Although it is too early to determine all of the implications of the new Business Corporations Act1 (hereinafter the "BCA"), the courts have, on several occasions, already analyzed the application of this statute, particularly in the area of recourses for rectification. New sections 450 and following strongly resemble the sections of the federal statute concerning this subject.
Henceforth, sections 450 and following clearly give judges the opportunity to rectify the situation in cases of abuse of power or iniquity, with respect to both existing situations and situations that may arise in the future2. This recourse is made available to shareholders and directors, whether former or current, and to any other persons who may have an interest, as determined by the court (such as the creditors for example).
Sections 450 and following give the courts wide discretion with respect to the orders they can make. Thus, under the provisions of section 451, judges may order the appointment of a receiver, the revision of the functioning of a corporation by amending its articles or a unanimous shareholder agreement, the purchase or redemption of securities, etc. The list set out in that section is not restrictive.
For example, in the context of dispute heard in July 2011, three plaintiffs (two shareholders of a Quebec corporation incorporated under the BCA and the corporation itself) instituted an action for rectification against the third shareholder of the corporation, who was also the duly authorized representative of a Chinese subsidiary of the corporation. The plaintiffs alleged certain oppressive acts by the third shareholder who had, in particular, refused access to the Chinese subsidiary by the other two shareholders and made certain false statements to some of its customers concerning its problems in delivering products. Apparently, the subsidiary had even ceased its activities due to the delivery problems. The plaintiffs, having been refused access to the plant and to the subsidiary's documents, could not assess the situation or restore normality.
Taking into account the affidavits describing the third shareholder's oppressive actions, and in view of the contradictory version of the facts furnished by that shareholder, the Court, basing itself on section 451 of the BCA, ordered the communication to the plaintiffs of not only the annual financial statements of the corporation (access to which is mandatory under section 228 of the BCA), but also a whole series of documents relating to the financial statements, such as the order forms, invoices, bank statements and all communications relating in particular to the products sold.3
This decision shows to what extent the courts can use their discretionary powers to make any order that should enable the persons concerned to rectify a problematic situation.
Footnotes
1 R.S.Q. c. S-31.1.
2 Section 450 BCA.
3 9229-5518 Québec inc. v. Desautels, 2011, QCCS 4606 (CanLII).
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