that fall within list of exceptions (189(5). Onus
on D’s to prove exceptions apply
 Doesn’t alter allocation of power btw SH and Ds- resolution isn’t
binding on D’s if the matter is within MGMT’s discretion

o
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
SH Proposals: BCA
 S. 187:

o
Qualified SH = a person who has one+ voting
shares; and has been a registered owner for 2
years.
 S. 188: (1) Proposals are valid if:
o (a) signed by submitter
o (b) Proposal is signed by the qualified SHs
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
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(c) Proposals are received at least 3 moths before
AGM
o (d) Proposal is accompanied by a declaration from
the submitter and each supported, signed, providing
name/mailing address/number of shares
S. 188 (2): Proposal may be accompanied by one written
statement in support of the proposal
S. 188(3): A proposal & any statement must not exceed 1000
words
S. 189: (1) Company must sent the text of the proposal, names of
parties, text of statement, all the other info, in or within the time
set for the sending of the notice of the AGM, or in the company’s
info circular in respect of the AGM
S. 189(3): Company must let the person speak at the AGM w/
regards to their proposal.
S. 189(4): If there are multiple proposals relating to the same
matter, must comply with 1-3 with regards to the first proposal,
but not the ones received later.
S. 189(5): EXCEPTIONS- no need to comply if
o (a) If notice of AGM has already gone out
o (b) proposal isn’t valid
o (c) substantially the same proposal was submitted
and turned down in the previous year
o (d) proposal doesn’t relate to affairs of corporation
o (e) primary purpose of the proposal is securing
publicity or enforcing a personal claim
o (f) the proposal has been implemented
o (g) The proposal would cause the company to
commit n offence
o (h) It’s beyond C’s powers to implement
S. 190: No one is liable because the person complies with these
sections
S. 191: (1)- if a company isn’t going to comply, they must, w/in 21
days, send the submitter written notice and an explanation why
S. 191 (2): Submitter can apply to a court for review of that
decision
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 S. 191 (3): On application, the court can restrain the holding of
the AGM, and make an order that the company comply, order that
the company hold a special meeting to consider the proposal;
and/or order costs
separate resolution of those SH, or anther way the articles
provide for.
 S. 131(a): Vacancies amongst directors may, if removed as
above, be filled by the SHs at the meeting he’s removed at, or by
SHs or the remaining directors.
Exceptions: Varity Corp. v. Jesuit Fathers of
Upper Canada
8.) Enforcement of Duties Owed by
Directors and Officers to the
Corporation: The Derivative Action
 F: Application to V for an order permitting V not to include in its
mailing to SHs a proposal that the C end its investments in South
Africa
 I: Is the corporation obliged to put the proposal forward? NO
 R: The proposal has a specific purpose, and the purpose is
directly relevant to V. However, the language of the proposal and
supporting statement indicate that the primary purpose of the
proposal is the abolition of apartheid in South Africa, and the
Corp is therefore not obliged to put the proposition forward.
A.) The Rule in Foss v. Harbottle
The Rule
 The company is the only proper plaintiff to bring an action for a
breach of a duty owed to the company.
 (premised on the separate legal personality of the corporation
and on majority rule in internal corporate affairs)
 If SH sue in the corporation’s name, the initiative could be foiled
by the other SHs voting to ratify the breach (ie- the company
could forgive the directors’ negligence). Therefore, had to be
corporation suing, not a SH.
 Exceptions to when action had to be brought by corporation (no
longer relevant)
o Ultra vires Actions (can’t be ratified)
o Matters requiring special resolution (as ratification is
based on a simple majority)
o Personal SH claims, which couldn’t be undermined
by a vote
o Fraud on the minority: D’s have done something so
aweful it can’t be ratified.
Exceptions: Greenpeace Foundation of Canada
v. Inco Ltd
 F: Proposal to limit sulphur dioxide emissions at Inco’s operations
to 274 tons per day.
 I: Was Inco obliged to circulate the proposal? NO
 R: The proposal was voted on the previous year, and received
very little support. Proposals were substantially the same, thus
running afoul of an exception
o Note that the earlier proposal would have been
much more costly. Not important for the court.
Removal of Directors: BCA
 S. 128(3): D’s can be removed by special resolution, or by
another method specified in the articles
 S. 128(4): If a special class of shares are the only ones who can
elect/appoint directors, a D can only be removed by a special
General:
 Leading English Case followed in Canada until 1970s.
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 Now replaced by statute. Has made the process much more
formulaic and change the nature of corporate litigation.
 Still good law in other commonwealth jurisdictions that don’t have
stat provisions

B.) The Statutory Derivative Action
o
General
o
 Applies when someone other than the company seeks leave to
sue in respect of an alleged breach of a duty owed to the
company.
 Who has Standing? SH or Director.
 Style of Cause: Corporation v. Director(s)
 Most are for s. 142 (fiduciary duty) breach
 Before an SH or a D can bring an action in the C’s name, must
get leave to do so via. S.232 & 233.
o
(b): Notice of the application for leave has
been given to the company and any other
person the court may order
 (c): The complainant is acting in good faith,

And (d): it appears to the court that it’s in
the company’s best interest for the legal
proceedings to be prosecuted or defended.
(2): this doesn’t prevent the court from making an
order that the complainant give security for costs
(5): No legal proceeding prosecuted/defended
derivatively may be discontinued, settled, or
dismissed without court approval
(6): No application can be stayed or dismissed b/c of
ratification, but the court may consider evidence of
ratification in making a decision whether to grant
leave under s. 232.
Re Northwest Forest Products Ltd
 F: N, 51% owner of Fraser Valley Pulp, sells FVP’s assets for
undervaluation (breach of FD). Northwest’s D’s were petitioned
by SHs to vote to set aside the sale, but N did not respond. SH
seeks leave to commence a derivative action
 I: Is it in the company’s best interest that the SH’s bring a
derivative action? YES
 R: The SHs must make allegations that, if proven, it would be
in company’s best interest to prosecute. No need to establish
a Prima Facie case. No need to prove the elements of the case,
as the SH probably doesn’t have access to the evidence to
establish a PF case. Keep s.233(6) “in mind”- no problem with
ratification here because of finding on facts that there was no
ratification.
BCA
 S. 232: Derivative Actions
o (2): A complainant may, with leave of the court,
prosecute a legal proceeding in the name and behalf
of the company
o (a): to enforce a right, duty, or obligation owed to
the company that could be enforced by the company
itself, or
o (b): to obtain damages for a breach of a right, duty,
or obligation referred to in paragraph (a)
o (3): duty can arise under the Act or otherwise
o (4): With leave, a person can also defend a legal
proceeding brought against the company
 S. 233: Powers of Court in relation to derivative actions
o (1):Court may grant leave under s.232(2) or (4), on
terms it considers appropriate if…
 (a): the complainant has taken reasonable
efforts to get the corporation to sue
Re Bellman and Western Approaches Ltd
 F: W faced takeover bid by Dukes. Alleged breach of s. 195 of
Act which prohibits taking out loans to take control of firm’s
shares. B was opposed to the takeover and asked W to sue. W
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started a committee to look at the issue, which determined that
the corporation didn’t need to bring an action. Passed a resolution
that the C would not sue. B then asked for leave to bring an
action under s. 232/3
 I: Can B Sue Derivatively?
 R:
o 1- Notice to Company: Letter omitted one ground
on which B wanted to sue, but that’s OK. It’s
sufficient to say you tell the corporation you want to
bring an action derivatively
o 2- Acting in Good Faith: yes
o 3- In Corporation’s Best Interest (KEY)- An
arguable case must be shown to subsist. Statute
eliminates CL ratification allowance. Court has wide
discretion to determine what’s in best interest.
Litigation committee had one person on it against
whom allegations were made, and the report didn’t
deal with one of the alleged breaches. Report is
therefore set aside for purpose of determining it a
derivative action is in the corp’s best interest.
C) Costs
Litigation Committee Reports and the
Corporation’s Best Interest
Re City Equitable Fire Insurance Co. Ltd
General
 S.233(3)(b): Interim costs available to reduce financial hardship,
but may have to pay them back if you loose
 S.233(4): Courts may order a company to indemnify the
complainant for all costs incurred
 S.233(4)(b) Court may order recovery of costs against SHs if they
lost under 4b or c
 S. 234: If a director is found guilty but acted honestly, the court
may relieve liability.
9.) Duties of Directors and Officers
A.) Care and Skill (Negligence)
i.) common law
 F: Order for winding up of once profitable insurance company,
found a huge deficit (1,200,000) b/c of investments in securities
that depreciated, and of diversion of funds by the managing
director into another company in which he was interested. D jailed
for fraud. Liquidator brings an action against C’s D’s and auditors
for misfeasance, negligence, breach of trust, and breach of duty.
 I: Were the other directors and auditors negligent? Did they
breach the duty of care they owed to the corporation? YES
 R: Duty of care woed by directors will be different in every
situation. D’s must act honestly and exercise some degree of
skill and diligence. If they ct honestly, D’s only liable if they
are culpable of gross negligence in a business sense. Policy
basis- business judgment rule. Hard to hold D’s accountable.
Different companies will give D’s different responsibilities based
on their business judgment. 3 prong test for Reasonable care:
 In Bellman, the litigation committee report was flawed; what if
those flaws weren’t there? What weight should be given to a
report of a committee set up by the Board re: allegations against
the Board?
 US Approaches:
o Deference to the business judgment rule- not OK for
the court to deconstruct the report to foray into the
corporation’s business (Bennett).
o OR Business judgment can’t override the court’s
judgment (Zapata)
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o
o
o
 S. 142(2): This section is in addition to, and not in derogation of,
any enactment or rule of law or equity relating to director’s duties
and liabilities
 S. 142(3): Can’t contract out of the duty to exercise care or
fiduciary duty via memorandum or articles
 S. 154: Joint/several liability for breaches of statute
o (1) D’s who vote for or consent to a resolution
authorizing the company to do any of the following
are jointly and severally liable to restore to the
company any amount paid or distributed
 (a) do a restricted act that causes them to
have to pay compensation
 (b) Sell shares at a discount
 (c & d) pay a dividend or making a payment
when the company is insolvent
 (e) indemnifies itself
o (5): A director who is present at a meeting is
deemed to have consented unless their doesn’t is
recorded, put in writing and delivered before the end
of the meeting, or promptly thereafter.
o (7): If a D doesn’t go to a meeting, they are deemed
to have consented to the resolution (8) unless they
deliver a dissent in writing as soon as they become
aware of the resolution.
 S. 157: Defences to breaches of 154 and 142: Gloss on the
CL: (1) A D isn’t liable under 154 and has complied with 142
duties if the director relied on
o (a) financial statements (audited, etc)
o (b) A written report of a professional
o (c) a statement of fact represented to the D by an
officer of the C to be correct
o (d) Any record, info, or representation that the court
considers provides reasonable grounds for the
actions.
o (2) no liability if the D did not know or couldn’t have
reasonably known that the act was contrary to the
Act.
A director need not exhibit a greater degree of
skill than may reasonably be expected from a
person of his knowledge and experience
Directors are not bound to give continuous
attention to the affairs of his company; his duties
are of an intermittent nature to be performed at
periodical board meetings. He is not bound to
attend all such meetings, though he ought to
when able
A director is justified in trusting that an official
perform his/her duties honestly
Notes on the Test
 The test is partially subjective: If D’s have specific skills, they
must give the corporation the benefit of those skills.
 If you’re more involved in the corporation’s management, you’re
expected to bring your special knowledge to bear on your actions
as a director.
 BCE & Peoples: SCC says directors have obligations to
“stakeholders” like creditors. In the future, this may extend to the
environment, etc.
 Duties are owed individually although mgmt functions are
exercised collectively.
ii.) statutory reform
BCA- Negligence
 S. 142(1)(b): A director or officer must, when exercising powers
and performing functions, exercise the care, diligence and skill
that a reasonably prudent individual would exercise in
comparable circumstances
o NOTE: Corporation isn’t referred to here- Bell- SCC
says therefore, must adhere to minimal standard of
care to all stakeholders (although they may have
trouble finding standing)
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Re People’s Dept. Stores Ltd.
and maybe the environment. Here, the Board acted through a
committee, and respected contractual rights. Business judgment
rule applies- the D’s thought that the act was in the corporation’s
best interest. Even though there was risk, the court won’t
interfere. Therefore, they did not breach their duty.
 F: P & Wise purchased inventory jointly to obtain economies of
scale , both went into liquidation, so the creditors of P and W
were pitted against one another. The trustee in bankruptcy sued
Wise alleging the compromised people’s interests and breached
duty owed in s.142 (negligence &/or breach of fiduciary)
 I: Did W’s directors breach their duty of care? NO
 R: Deference will be granted to D’s b/c D’s and O’s often
have business expertise that courts do not (bus. Judgment
rule).  D’s will not have breached duty of care if they act
prudently and on a reasonably informed basis in light of all
the circumstances about which the D’s or O’s knew or ought
to have known. Claim or breach of duty of care can be
brought by any “stakeholder” b/c the provision does not
refer to an identifiable party as beneficiary of duty, and will
include creditors. D’s are personally responsible or the action of
the company only if they commit a gross fault. D’s must show fair
and reasonable diligence in managing the company and act
honestly, but no more than that, and they need have no special
knowledge. Here, the corporation implemented a new policy that
was reasonable as it was made with a view to rectifying serious
and urgent business problems in circumstances where there may
have been no solution. Que c of a found it persuasive that they
relied on the specialized knowledge of Clement, who had a BA in
commerce and professional experience in administration and
finance for 15 years (Last part overturned by SCC).
B.) Fiduciary Duties
BCA- Fiduciary duties
 S. 142(1)(a): A director or officer must act honestly and in good
faith with a view to the best interests of the company
 S. 142(2): this is in addition to other enactments or rules of law or
equity
 S. 142(3): Can’t contract out of it.
Introduction:
 Fiduciaries are legal norms that are imposed on directors and
managers in relation to their conduct with the corporation and
SHs
i.) Self-Dealing (contracting with the
corporation)
General
 Self-dealing transactions involve contracts or transactions
concluded between the directors and officers of a corporation
(directly or through their interest in another entity) and the
corporation itself.
 Simplest form: sale of an asset to the corporation by a D or officer
at a price that exceeds the asset’s fair market value. Constitutes
an unbargained for diversion of wealth from SHs to the interested
party.
BCE Inc. v. 1976 Debentureholders (2008)
 F: Largest leveraged buyout in Canadian history (the privatization
of Bell). Needed SH approval via special resolution and judicial
approval. Approved by 98%, bt denied by the remaining 2%
(DBholders). Arrangement challenged by Bell’s DBholders b/c it
was unfair to them and there was oppression (see Bell later…).
 I: Was there a breach of the duty of care?
 R: Directors owe a duty to, and must consider the best interest of
all stakeholders- certainly creditors, as well as SHs, governments,
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Common Law: Aberdeen Railway Co. v. Blaikie
Bros
Legislative Responses: General
 Statutory plan of liability when D’s have a contract with the
corporation
 At CL, such a K would be voidable as a prima facie breach of
fiduciary, though it could be ratified via a SH vote
 CL codified in these sections- it’s the only instance where statute
details a particular form of liability for a breach of fiduciary duty
 If a D tells his fellow Board members of an interest, and doesn’t
vote at the board meeting, and the other D’s ratify, then the D can
keep the money from their interest; he/she can even be counted
as quorum at the meeting (s.149)
 If all the directors have an interest, and they ratify beforehand,
they’re fine. If they don’t ratify beforehand, after the fact, they can
keep the money if it’s approved by special resolution (149(3).
 Statute only applies to D’s & SOs- CL will still apply to
regular (not senior) officers
 F: B= corporation’s director. Also in another partnership. Entered
into K for partnership to sell company a quantity of chairs.
 I: Did B breach his fiduciary to the corporation?
 R: D’s are agent of corp with fiduciary duties towards their
principle. No one can enter into engagements in which he
has or can possibly have a personal interest conflicting or
possibly conflicting w/C. Corp’s agents must promote best
interest of the corporation whose affairs they are conducting. No
questioned may be raised as to the fairness or unfairness of a
contract entered into where an agent has a conflicting personal
interest. Inflexible. No inquiry into the subject of whether the K
would have been good for the corporation. Doesn’t matter if
there were multiple directors, b/c each director is bound to assist
other D’s in getting the best possible rate.
o Here, B was a director, and was therefore bound to
a fiduciary. His personal interest would induce him to
fix the price of the chair as high as possible.
 Corporation had the right to rescind the K. If they chose not to
rescind, the corp could affirm the contract notwithstanding the
conflict of interest.
Legislative Responses: BCA: (D’s and Senior
Officers Only)
 S. 147(1): Director or senior officer holds a disclosable interest in
a K or transaction if (a) the K is material to the company; (b) the
company is entering into the contract; and (c) the D or senior
officer either has a material interest in the contract or transaction;
or has a material interest or is D or SO of a person who has a
material interest in the contract or transaction.
 S. 147(2): No disclosable interest if (a) the situation arose before
the Act came into force, or (b) both he company and the other
party are wholly owned subsidiaries of the same corp, or (c) – (e)
the companies are otherwise affiliated.
 S. 147(4): No disclosable interest merely because it’s part of D’s
remuneration, ieo A.) K is a security granted to the company
o B.) the K relates to an indemnity or insurance
o C.) The K relates to the remuneration of the director
or senior officer in their capacity as such
Common Law: Northwest Transportation Co v.
Beatty
 F: One of the SHs sued the C and 5 Ds to set aside sale to the C
of a steamer by a director. Ratification vote waiving a breach
 I: Could a director with an interest in the conflict vote n an SH
vote to ratify his own wrongdoing? YES
 R: Directors may vote as SHs however they see fit, even if it
would ratify their own wrongdoing. NOTE- THIS NOW ONLY
APPLIES TO (non senior) OFFICERS
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o
o
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









D.) The K relates to a loan to the company
E.) The K has been or will be made with or for the
benefit of a corporation that is affiliated
S. 148(1): D’s or senior officers must account to the company for
any profit that accrues under or as a result of a K in which there’s
a disclosable interest,
S.148(2): Unless,
o (b) the K is approved by the D’s in accordance with
s. 149, after the nature and extent of the interest
was disclosed
o (c) The contract is approved by a special resolution
o (d) Whether or not it’s ratified via s. 149, the
company entered into the K before the director or
senior officer was appointed, the disclosable interest
is disclosed, and the D does not participate in or
vote as a D on any decision touching on the contract
or transaction.
S. 148(3): disclosure must be documented in minutes, etc.
S. 148(4): a general statement in writing is a sufficient disclosure
S. 148(5 & 6): SHs entitled to inspect disclosure, etc.
S. 149(1): A contract or transaction in respect of which disclosure
has been made in accordance with s. 148 may be approved by
the Ds or by a special resolution
S. 149(2): The director or senior officer at issue isn’t entitled to
vote on a director’s resolution to ratify
S. 149(3): If all the directors have a disclosable interest, then any
or all of them can vote to approve the K
S. 149(4): Unless the memorandum/articles say otherwise, a D
with a disclosable interest can be counted in quorum for a
meeting where his K wil be approved.
S. 150(1): Court may find on application by Director, senior
officer, SH, or beneficial owner of shares that the D/SO isn’t liable
to account for profit that the D isn’t liable to account for profit.
S. 150(2): Unless there’s been ratification, the court may order,
BASED ON A PERSONAL APPLICATION, if the K wasn’t fair and
reasonable to the corporation, that the corp is enjoined from




entering into the transaction; order the D/SO is liable to account
for profits, or any other orders (PERSONAL REMEDY HERE)
S. 151: A contract isn’t invalid because the disclosable interest
wasn’t disclosed and it wasn’t ratified.
S. 152: A D/SO has no obligation beyond this division to disclose
an outside interest
S. 153(1): If a D/SO has an office or property that could come into
conflict, the D/SO must disclose the nature and extent of that
conflict
S. 153(2): The disclosure must be made to the D’s Promptly after
they become a D/So of that company or the other company.
o Only required to disclose to other D’s, not SHs.
Stand-alone duty; no actual conflict necessary.
Differences btw Statute and Common Law
 At Common Law: D’s could vote to ratify their own wrongdoing;
disclosure of outside interests not mandatory; excusatory
provision in articles OK; SHs only people able to ratify
 Under Statute: D’s can’t vote to ratify own wrongdoing (149(2));
No excusatory provision in articles; Disclosure of outside interests
mandatory (s.153); Board can ratify interests (s.149(1))
ii.) Corporate Opportunities
Reasons it isn’t Codified:
 Defining when there will be liability will also determine when there
isn’t liability; liability may be inadvertently limited
Cook v. Deeks
 F: Co-ordinated scheme for mgmt to channel business
opportunities for personal profit. Wanted Cok out, so formed a
new company and stole original C’s business. Tried to ratify their
conduct by a vote.
 I: Did the D’s breach their duty to the C? YES
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 R: Intolerable situation. While entrusted with the conduct of the
affairs of the company, they deliberately designed to exclude and
use their influence and position to exclude, the company whose
interest it was their first duty to protect. Can’t vote because
ratification would be acting as their own judge and jury, which is
not permissible.
 Difference btw corporate opportunities and self-dealing:
o Ratification is OK in self-dealing because the harm
to the corporation there is theoretical, and ratification
is therefore OK.
o In this case, ratification is impossible because the
corporation lost out on the whole benefit of the
profits.
Peso Silver Mines Ltd. v. Cropper
 F: P held a number of mining claims in the Yukon. Evidence
showed that it was typical for two or three proposals to be made
to Peso each week for it to acquire new claims/ C was a D of both
P and its parent, and president of an investment company and
several mining companies. An offer close to Peso’ claims was
considered by full board and rejected. Offer then made to C
personally, after P had rejected the offer and the matter had
passed out of P’s mind. C forms new company and a few others
to develop those claims.
 I: Did C breach his duty to the corporation? NO
 R: Rejection of an opportunity by the Board when a
corporation regularly rejects such offers, and D is
approached personally & has no special knowledge b/c of dship & is approached personally, may be a defence. C would
have been liable if the corporation hadn’t declined the offer.
However, because the corporation declined the opportunity, and
regularly declined opportunities such as this, there was
remoteness and no liability. C not approached in his capacity ad
D of P, but as an individual. No confidential info obtained b/c of
directorship. Not ratification—but approval that serves as
evidence to determine whether there’s a breach.
Regal Hastings v. Gulliver
 F: Company set up a subsidiary to buy a new theatre.
Corporation didn’t have enough money to purchase the theatre,
so several people put up money, including the directors. The
shares were then sold for a huge profit. The new owners and
directors sued the former directors in the corporation’s name. No
evidence of a lack of good faith, or that the corporation was
harmed. In fact, the corporation was helped, because it could buy
the new theatre.
 I: Did the former directors breach their fiduciary duty to the
corporation? YES
 R: The directors could have kept the profit if they’d asked for a
ratification of their breach at a SH meeting (note- this conflicts
with what Cook v. Deeks says), as ratification would acknowledge
the potential risk, but says its OK. In Cook v. Deeks, there was no
chance that the corporation could have turned a profit. Conflict
Test: Directors, standing in a fiduciary to the company, and
having obtained shares purely by reason of their fiduciary
directorships, are accountable for any profit they made out
of their role.
Canadian Aero Services (Canaero) v. O’Malley
 F: C went to Guyana, looked at opportunities, came home, and
quit, then started new corporation to do exactly the same project.
 I: Did C breach his fiduciary? YES
 R: Does away with “conflict rule” and “profit rule.” Goes back to
language of s. 142- D must act bona fides and in best interest
of the corporation. Open test, based on the facts of a case.
The focus should be on the nature of the opportunity (which
could lead to an obligation to bring opportunities to the
corporation before acting yourself if you find the opportunity
yourself..) Factors to consider (not exhaustive) below. Sr
officers owe same fid duty to C as Ds. Regal Hastings shouldn’t
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not to fetter their discretion (say in advance how they’ll exercise
it).
 ISSUES: Crown corporations- Owe a fiduciary duty to the general
public. How would a derivative action be brought?
be limited to benefits acquired while holding of offices. Irrelevant
whether Canaero would have actually obtained the K.
o Position held; nature of the opportunity; its ripeness;
its specificness, and the D’s relation to it; the amount
of knowledge possessed; the circumstances in
which it was obtained and whether it was special, or
even private; the factor of time in the continuation of
fiduciary duty where the breach occurs after
termination of the relationship with the company;
and the circumstances under which the relationship
was terminated.
iv.) Hostile Takeovers and Defensive
Management Tactics
Takeover Bids
 Any attempt to acquire 20%+ voting shares of a corporation.
 Law & Economics- takeover bids are good because they ensure
proper behaviour by D’s. Law that limit takeover bids and provide
D’s with greater job security should be rejected because they
impinge market efficiency
 Governed by Securities Acts, which set out disclosure provisions,
and some substantive rules
o 2 documents required to inform SHs of the details.:
Must give SHs a circular with info on the bidders
finances, any conflicts, etc. Essentially a
“prospectus.” Also, a Director’s circular revealing D’s
holdings of other shares.
o If you increase the price you’re offering for shares
part way, you have to “top up” the pay for the people
who sold their shares for a lower value
o Elaborate timing requirements.
US Case Law
 Burg v. Horn
o Fairness Test- Corporation’s interest is measured
against personal interest; Was it fair for the D to
exploit the opportunity? Similar to Canaeor. Adopted
here.
o Interest Test (common)- Does the corporation
need/have an interest in the opportunity? (vague
and unhelpful)
o Line of business test: Does the corporation do this
type of work? (can be too broad of a generalization)
o Burden of Proof Shifts- After a prima facie case of
a conflict is shown, the onus shifts to D to rebut the
presumption.
iii.) Competition
Proper Purpose Doctrine
 D’s cannot offer shares to defeat a takeover bid (HOGG); shares
may only be issued to raise capital, and not to defeat a takeover
bid.
 An issuance of shares relating to the D’s self-interest of staying in
power is a breach of a fiduciary duty to the corporation
BCA:
 S. 153: May be a director of more than one corporation, but you
are obliged to disclose as much (except with banks)
 RISKS: Have to be more careful of fiduciary breaches; more
likely to have facts that would lead to oppression, must be careful
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believe it’s in the C’s best interest to block the bid? Consider,
takeover corporation’s finances; whether they’d be closing plants.
Also consider Fairness. This is a strong example of the business
judgment rule. Directors are entitled to consider the
reputation, experience and policies of anyone seeking to
take over a C and use their power to protect the C if they
decide, on reasonable grounds, that a takeover will cause
substantial damage to the C.
o Here- the purpose of issuing the shares wasn’t to
defeat Teck, but to get the best financing for the
drilling technology. Was some evidence that Canex
was better at bringing mines into production in BC.
Essentially, both Teck and Canex were offering
financing, and M was choosing the corporation with
the best record.
Common Law/proper purpose: Bonisteel v. Collis
Leather Co.
 F: Collis ha issued 1208 of 1500 shares. B had 458 shares when
he agreed to acquire another 150 which would give him control.
Collis’ manager said he’d quit if B had control. Board issued
remaining shares, but didn’t offer B shares in proportion to what
he had. Issuance would eliminate his control.
 R: An issuance of shares was in good faith and in what the D’s
believed to be the best interest of the company (as Collis was
responsible for corp’s success). Nevertheless, the court held that
the issuance was made with an improper purpose—the purpose
of defeating the intended acquisition of a control block by a SH
that the Board didn’t approve of. Illegal even though it wasn’t a
breach of fiduciary.
Poison Pills
C.) Relief from Liability
 Provisions in a corporate charter/memo/articles that stop takeover
bids
 Ie- if any offeror takes 20%+ of shares, the other 80% of shares
increase in voting value
 Limits in securities acts, etc, on a corporation’s ability to place
poison pills in memo/articles.
i.) ratification
BCA
 S. 233(6): No derivative actions may be stayed or dismissed
because a breach has been ratified, but evidence of that approval
or possible approval may be taken into account by the court in
deciding whether an SH can bring a derivative action
Teck Corp. Ltd. v. Millar
 F: TC was trying to takeover Afton Mines, of which M was a
director. A had improved drilling results. Shares issued to Placer
for infusion of cash into the corporation. Teck obtained a majority
of shares. In light of this, Miller revised the agreement with Placer
to give greater shareholding to dislodge Teck.
 I: Was this a breach of fiduciary duty? NO
 R: Critical of concept from Hogg that issuing shares like this is a
prima facie breach of fiduciary. It may be so, but it may not. Must
look to the primary purpose on the facts, a reasonable grounds
test- 2 Steps: Is the primary purpose to block to takeover
bid? If yes, there must be reasonable grounds for the Ds to
North-West Trans Co. v. Beatty (p.528-533)
 F: NW brings a derivative action to set aside the sale of a ship
(United Empires) to the company by James Hughes Beatty, one
of the directors of the company. Company ratified the sale by
majority vote of SHs. However, James Hughes Beatty controlled
one third of the shares.
 I: Can a director vote to ratify his own self-dealing? YES
 R: Company’s constitution enables directors to acquire his voting
power. There were no limits upon the number of shares he might
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excused. Narrow Interpretation ie- UK case, not
reasonable to forgo seeking legal advice. Easier for
an outside director to use this. MAY HAVE
APPLIED IN REGAL HASTINGS SITUATION
hold. He had a perfect right to acquire shares an exercise voting
power as he saw fit. The voice of the majority out to prevail; to
reject the votes of the defendant upon the question of the
ratification would be to give effect to the views of the minority and
disregard the majority. Self-dealing (or an interest in the K by a
director) can be ratified by simple majority vote of SHs, and
the self-dealer can vote his shares in the ratification vote.
Now Overturned By Statute- only applies to junior officers
iii.) Indemnification and Insurance
BCA
 Generally:
o Directors don’t have a right to indemnification from
the corporation, and in some circumstances may not
be indemnified. However, it is legal to indemnify in
some circumstances, and notwithstanding all this, a
D can apply to a court for indemnification and a
court may grant it.
 S. 159: Interpretations
 S. 160: A corporation may reimburse/indemnify a director for a
judgement/fine or settlement and/or legal fees arising out of his
role as a director.
 S. 161:Corporations MUST indemnify for defence costs when a
director has successfully defended as a director or officer.
 S. 162: A corporation may pay the expenses actually and
reasonably incurred in advance of final disposition, so long as
there’s an undertaking to pay he money back if indemnification is
prohibited.
 S. 163(1): NO INDEMNIFICATION if
o (a) & (b) Prohibited by the memorandum or articles
o (c) Failure to act honestly and in god faith with a
view to the best interests of the company or the
associated corporation-- Breach of fiduciary duty
(and possibly negligence, but this isn’t clear)
o (d)
 S. 164: An eligible party can apply to a court to order
indemnification for anything else the court considers appropriate
This may also apply in a regal hastings situation
ii.) Statute
BCA
 S. 142(3): No contracting (ie- placing a provision in the articles)
out of a duty to act in accordance with the act, or liability for
breach of a fiduciary or duty of care
 S. 154: List of statutory infractions for which the D must
return the money to the corporation—Ultra vires acts.
 157: A D is not liable for statutory breaches (under 154) and has
complied with his duties to disclose his material interest under
(152) if the director relied in good faith on financial statements;
professional reports; an officer’s statement; or any record, info etc
the court deems appropriate
o NOTE: This will apply differently to outside directors
and inside directors- inside will need to rely on their
insider knowledge while outside directors will not.
 S. 234: If the court finds that someone is liable in respect of
negligence; default; breach of duty; or breach of trust, the
court must take into consideration all of the circumstances of the
case, including the circumstances connected with their election or
appointment, and may relieve the person if they believe that
they have acted honestly and reasonably and ought fairly to be
excused.
o NOTE: This is designed to exonerate people with
limited expertise. It gives the court independent
discretion to excuse directors and officers if they
acted honestly reasonably and ought fairly to be
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 S. 165: A company can get insurance to deal with
indemnification, etc
 In other situations, the SH may have the ability to seek a remedy
on their own behalf, for their own benefit. Procedurally, it’s the
simplest remedy.
10.) Shareholder’s Remedies
Farnham v. Fingold- Derivative action
 F: Allegation that when majority SHs sold shares with a control
premium, there was a fiduciary duty to hold the premium for the
C. Novel argument. At issue was whether that would be a
personal or derivative action.
 R: The claim re: the control premium may be personal; that
wasn’t decided. However, the statement of claim contained
certain allegations apart from the fiduciary duty issues that were
clearly derivative. When rights, duties, or obligations are owed
to the C, and any rights of the SHs are clearly incidental,
must proceed derivatively.
A.) Shareholder Agreements (private
contracts)
General
 Similar to a “pre-nup” btw the corporation and the SH
 Most useful in close corporations
 Need unanimity to amend
BCA, Pooling Agreements:
 S. 19: Corporate charter documents are a K binding btw SHs
themselves and the corporation. It’s a contract, but doesn’t
require unanimity to be amended.
 S. 175: Allows for an agreement btw SHs to vote in unison on
particular matters.
o But, this isn’t the only type of agreement out there.
o Ringuet & Bergeron- Directors cannot enter into a
pooling agreement because it’s fettering their
discretion, and a prima facie breach of fiduciary
duty. Directors cannot contract re: how they will vote.
Perlman v. Feldman (USA)
 F: Minority SH brought derivative action alleging majority
appropriated a control premium on sale of its shares.
 R: Premium must be held in trust for those who were SHs at the
time the company sold. S. 233 of the BCBCA does not allow
such a personal remedy in a derivative action, although it
may be available federally or in Ontario.
Goldex Mines Ltd. v. Revill
 F: G, an SH of Probe, wished to oppose a decision by the D’s of
probe to buy a new mining property. Brought an action that
certain resolutions were null, and for injunctions restraining the
Ds from conducting the annual meeting b/c of misleading proxy
info circular. Alleged that the agreements weren’t in the best
interest of the C and the issuance of shares would effectively
entrench the Board.
 R: TEST: All the relief sought was derived from rights, duties and
obligations owed to the C and enforceable by the C. To ascertain
whether misconduct was a breach of a personal obligation to
B.) The Personal Action (Standing to Sue)
General:
 Fiduciary duties are owed to the company and to the company
alone, and to redress a wrong to the company the action should
prima facie be brought by the company itself.
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SHs or to the corporation is to ask if the injury to the SHs
was merely incidental to an injury to the corporation, or
whether the company can sue for the action, as a company
can’t sue for a personal action. A majority of SHs must not
discriminate towards the minority. If they do, the minority can
bring an action against the majority.
o
C.) The Statutory Oppression Remedy
General
 Widest basis for getting a remedy
 Cohen report- examples of when it is necessary:
o Refusal without grounds to enter a new SH’s name
in the register
o Excessive remuneration of D’s
o Issuing shares on unfair terms
 Often an overlap between a breach of fiduciary and oppression
remedy—Oppression remedy arises because a derivative action
doesn’t fairly compensate individuals. GIVES A PERSONAL
REMEDY FOR A FIDUCIARY BREACH
 Replaced the winding up remedy (which was too extreme at
times)
BCA-Oppression Remedy
 S. 227:
o
(2): An SH can apply to the court for an order on the
ground that
 (a) the affairs of the C are being or have
been conducted, or the D’s powers
exercised, in a manner oppressive to one
or more SHs (including the applicant)
 (b): Some act of the C has been done or is
threatened, or a resolution of the SHs is
passed or prosposed, that is unfairly
o
o
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prejudicial to one or more the SHs,
including the applicant
(3): Court can then, with a view to remedying or
bring an end to the matters complained of, make on
order
 (a) directing or prohibiting an act
 (b) regulating the conduct of the C’s affairs
 (c) Appoint a receive or receiver manager
 (d) direct an issue or conversion or
exchange of shares
 (e) modify the D’s
 (f) remove the d’s
 (g) Direct the C to purchase back some
shares
 (h) Direct an SH to purchase some shares
 (i) Direct the C or any other to pay an SH for
some shares
 (j) vary or set aside a transaction
 (k) vary or set aside a resolution
 (l) require the C to produe to the court
financial statements, etc
 (m) Direct the C to compensate an agreived
person
 (n) Direct correction of the regisers or other
records
 (o) direct that the C be liquidated or resolved
 (p) direct an investigation
 (q) require the trial of any issue
 (r) authorize or direct the commencement of
a derivative action
(4): The court can make an order above if it is
satisfied that the application was brought by the SH
in a timely manner
(5): IF an order is made under g, m, or, I for the
corporation to pay someone, the company must pay
unless they’re insolvent, or the payment would make
the company insolvent
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(6): If (5) happens, must pay as much of the amount
as is possible without causing insolvency, and must
pay the balance as soon as possible.
Who may bring an action?
 SH; Beneficial SH; Appropriate person (widow of SH; Trustee in
bankruptcy; creditors) NOT employees.
BELL: Roadmap for bringing oppression remedy
First Edmonton Place Ltd. v. 315888 Alberta Ltd.STANDING
 R: An oppression remedy is an equitable remedy that goes
beyond the law. It aims to protect reasonable expectations,
which are the cornerstone of the remedy. Even if an act is
otherwise legal, an act can be inappropriate because of
oppression. Courts will look at the agreements between the
parties, contributory negligence/estoppel aspects, etc. Business
judgement rule may play a role. TEST:
o 1.) D had reasonable expectation(s)
 ? of fact
 Turns on particular expectations arising in
particular situations.
 Must identify the expectations that he or she
claims have been violated by the conduct at
issue and establish that the expectations
were reasonably held.
 Will consider whether it’s just and equitable
to grant a remedy having regard to the facts
of the specific case, the relationships at
issue, and the entire context, including the
fact that there may be conflicting claims and
expectations.
o 2.) Prove a breach of that expectation
 Not limited to illegality, or bona fides of
intent of Ds
o 3.) Did it constitute (a) oppression or (b) unfair
prejudice?
o  In this case, there were expectations, but those
expectations weren’t breached.
 F: Lessor under a real estate lease (landlord) wanted standing to
bring a claim for an oppression remedy.
 I: Is a landlord an appropriate person, even though he didn’t hold
securities? NO
 R: When the applicant isn’t a security holder, director, or
officer, Court has a broad power to do justice and equity in the
circumstances of a particular case. The creditor should be a
person who could reasonably be entrused with the responsibility
of advancing the interests of the corporation by seeking a
derivative action. 2 circumstances: if the D’s conduct constituted
using the corporation as a vehicle for committing a fraud upon the
applicant (not here) or if the act or conduct of complained of = a
breach of the underlying expectations of the applicant arising
from the relationship with the corporation.
o Here, the applicant wasn’t a creditor—ie, statute
meant he couldn’t collect rent. No leave.
Re: Daon Development Corp
 R: Debentureholders’ rights are pre-determined via an expensive
transaction, and those would be the limits of their rights.
Ferguson v. Imax Systems Corp.
 F: Founding SHs were applicant, husband, and two other
companies. Husbands had common shares; wives had class b
shares (non-voting, paid a dividend). Couple divorced. F
squeezed out of management of company, corp refused to pay
dividends beyond those required, corp moved to cancel and
convert all class be shares to non-voting limited dividend.
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 I: Opressive behaviour? Unfairly prejudicial? YES
 R: Oppression remedy doesn’t just codify common law
requirement of fairness. Broad interpretation necessary to allow
section to carry out its purpose. HERE- small closed
corporation is important factor that makes their move
oppressive. She would be the only one affected because only she
doesn’t have common shares via marriage. Abuse of dominant
power by the majority to discriminate against the
complainant in her employment, payment of dividends, and
in a capital reorganization. Circumstances indicated she
would be able to participate in the company’s growth
 R: unfairly prejudicial is broader than that which is oppressive.
Conduct that is oppressive would include only an interference
with the strict legal rights of the petitioner. Unfairly prejudicial
allows the court to import Ebrahimi case’s notion of equitable
rights into the oppression remedy, and thus to inquire into
whether the petitioner’s equitable rights have been violated.
o In a closed corp, it’s a reasonable expectation to
anticipate having both SH and Dship. Therefore,
it’s a reasonable expectation as an SH to expect to
be a D. Removal = unfair prejudice.
Ebrahimi v. Westbourne Galleries Ltd
Scottish Co-op Wholesale Soc. Ltd v. Meyer—
What constitutes oppression?
 F: Petition for winding up on just/equitable grounds
 R: Ebrahimi indicates that SH expectations may be a source of
rights as well as the interests they explicitly contracted for.- ie- an
association formed or continued on the basis of a personal
relationship, involving mutual confidence (ie-partnership
turns into company); an agreement or understanding that all
or some of the SHs shall participate in the conduct of the
business; restriction on the transfer of the members’ interest
in the C- This broadens the grounds upon which a disgruntled
minority may challenge the actions of majority SHs
 F: Rayon companies. Parent company ran the subsidiary
company in the interest of the parent company without paying
enough attention to the subsidiary’s interests. Sought to destroy
the company it created so it could foray into the rayon business
itself.
 I: Is such conduct oppressive? YES
 R: Oppressive behaviour is acting with a lack of god faith, legal
impropriety, burdensome, harsh, or wrongful conduct. A HIGH
DEGREE of bad faith. The affairs of a company can be
conducted oppressively by the directors doing nothing to defend
its interests when they ought to do something, just the same as
they can conduct affairs oppressively by doing something
injurious to its interests when they ought not to. HERE< they
could have protested
Diligenti v. RWMD Operations Kelowna LtdDifference between Oppression and Unfair
prejudice
 F: D was one of 4 25% SHs in a business formed to operate a
restaurant. D was entitled to remuneration for his managerial
duties. D was ousted from management, removed as a manger,
and as a D at a SH meeting. Other three SHs formed a
management company.
 I: Was the conduct oppressive and/or unfairly prejudicial? YES,
on the facts—D’s removal as a D was unfair prejudice b/c of
nature of corporation as closed corp.
Differences between oppression remedy and
breach of fiduciary duty
 Oppression remedy- less onerous to get standing; easier to
discuss “unfairness” than breach of fiduciary; no ratification of
oppression unless the oppressed person ratifies himself.
 BELL:
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o
o
o
o
(2): Despite any other provision of the act, the court
may make an order to correct, negative, or modify
the consequences in law of a corporate mistake or
to validate an act, and may given ancillary or
consequential directions it considers necessary
o (3): Court must consider the effect of that order on
the C, D, O, C’s, And SHs before making that order.
o EX- Board meets one day late. All decisions at
meeting would be void. This allows court to correct.
 S. 143: Irrespective of 229, actions of improperly elected D’s are
OK.
Oppression focuses on the harm to the legal or
equitable interests of stakeholders by
oppressive/unfair acts
Fiduciary duty focuses on the rights/interests of the
corporation
Compliance with a fiduciary duty is a reasonable
expectation of any SH. Breach of fiduciary duty can
therefore be the basis for bringing an action for the
oppression remedy, so long as you can prove
oppression/unfair prejudice.
D.) Other Statutory Remedies
Dissent Proceedings (the appraisal Remedy)
 GENERAL: A transaction that = a fundamental change to the
corporation is approved via special resolution, and will be
implemented. If an SH dissents as per the statute, they may have
the right to have their shares bought back. More useful in closed
corps
 S. 237:
 S. 238(1): List of fundamental changes: 2 we’ve studies:
amend articles to change a corporation’s rights; sale of the
undertaking. Also includes plans of amalgamation, or continuation
in another jurisdiction
 S. 239: Can’t contract out of the right, but may waive the right
 S. 240: Procedure:
o NOTICE: If a matter is to be voted on, the C must
tell the SHs of their right to dissent, and that it could
trigger appraisal rights- notify 21 days before
meeting
o Notice of Dissent: SHs must then tell the C they
intend to dissent in the approved form within 2 days
of the meeting
o Intent to Proceed: C must then tell the SHs if they
intend to proceed with the fundamental change
o Dissent becomes a substantive right
Compliance and Restraining Orders and
Rectification: BCA
 S. 19(3): Everyone’s bound by the notice of articles/articles as
though they’re a signed and sealed contract, with covenants for
each SH to observe the articles
 S. 228: (1) A complainant = an Sh or any other person deemed
appropriate
o (2): If a corp, D, officer, Sh, employee, agent,
auditor, trustee, receiver manager of liquidator of
any company contravenes the act, memorandum,
articles, etc, a complainant may in addition to other
rights, apply to the court for an order that the person
who has contravened must comply.
o (3): he court can then make any order it deems
appropriate
o NOTE: Goldhar (Ontario)- can’t sue under this to
comply with the statutory obligation not to
breach a fiduciary duty because there’s already a
statutory scheme to deal with that. That still
must be done derivatively.
 S. 229: Negligent articling student provision- allows the court
to waive technical non-compliance with statutory requirements
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o




o Will look at unclean hands
 S. 324: Court may order a company be liquidated on application
by an SH, D, or any other including a creditor if an event occurs
on which the memorandum or the articles provide the C should
be liquidated or dissolves, or the court otherwise thinks it’s
equitable to do so. Court could grant a 227 remedy instead. Court
will appoint a liquidator.
Sale of Shares: SH must send share certificates
(ALL) and final notice
S. 244(6): A dissenter who’s complied cant exercise his rights as
a SH. Can’t also claim for oppression.
S. 245: Sh can apply to the court to set the payout value: the fair
value of shares immediately prior to the passing of the resolution
S. 246: Dissent can’t be used when the resolution doesn’t pass,
or you vote inconsistently with your notice of dissent, or the
corporation doesn’t plan to proceed.
S. 247: Corporation can’t buy back the shares if it can’t afford to
do so
Domglas: 3 approaches to valuing Shares
 Market Value: Median price over previous 21 daysproblematic for closed corps. rejected on the facts here
because trading was limited; it wouldn’t be a proper valuation
 Asset: Value the assets of the corp, then divide by the
number of shares. Better for corporations with a large number of
tangible assets. Doesn’t work these days because corporations
are valued by their future earning potential
 Earnings: Expected future earnings; an estimation of where
the corporation is going.
 Can use multiple methods, or ask outside experts.
 If shares are forcibly acquired (as in a takeover bid when you
have 90% of shares and can forcibly buy the rest- s.300), then an
equitable bonus should be added t the price
Winding Up, BCA
 General: Corporation/SHs can vote to do this, or the government
can force this through statutory provisions, etc. Only available if
the court thinks it’s just and equitable. Higher threshold than
oppression remedy; courts are generally unwilling.
Considerations are similar to oppression
o Justified lack of confidence in D’s
o Lack of probity/good faith
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