Canada: “Business Corporations Act” (Bill 63) — A Major Reform Of Quebec Corporate Law

Bill 63, Business Corporations Act ("Bill 63"), which was introduced in the Québec National Assembly on October 7, 2009, constitutes a substantial reform and modernization of the Québec Companies Act (the "QCA"). The QCA currently governs Québec-incorporated companies and has not been significantly revised since 1981. Bill 63 is similar in content to most modern corporate statutes, such as the Canada Business Corporations Act (the "CBCA"), but does contain a number of enhancements, clarifications and innovations which, in the aggregate and together with some features of the QCA that have been retained, should make Bill 63 an appealing corporate statute and Québec an attractive jurisdiction for Canadian, and certainly Québec-based companies.

Bill 63 contains close to 500 sections relating to corporate law. In this Legal Update we highlight the differences that we have identified between the provisions of Bill 63 and those of either the QCA or the CBCA, or both, that we believe are of interest, in respect of:

  • what Bill 63 does not contain;
  • capital structure/corporate finance;
  • shareholder rights and protections;
  • governance; and
  • corporate procedures.

What Bill 63 Does Not Contain

  • No residency requirement for directors (although the company's head office must be located in the Province of Québec).
  • No proxy solicitation rules.1
  • No provisions prohibiting loans, guarantees or other forms of financial assistance.
  • No "balance sheet" test2 to be met for, inter alia, the payment of dividends, reduction of capital and purchase or redemption of shares.3

Capital Structure/Corporate Finance

Bill 63, in retaining certain provisions of the QCA while adding certain new features, will provide for flexible capital structures:

  • Shares may be issued with or without par value, and shares may be issued that are not fully paid.
  • Shares may be issued that are uncertificated.4
  • Fractional shares may be issued that carry proportionate rights.
  • Temporary "corporate incest" is permitted: subsidiaries will be able to hold shares of their parent for a period not exceeding 30 days.5
  • Separate classes or series of shares may have identical rights and restrictions.6
  • The paid-up capital account may be credited, in certain circumstances, with less than the full value of the consideration received on the issue of shares, and less than the full value of the shares issued on payment of a stock dividend.
  • The issue of shares in excess of a corporation's authorized share capital or otherwise in a manner inconsistent with the corporation's articles may be regularized by unanimous resolution of the shareholders.

Shareholders Rights and Protections

Bill 63 contains an array of shareholder rights and protections typically found in modern corporate statutes — dissent rights, derivative actions, oppression remedy,7 right to requisition shareholder meetings, shareholder proposals, right to examine corporate records and financial statements, etc. — but with certain enhancements and clarifications. It also contains some new rights of interest:

  • Companies that are not reporting issuers must notify shareholders of the details of any share buy-back.
  • The dissent right provides a specific mechanism for beneficial shareholders to exercise this right.
  • Bill 63 clarifies that a meeting requisitioned by shareholders may only transact business that is within the powers of the shareholders.8
  • As in the CBCA, beneficial shareholders of reporting issuers or corporations with 50 or more shareholders will be able to submit proposals to be included on the agenda at the next annual shareholder meeting; also as in the CBCA, a shareholder proposal may include nominations for the election of directors if the proposal is signed by shareholders of not less than 5% of a class of voting shares. No such rights exist in the present QCA.
  • The chair at a shareholder meeting must allow shareholders "a reasonable period of time" to discuss relevant matters.
  • Shareholders and proxyholders have the right to inspect ballots and proxies used at a shareholder meeting.9
  • Shareholders have a class vote in the case of any special resolution that "favours certain shareholders of a class" of shares or "changes prejudicially the rights attaching to all the shares of a class" except, inter alia, in circumstances where the rights attaching to all shares are changed "prejudicially in the same way".10
  • Shareholders must approve by special resolution any sale, lease or exchange of property representing a "significant part of its business activity"; an exception is provided for dispositions to wholly-owned subsidiaries;11 a disposition of assets that represents 75% or less of the value of the corporation's assets or pre-tax revenue is deemed not to constitute a "significant part" of a corporation's business activities.12 A corporation also "must prevent"13 its subsidiary from disposing of property that would constitute a significant part of the corporation's business activities unless, inter alia, authorized by the corporation's shareholders.14


  • Directors have a duty of loyalty (i.e., to act with "honesty and loyalty and in the interest of the corporation") and a duty of care owed, in both cases, to the corporation.15
  • Bill 63 provides directors with a due diligence defence pursuant to which directors are expressly permitted to rely on the report or opinion not only of professional advisors or experts (as is the case in the CBCA and in the present QCA), but also on an officer of the corporation that is "reliable and competent" and a board committee that "merits confidence".
  • Bill 63 clarifies16 that boards of directors may generally delegate their powers, but not, inter alia, to authorize the issue of shares or to appoint, and determine the remuneration of, the president of the corporation, the chair of the board, the CEO, the CFO and the COO.17
  • Bill 63 contains an extensive disclosure regime for the disclosure of a director's or officer's interest in a contract or transaction with the corporation;18 it clarifies that, in circumstances where an interested director may not vote on the matter, such director will also not be able to be present during the relevant board deliberations.
  • A corporation must indemnify directors and officers against all costs, charges and expenses reasonably incurred in the exercise of their functions, and advance costs, provided the director or officer has acted in the interest of the corporation; Bill 63 expressly provides, as is in the CBCA but not in the present QCA, that a corporation may purchase and maintain D&O insurance for the benefit of its directors and officers.
  • If the articles so provide, the directors may appoint, mid-term, additional directors not to exceed in number one-third of the directors elected at the previous annual shareholders meeting.
  • A unanimous shareholder agreement can withdraw all the powers from the board of directors; unlike under the CBCA, the shareholders may choose to dispense with a board of directors.
  • Bill 63 clarifies that the majority required to have quorum at a board meeting is a majority of the directors "in office".
  • The chair of a meeting of shareholders is entitled to a casting vote, unless the by-laws provide otherwise.
  • Shareholder meetings may be held outside of Québec if the articles so allow.19
  • A written resolution signed by all shareholders entitled to vote on the resolution is valid as if it had been passed at a shareholders meeting, without exception (as is presently the case in the QCA, but not in the CBCA where certain resolutions, such as a resolution to remove directors, may not be in writing).

Corporate Procedures

Bill 63 contains the typical corporate procedures found in most modern corporate statutes, though formulated in some cases with modifications of interest:

  • Plans of arrangement will no longer require a 75% shareholder vote to be approved, as is currently the case in the QCA; they will have the same flexibility as do such plans under the CBCA20 and, moreover, the certificate of arrangement may specify an effective "time"21 in addition to the date.22
  • The statutory right of compulsory acquisition is available to offers who acquire not less than 90% of outstanding shares, other than shares held by the offeror or affiliates and associates, pursuant to a take-over bid. A "compelled acquisition" in favour of shareholders in such circumstances is, however, not provided.
  • In the case of amalgamations, no director or officer declaration regarding the solvency of the amalgamating and amalgamated corporations, and certain creditor matters, is required; however, director liability will be triggered if the amalgamated corporation cannot pay its debts as they become due. The certificate of amalgamation may specify an effective "time", in addition to date.
  • So-called "squeeze-out" transactions,23 whereby the shares of a shareholder may be cancelled without substitution of shares carrying equivalent or greater rights, are provided for in Bill 63; in the case of corporations that are not reporting issuers,24 such transactions must be approved by ordinary resolution of the "shareholders concerned", whether or not their shares carry voting rights, but not including certain interested shareholders.
  • The articles of a corporation may be amended by special resolution of shareholders, and such resolution may specifically permit the board not to proceed with the amendment notwithstanding its approval. The certificate of amendment may specify an effective "time", in addition to date. Stock splits and stock consolidations, unlike under the CBCA, are not considered to be amendments to the articles and therefore may be authorized by the directors alone, without shareholder approval (except, in the case of a consolidation, if it would result in a shareholder holding less than one share).25
  • Corporations may be dissolved, inter alia, by consent of the shareholders by special resolution, in which case a declaration of dissolution is required stating that the "board of directors [...] has otherwise provided for" the corporation's obligations.26
  • As in the CBCA, but not currently permitted under the QCA, corporations incorporated under the laws of another jurisdiction may be "continued" under Bill 63 and vice versa.

McCarthy Tétrault Notes

In short, Bill 63 modernizes the present QCA while retaining some of its unique features. It also provides for the array of shareholder rights and protections found in most modern corporate statutes, while adding certain enhancements, clarifications and innovations which should make Bill 63 an appealing corporate statute and Québec an attractive jurisdiction for Canadian, and certainly Québec-based, companies.

The transitional provisions of Bill 63 provide that all companies governed by Part IA of the QCA will automatically be governed by Bill 63 once it comes into force. It is not anticipated that Bill 63 will be proclaimed in force before the end of 2011.

We will be pleased to assist McCarthy Tétrault clients and existing Québec companies with the mandatory aspects of the transition on an ongoing basis and present seminars to explain the new opportunities that Bill 63 offers. In particular, we will be pleased to assist in reviewing corporate by-laws and pointing out where it would be useful or appropriate to modify them.


1. Reporting issuers will, of course, be subject to the proxy solicitation rules under applicable securities law. Furthermore, Bill 63 does contain certain rules relating to proxies. For example, a proxy may be revoked at any time, and lapses one year after it is given, unless otherwise stated; a proxyholder who has conflicting instructions may not vote by a show of hands, there being no exception similar to that found in the CBCA where less than 5% of the votes will be cast against the resolution.

2. Requiring that the "realization value" of the corporation's assets not be less than its liabilities and, depending on the circumstances, certain stated capital accounts.

3. However, the "solvency" test (i.e., ability to pay liabilities when due) remains and, in the case of the repurchase or redemption of shares, there is also the requirement that the payment shall not make the corporation unable, in the event of liquidation, to repay higher or equally ranking shares.

4. i.e, "direct registrations systems" are explicitly contemplated under Bill 63.

5. This, along with the fact that certificates of amendment, amalgamation and arrangement may specify an effective "time" (see below under "Corporate Procedures"), will facilitate internal corporate reorganizations, whether to simplify corporate structures or for tax planning purposes, that often require a subsidiary to hold shares of a parent at least momentarily.

6. i.e., "discretionary dividends" may be paid to different shareholders without requiring such shareholders to hold shares of different classes which differ artificially in their rights and restrictions.

7. In Bill 63, called the "rectification of abuse of power or inequity".

8. It remains to be seen how this provision will be interpreted where the business in question, even if it would otherwise not be within the "powers of the shareholders", is formulated by the requisitioning shareholder as an amendment to the by-laws.

9. Corporations must keep at their head office such ballots and proxies for at least three months.

10. This is a much more general, "principle-based" rule than the more detailed, analogous rule in the CBCA.

11. i.e., roll-downs of divisions to wholly-owned subsidiary will not trigger a shareholder approval requirement.

12. This would seem to codify the Québec Court of Appeal's decision in Cogeco Cable v. CFCF, which set a "bright line" quantitative test at 75%. Since Bill 63 "deems" (i.e., an irrebuttable presumption) that a sale representing less than 75% of assets or revenues is not a "significant part of a business activity", it would appear that, in such case, there should be no need to conduct an additional "qualitative" analysis.

13. presumably, as shareholder of the subsidiary, by voting against the disposition.

14. This provision may be problematic, particularly where both the corporation and its subsidiary are public companies since, in such case, the ability of the subsidiary to proceed with a disposition that its board and shareholders have authorized will be subject to, and dependent on, the vote of the parent's shareholders. Hopefully this provision will be discarded or at least refined before Bill 63 is proclaimed into force.

15. The Supreme Court of Canada in Peoples Department Stores v. Wise interpreted the duty of care, under the CBCA, to be owed generally and not just to the corporation.

16. It is unclear under the present QCA that boards may delegate to committees other than "administrative" matters.

17. i.e., compensation committees will be able to recommend to the board, but not determine, the CEO's compensation.

18. which include, under Bill 63, "proposed" contracts and transactions. The Bill also defines "interest" as "any financial stake [...] that may reasonably be considered likely to influence decision-making".

19. Currently, public companies incorporated under the QCA may hold their shareholder meetings only in Québec.

20. Certain authors have claimed (incorrectly, we believe) that, based on the wording of the arrangement sections in the QCA, amalgamations, for example, cannot be effected within an arrangement.

21. Under Bill 63, a court may make an interim order to, inter alia, protect the rights of "interested persons". This would be consistent with, but arguably goes beyond, the recent decision of the Supreme Court of Canada in Dentureholders v. BCE to the effect that, in special circumstances, an arrangement must consider not only security holders whose legal rights are altered or affected by the arrangement, but those whose economic interests may be prejudiced.

22. Bill 63, as in the CBCA but not in the QCA, also provides for the reorganization of insolvent corporations that have filed for protection under the Bankruptcy and Insolvency Act (Canada) or the Companies' Creditors Arrangement Act (Canada).

23. As defined in Bill 63, such transactions need not involve an amendment to the corporation's articles.

24. Reporting issuers, of course, will generally be subject to Multinational Instrument 61-101 in such circumstances.

25. i.e., declaring a stock dividend, with the related tax issues, will not be necessary to effect a stock split where it would be inconvenient to wait for the next annual shareholder meeting (or convene a special meeting) to do so.

26. This is similar to the present QCA, but differs from the CBCA in putting a direct onus on the board and in clarifying that the corporation's liabilities need only be "provided for" and not "discharged".

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.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

In association with
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.