Modernization, simplification and a more robust protection for shareholders – these are the major changes proposed by Bill 63 - Business Corporations Act that modifies the existing Québec Companies Act. Tabled in the National Assembly of Québec on October 7, 2009, the bill will affect some 300,000 companies in Québec and is the first major reform to Québec company law since 1981. While it incorporates many standard practices that exist elsewhere in Canada, Bill 63 has the ambitious announced objective of making Québec a national leader in corporate legislative framework. To ensure that the legislation constantly evolves to reflect the realities of modern corporate practice, the bill also provides that the Business Corporations Act be updated every five years.

The following is a brief overview of the principal changes proposed by the Business Corporations Act.

More Robust Protection For Minority Shareholders

  • A minority shareholder who disagrees with a major change made to the structure or the activities of the corporation will be able to require that its shares be repurchased.
  • Shareholders will have the opportunity to table a shareholders' proposal at annual meetings.
  • Shareholders will have new remedies in the event of abuse or inequity, notably:
    • Shareholders will have the right to ask the Court for the authorization to act in the name of the corporation (also known as "representative action" and "derivative action").
    • The Court will now have vast remedial powers to deal with cases of abusive or unjust acts on the part of the corporation or its directors.

New Governance Rules

  • Codification of the duties of care, diligence, honesty and loyalty.
  • A director will now have the right to present a defense of reasonable diligence with respect to acts made in good faith within the framework of his or her office.
  • Creation of a new system of disclosure of directors' and officers' interests.
  • The absence of a requirement of Canadian residence for the directors is maintained under the new act.

Use of New Technologies

  • Shareholders and directors will now be able to participate and vote remotely in their respective meetings by way of technology.
  • The constitution and many administrative transactions will be carried out online with the enterprise registrar.
  • Possibility of issuance of shares without certificate.

Administrative Simplification

  • Clarification of the rules regarding the unanimous shareholder agreement.
  • A corporate entity constituted in another jurisdiction will have the right to continue its existence under the new Québec legislation.
  • A Québec corporation will have the right to continue its existence in another jurisdiction.
  • Removal of the solvency and liquidity tests with respect to granting financial assistance to shareholders.
  • Removal of certain financial tests for the payment of dividends and the repurchase of shares.
  • Removal of the requirements for annual meetings and for the nomination of an auditor in single shareholder corporations.

The transition to this new legislative system should be relatively straightforward. A company constituted, continued or resulting from an amalgamation under Part IA of the Québec Companies Act will be automatically continued under the Business Corporations Act on the date the law comes into force. A company constituted, continued or resulting from an amalgamation under Part I of the Québec Companies Act will be required to send, within five years of the law coming into force, articles of continuance to the enterprise registrar. Companies that do not satisfy this requirement will be dissolved as of that date.

The government anticipates that the new Business Corporations Act will come into force in November 2011. Until then, we will follow any legislative developments and will keep you informed of same. We will also advise you of the seminars that will be offered by our firm on this new law.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.