1981 BILL 43 Third Session, 19th Legislature, 30 Elizabeth II THE LEGISLATIVE ASSEMBLY OF ALBERTA BILL 43 THE BUSINESS CORPORATIONS ACT THE MINISTER OF CONSUMER AND CORPORATE AFFAIRS First Reading Second Reading Committee of the Whole Third Reading Royal Assent Title: 1981 (19th, 3rd) Bill 43, The Business Corporations Act

THE BUSINESS CORPORATIONS ACT TABLE OF CONTENTS

PART 1

INTERPRETATION AND APPLICATION

Section No.

Definitions 1 Relationship of corporations 2 Distribution to the public 3 Execution in counterpart 4

PART 2 INCORPORATION Incorporation 5 Articles of incorporation 6 Delivery of articles of incorporation 7 Certificate of incorporation 8 Effect of certificate of incorporation 9 Corporate name 10 Reservation of name 11 Prohibited names 12 Certificate of amendment 13 Pre-incorporation contracts 14

PART 3 CAPACITY AND POWERS Capacity of a corporation 15 Restriction on powers 16 No constructive notice 17 Authority of directors, officers and agents 18

PART 4 REGISTERED OFFICE, RECORDS AND SEAL Registered office, records office, address for service by mail 19 Corporate records 20 Access to corporate records 21 Form of records 22 Corporate seal 23

PART 5 CORPORATE FINANCE Shares and classes of shares 24 Issue of shares 25 Stated capital accounts 26 Shares in series 27 Shareholder’s pre-emptive right 28 Options and other rights to acquire securities 29 Prohibited share holdings 30 Exception 31 Acquisition by corporation of its own shares 32 Alternative acquisition by corporation of its own shares 33 Redemption of shares 34 Donated and escrowed shares 35 Other reduction of stated capital 36 Adjustment of stated capital account 37 Repayment, acquisition and reissue of debt obligations 37.1 Enforceability of contract against corporation 38 Commission on sale of shares 39 Dividends 40 Form of dividend 41 Prohibited financial assistance by corporation 42 Shareholder immunity 43

PART 6 SECURITY CERTIFICATES, REGISTERS AND TRANSFERS

Interpretation and General

Definitions and

interpretation 44 Security certificates 45 Securities records 46 Dealings with registered holders and transmission on death 47 Overissue 48 Burden of proof in actions 49 Securities are fungible 50 Issue — Issuer Notice of defects 51 Staleness is notice of defect 52 Unauthorized signature 53 Completion or alteration 54 Warranties of agents 55 Purchase Title of purchaser 56 Deemed notice of adverse claims 57 Staleness as notice of adverse claims 58 Warranties 59 Right to compel endorsement 60 Endorsement 61 Effect of endorsement without delivery 62 Endorsement in bearer form 63 Effect of unauthorized endorsement 64 Warranties of guarantees of signatures or endorsements 65 Constructive delivery and constructive ownership 66 Delivery of security 67 Right to reclaim possession of security 68 Right to requisites of transfer 69 Seizure of security 70 No conversion if good faith delivery by agent 70.1 Duty to register transfer 71 Assurance that endorsement is effective 72

Limited duty of inquiry as to adverse claims 73 Limitation of issuer’s liability 74 Rights and obligations on loss or theft 75 Rights, duties, etc. of issuer’s agent 76

PART 7 CORPORATE BORROWING Division 1 Trust Indentures

Interpretation and application 77 Conflict of interest 78 Qualification of trustee 79 List of security holders 80 Evidence of compliance 81 Contents of declaration 82 Further evidence of compliance 83 Trustee may require evidence of compliance 84 Notice of default 85 Trustee’s duty of care 86 Trustee’s reliance on statements 87 No exculpation of trustee by agreement 88 Division 2 Registration of Debt Obligations

Definitions 88.1 Registration of mortgage 88.2 Extension of time for registration and rectification of register 88.3 Duty to register 88.4 Corporation’s register of mortgages 88.5 Inspection of register of mortgages 88.6 Copies of register 88.7 Notice of appointment of receiver or receiver-manager 88.8 Transitional registration 88.9

PART 8 RECEIVERS AND RECEIVER-MANAGERS Functions of receiver 89 Functions of receiver-manager 90 Directors’ powers during receivership 91 Duty of Court-appointed receiver or receiver-manager 92 Duty under debt obligation 93 Duty of care 94 Powers of the Court 95 Duties of receiver and receiver-manager 96

PART 9 DIRECTORS AND OFFICERS Directors 97 By-laws 98 General borrowing powers 98.1 Organization meeting 99 Qualifications of directors 100 Election and appointment of directors 101 Cumulative voting 102 Ceasing to hold office 103 Removal of directors 104 Attendance at meeting 105 Filling vacancies 106 Change in number of directors 107 Notice of change of directors 108 Meetings of directors 109 Delegation to managing director or committee 110 Validity of acts of directors, officers and committees 111 Resolution in lieu of meeting 112 Liability of directors and others 113 Directors’ liability for wages 114 Disclosure by directors and officers in relation to contracts 115 Officers 116 Duty of care of directors and officers 117 Dissent by director 118 Indemnification by corporation 119 Remuneration 120

PART 10 INSIDER TRADING

Definitions 121 Deemed insiders 122, 123 Business combination defined 124 Civil liability of insiders 125

PART 11 SHAREHOLDERS Place of shareholders’ meetings 126 Calling meeting 127 Record dates 128 Notice of meeting, adjournment, business and notice of business 129 Waiver of notice 130 Shareholder proposals 131 Shareholder list 132 Quorum 133 Right to vote 134 Voting 135 Resolution in lieu of meetings 136 Meeting on requisition of shareholders 137 Meeting called by Court 138 Court review of election 139 Pooling agreement 139.1 Unanimous shareholder agreement 140

PART 12 PROXIES

Definitions 141 Appointing proxyholder 142 Mandatory solicitation 143 Soliciting proxies 144 Exemption orders 145 Rights and duties of proxyholder 146 Duties of registrant 147 Court orders 148

PART 13 FINANCIAL DISCLOSURE Annual financial statements 149 Exemption 150 Consolidated statements 151 Approval of financial statements 152 Copies to shareholders 153 Copies to Director 154 Qualification of the auditor 155 Auditor’s appointment and remuneration 156 Dispensing with auditor 157 Auditor ceasing to hold office 158 Removal of auditor 159 Filling vacancy 160 Court-appointed auditor 161 Rights and liabilities of auditor or former auditor 162 Auditor’s duty to examine 163 Auditor’s right to information 164 Audit committee 165 Qualified privilege 166

PART 14 FUNDAMENTAL CHANGES Amendment of articles 167 Constrained shares 168 Proposal for amendment 169 Class votes 170 Delivery of articles of amendment 171 Certificate of amendment 172 Effect of certificate 173 Restated articles of incorporation 174 Amalgamation 175 Amalgamation agreement 176 Shareholder approval of amalgamation agreement 177 Vertical and horizontal short form amalgamation 178 Delivery of articles of amalgamation and statutory declaration to Registrar 179 Effect of certificate of amalgamation 180 Amalgamation of an Alberta corporation and an extra-provincial corporation where one is the wholly-owned subsidiary of the other 180.1 Continuance of an extra-provincial corporation as an Alberta corporation 181 Continuance of an Alberta corporation into another jurisdiction 182

Extraordinary sale, lease or exchange 183 Shareholder’s right to dissent 184

PART 15 CORPORATE REORGANIZATION AND ARRANGEMENTS Articles of reorganization resulting from Court order 185 Court-approved arrangements 186

PART 16 TAKE-OVER BIDS — COMPULSORY PURCHASE

Definitions 187 Compulsory acquisition of shares of dissenting offeree 188 Offeror’s notices 189 Surrender of share certificate and payment of money 190 Offeree corporation’s obligations 191 Offeror’s right to apply 192 No security for costs 193 Procedure on application 194 Court to fix fair value 195 Power of Court 196 Final order 197 Additional powers of Court 198 Corporation’s offer to repurchase its own shares 199

PART 17 LIQUIDATION AND DISSOLUTION Staying proceedings 200 Revival 201,202 Dissolution by directors or shareholders in special cases 203 Voluntary liquidation and dissolution 204 Dissolution by Registrar 205 Dissolution by court order 206 Other grounds for liquidation and dissolution pursuant to court order 207

Application for court supervision 208 Show cause order 209 Powers of the Court 210 Commencement of liquidation 211 Effect of liquidation order 212 Appointment of liquidator 213 Duties of liquidator 214 Powers of liquidator 215 Final accounts and discharge of liquidator 216 Shareholder’s right to distribution in money 217 Custody of records after dissolution 218 Continuation of actions after dissolution 219 Unknown claimants 220 Property not disposed of 221

PART 18 INVESTIGATION Definition 222 Court order for investigation 223 Powers of the Court 224 Powers of inspector 225 Hearings by inspector 226 Compelling evidence 227 Absolute privilege 228 Solicitor-client privilege 229 Inspector’s report as evidence 230

PART 19 REMEDIES, OFFENCES AND PENALTIES

Definitions 231 Commencing derivative action 232 Powers of the Court 233 Relief by the Court on the ground of oppression or unfairness 234 Court approval of stay, dismissal, discontinuance or settlement 235 Court order to rectify records 236 Court order for directions 237 Refusal by Registrar to file 238 Appeal from decision of Registrar or Director 239 Compliance or restraining order 240

Summary application to Court 241

Appeals from court orders 242 Offences relating to reports, returns, etc. 243 General offence 244 Order to comply 245 Security for costs 245.1

PART 20 GENERAL Sending of notices and documents to shareholders and directors 246 Notice to and service on a corporation 247 Notice to and service on Director 247.1 Waiver of notice 248 Certificate of Registrar and evidence 249 Certificate of corporation as evidence 250 Copies 251 Proof required by Registrar 252 Appointment of Registrar, service 253 Registrar’s publication 253.1 Agreements regarding payment of fees 253.2 Regulations, publication of proposed regulation 254 Issuing of certificates by Registrar 255 Annual return 256 Alteration of documents 257 Errors in certificates 258 Inspection and copies 259 Records of Registrar 260 Continuance of Alberta companies as corporations under this Act 261 Continuance of revived Alberta companies 262

PART 21 EXTRA-PROVINCIAL CORPORATIONS

Definitions 263 Carrying on business in Alberta 264 Application 265

Division 1 Registration Requirement to register 266 Application for registration 267 Reservation of name 268 Name of extra-provincial corporation 269 Registration by pseudonym 270 Certificate of registration 271 Cancellation of registration 272 New certificate of registration 273 Division 2 Information Use of corporate name 274 Attorney for service of an extra­ provincial corporation 275 Changes in charter, head office, directors 276 Filing of instrument of amalgamation 277 Notices and returns respecting liquidation 278 Annual and other returns 279 Certificate of compliance 280 Division 3 Capacity, Disabilities and Penalties Validity of acts 281 Capacity to commence and maintain legal proceedings 282 General penalty 283

PART 22 CONSEQUENTIAL AND COMMENCEMENT Consequential amendments 284 Commencement of Act 285

Bill 43 BILL 43 1981 THE BUSINESS CORPORATIONS ACT (Assented to , 1981) HER MAJESTY, by and with the advice and consent of the Legislative Assembly of Alberta, enacts as follows:

PART 1

INTERPRETATION AND APPLICATION

Definitions 1 In this Act, (a) “affairs” means the relationships among a corporation, its affiliates and the shareholders, directors and officers of those bodies corporate but does not include the business carried on by those bodies corporate; (a.1) “affiliate” means an affiliated body corporate within the meaning of

section 2(1); (b) “Alberta company” means a body corporate incorporated and registered under The Companies Act or any of its predecessors; (b.1) “articles” means the original or restated articles of in­ corporation, articles of amendment, articles of amalgamation, articles of continuance, articles of reorganization, articles of ar­ rangement, articles of dissolution and articles of revival and in­ cludes an amendment to any of them; (c) "associate”, when used to indicate a relationship with any person, means (

i) a body corporate of which that person beneficially owns or controls, directly or indirectly, shares or securities cur­ rently convertible into shares carrying more than 10% of the

voting rights under all circumstances or under any circum­ stances that have occurred and are continuing, or a currently exercisable option or right to purchase those shares or those convertible securities, (ii) a partner of that person acting on behalf of the partnership of which they are partners, (iii) a trust or estate in which that person has a substantial interest or in respect of which he serves as a trustee or in a similar capacity, (iv) a spouse of that person, or (

v) a relative of that person or of his spouse if that relative has the same residence as that person; (c.1) “auditor” includes a partnership of auditors; (d) “beneficial interest” means an interest arising out of the beneficial ownership of securities; (d.1) “beneficial ownership” includes ownership through a trustee, legal representative, agent or other intermediary; (e) “body corporate” includes a company or other body cor­ porate wherever or however incorporated; (e.1) “Canada corporation” means a body corporate incorpo­ rated by or under

an Act of the Parliament of Canada; (f) “Commission” means the Alberta Securities Commission; (f.1) “corporation” means a body corporate incorporated or continued under this Act and not discontinued under this Act; (g) “Court” means the Court of Queen’s Bench of Alberta; (g.1) “debt obligation” means a bond, debenture, note or other evidence of indebtedness or guarantee of a corporation, whether secured or unsecured; (h) “Director” means the Director or any Deputy Director of the Commission; (h.1) “director” means a person occupying the position of di­ rector by whatever name called and “directors” and “board of directors” includes a single director; (i) “distributing corporation” means a corporation (

i) any of whose issued shares, or securities which may or might be exchanged for or converted into shares, were part of a distribution to the public, and 2

(ii) which has more than 15 shareholders; (i.1) “extra-provincial corporation” means a body corporate (

i) incorporated otherwise than by or under

an Act of the Legislature or an Ordinance of the Northwest Territories, or (ii) incorporated by or under an Ordinance of the Northwest Territories and not subject to the legislative authority of the Province by

section 16 of The Alberta Act; (j) “incorporator" means a person who signs articles of incorporation; (j.1) “individual” means a natural person; (k) “liability” includes a debt of a corporation arising under

section 38, 184(19) or 234(3)(

g) or (h); (l) “Minister” means the Minister of Consumer and Corporate Affairs; (m) “ordinary resolution” means a resolution (

i) passed by a majority of the votes cast by the shareholders who voted in respect of that resolution, or (ii) signed by all the shareholders entitled to vote on that resolution; (n) “person” includes an individual, partnership, association, body corporate, trustee, executor, administrator or legal representative; (o) “prescribed” means prescribed by the regulations; (p) “professional corporation” means a corporation that has the words “Professional Corporation” as the last words of its name; (q) “redeemable share” means a share issued by a corporation that the corporation, by its articles (

i) is required to purchase or redeem at specified time or on the happening of a certain event, (ii) is required to purchase or redeem on the demand of a shareholder, or (iii) may purchase or redeem on demand of the corporation, and includes a share issued by a corporation that is purchased or redeemed by a combination of any of the methods referred to in subclauses (

i) to (iii); 3

(r) “Registrar” means the Registrar of Corporations or a Deputy Registrar of Corporations appointed under

section 253; (s) “Registrar’s periodical” means the periodical referred to in

section 253.1; (t) “resident Albertan” means an individual who is ordinarily resident in Alberta or, if not ordinarily resident in Alberta, is a member of a prescribed class of persons and, in any case, (

i) is a Canadian citizen, or (ii) has been lawfully admitted to Canada for permanent residence; (u) “security,” except in

Part 6, means a share of any class or series of shares or a debt obligation of a corporation and includes a certificate evidencing such a share or debt obligation; (v) "security interest" means an interest in or charge on property of a corporation to secure payment of a debt or performance of any other obligation of the corporation; (w) “send” includes deliver; (x) “series” means, in relation to shares, a division of a class of shares; (y) “special resolution” means a resolution passed by a majority of not less than 2/3 of the votes cast by the shareholders who voted in respect of that resolution or signed by all the shareholders entitled to vote on that resolution; (z) “unanimous shareholder agreement” means (

i) a written agreement to which all the shareholders of a corporation are or are deemed to be parties, whether or not any other person is also a party, or (ii) a written declaration by a person who is the beneficial owner of all the issued shares of a corporation, that provides for any of the matters enumerated in

section 140(1). Relationship of corporations2(1) For the purposes of this Act, (

a) one body corporate is affiliated with another body corporate if one of them is the subsidiary of the other or both are subsidiaries of the same body corporate or each of them is controlled by the same person, and (

b) if 2 bodies corporate are affiliated with the same body cor- 4

porate at the same time, they are deemed to be affiliated with each other.

(2) For the purposes of this Act, a body corporate is controlled by a person if (

a) securities of the body corporate to which are attached more than 50% of the votes that may be cast to elect directors of the body corporate are held, other than by way of security only, by or for the benefit of that person, and (

b) the votes attached to those securities are sufficient, if ex­ ercised, to elect a majority of the directors of the body corporate.

(3) For the purposes of this Act, a body corporate is the holding body corporate of another if that other body corporate is its subsidiary.

(4) For the purposes of this Act, a body corporate is a subsidiary of another body corporate if (

a) it is controlled by (

i) that other, (ii) that other and one or more bodies corporate, each of which is controlled by that other, or (iii) 2 or more bodies corporate, each of which is controlled by that other, or (

b) it is a subsidiary of a body corporate that is that other’s subsidiary. Distribution to the public 3(1) For the purposes of this Act, securities of a corporation (

a) issued on a conversion of other securities, or (

b) issued in exchange for other securities are deemed to be securities that are part of a distribution to the public if those other securities were part of a distribution to the public.

(2) Subject to subsection (3), for the purposes of this Act, a security of a body corporate (

a) is part of a distribution to the public if, in respect of the security, there has been a filing of a prospectus, statement of material facts, registration statement, securities exchange take­ over bid circular or similar document under the laws of Canada, a province or territory of Canada or a jurisdiction outside Canada, 5

(

b) is deemed to be part of a distribution to the public if the security has been issued and a filing referred to in clause (

a) would be required if the security were being issued currently.

(3) On the application of a corporation, the Commission may de­ termine that a security of the corporation is not or was not part of a distribution to the public if it is satisfied that its determination would not prejudice any security holder of the corporation. Execution in counterpart4 A document or writing required or permitted by this Act may be signed or executed in separate counterparts and the signing or exe­ cution of a counterpart shall have the same effect as the signing or execution of the original.

PART 2 INCORPORATION Incorporation 5 One or more persons may incorporate a corporation by signing articles of incorporation and complying with

section 7. Articles of incorporation6(1) Articles of incorporation shall be in the prescribed form and shall set out, in respect of the proposed corporation, (

a) the name of the corporation, (

b) the classes and any maximum number of shares that the corporation is authorized to issue, and (

i) if there are 2 or more classes of shares, the special rights, privileges, restrictions and conditions attaching to each class of shares, and (ii) if a class of shares may be issued in series, the authority given to the directors to fix the number of shares in, and to determine the designation of each series, and the rights, priv­ ileges, restrictions and conditions attaching to the shares of each series, (

c) if the right to transfer shares of the corporation is to be restricted, a statement that the right to transfer shares is restricted and either (

i) a statement of the nature of the restrictions, or (ii) a statement that the nature of the restrictions appears in a unanimous shareholder agreement, (

d) the number of directors or, subject to

section 102(a), the minimum and maximum number of directors of the corporation, and 6

(

e) any restrictions on the businesses that the corporation may carry on.

(2) The articles may set out any provision permitted by this Act or by-law to be set out in the by-laws of the corporation.

(3) Subject to subsection (4), if the articles or a unanimous share­ holder agreement require a greater number of votes of directors or shareholders than that required by the Act to effect any action, the provisions of the articles or of the unanimous shareholder agreement prevail.

(4) The articles may not require a greater number of votes of share­ holders to remove a director than the number required by

section 104. Delivery of articles of incorporation7(1) An incorporator shall send to the Registrar (

a) articles of incorporation, and (

b) the documents required by sections 19 and 101.

(2) If the name of the corporation set out in the articles of incor­ poration contains the words “Professional Corporation”, the incor­ porator shall also send to the Registrar evidence satisfactory to him of the approval of the articles by or on behalf of (

a) the Institute of Chartered Accountants of Alberta, (

b) the Alberta Dental Association, (

c) the College of Physicians and Surgeons of the Province of Alberta, or (

d) the Law Society of Alberta, as the case may be. Certificate of incorporation8 On receipt of the documents and evidence required under

section 7 and the prescribed fees, the Registrar shall issue a certificate of incorporation in accordance with

section 255. Effect of certificate of incorporation9(1) A corporation comes into existence on the date shown in the certificate of incorporation.

(2) A certificate of incorporation is conclusive proof for the purposes of this Act and for all other purposes (

a) that the provisions of this Act in respect of incorporation and all requirements precedent and incidental to incorporation have been complied with, and 7

(

b) that the corporation has been incorporated under this Act as of the date shown in the certificate of incorporation. Corporate name 10(1) The word “Limited”, “Limitee”, “Incorporated”, “Incor­ poree” or “Corporation” or the abbreviation “Ltd.”, “Ltee”, “Inc.” or “Corp.” shall be the last word of the name of every corporation but a corporation may use and may be legally designated by either the full or the abbreviated form.

(2) Notwithstanding subsection (1), the words “Professional Cor­ poration” shall be the last words of the name of every corporation whose incorporation is approved in accordance with

section 7(2).

(3) No person other than a body corporate shall carry on business within Alberta under any name or title that contains the word “Lim­ ited”, “Limitee”, “Incorporated”, “Incorporee” or “Corpora­ tion” or the abbreviation “Ltd.”, “Ltee”, “Inc.” or “Corp.” or the words “Professional Corporation”.

(4) A person carrying on business in contravention of subsection (3) is guilty of an offence and liable to a fine of not more than $5000.

(5) A corporation may file a notice in prescribed form with the Registrar designating an additional form or forms of its name in accordance with subsection (6).

(6) Subject to

section 12(1), the name of the corporation or an additional form of its name in a notice filed under subsection (5) may be in an English form or a French form or in a combined English and French form and the corporation may use and may be legally designated by any of those forms.

(7) Subject to

section 12(1), a corporation may, outside Canada, use and may be legally designated by a name in any language form.

(8) A corporation shall set out its name in legible characters in or on all contracts, invoices, negotiable instruments, and orders for goods or services, issued or made by or on behalf of the corporation.

(9) Subject to subsection (8) and

section 12(1) and

section 85 of The Partnership Act, a corporation may carry on business under or identify itself by a name other than its corporate name. Reservation of name 11(1) The Registrar may, on request, reserve for 90 days a name for (

a) an intended corporation, (

b) a corporation about to change its name, or (

c) an extra-provincial corporation about to continue as a cor­ poration pursuant to

section 181.

(2) If requested to do so by the incorporators, a corporation or an 8

extra-provincial corporation referred to in subsection (1)(c), the Re­ gistrar shall assign to the corporation as its name a designated number determined by him. Prohibited names12(1) A corporation shall not be incorporated with, have, carry on business under, identify itself by or change its name to a name that is (

a) prohibited by the regulations, (

b) identical to the name of a body corporate incorporated under the laws of Alberta, (

c) reserved for an intended corporation or a corporation under

section 11(1), or (

d) disapproved by the Registrar pursuant to subsection (2).

(2) The Registrar may disapprove the name or the proposed name of a corporation if, in his opinion, the name (

a) is objectionable, (

b) is likely to mislead or confuse, or (

c) is similar to the name of any other body corporate or to the name of any association, partnership or firm known to the Re­ gistrar and the use of that name would be likely to confuse or mislead.

(3) If a body corporate, association, partnership or firm referred to in subsection (2)(c) (

a) consents in writing to the use of the name in whole or in part, and (

b) if required by the Registrar, undertakes to dissolve or change its name to a dissimilar name within 6 months after the filing of the articles by which the corporation’s name is to be or was acquired, the Registrar may approve the name.

(4) Notwithstanding anything in this section, a corporation may be incorporated with or change its name to a name similar to that of a corporation or an Alberta company which has been dissolved, liq­ uidated and dissolved or struck from the register, if (

a) the corporation or Alberta company was dissolved, liquidated and dissolved or struck from the register more than 3 years before such incorporation and has not since been revived or restored to the register, (

b) the Registrar approves the use of the name, and 9

(

c) the name of the new corporation includes the year in which it is incorporated.

(5) If, (

a) through inadvertence or otherwise, a corporation comes into existence with or acquires a name that contravenes subsection (1), or (

b) the Registrar disapproves a corporation’s name after it is acquired by the corporation, the Registrar may, by notice in writing, giving his reasons, direct the corporation to change its name to one that he approves within 60 days of the date of the notice.

(6) The Registrar may give a notice under subsection (5) on his own initiative or at the request of a person who feels aggrieved by the name that contravenes subsection (1).

(7) If a corporation (

a) is directed to change its name under subsection (5), and (

b) does not appeal the request of the Registrar within 60 days of the date of the notice, the Registrar may revoke the name of the corporation and assign to it a designated number, and until changed in accordance with

section 167 the name of the corporation is the designated number so assigned.

(8) If 2 or more corporations amalgamate, the amalgamated cor­ poration may have the name of one of the amalgamating corporations, or, with the prior approval in writing of the Registrar, (

a) a distinctive combination, that is not confusing, of the names of the amalgamating corporations, or (

b) a distinctive new name that complies with subsection (1).

(9) The amalgamating corporations shall be deemed to be bodies corporate for the purposes of this section.

(10) If an application is made to revive a corporation under this Act and, between the date of dissolution of the corporation and the date of its revival, another corporation has come into existence with or has acquired a name that is likely to be confused with the name of the corporation to be revived, the Registrar may require, as a con­ dition of the revival, that the revived corporation does not carry on business or, if it seeks to carry on business, that it change its name to a designated number immediately after it is revived.

(11) If the Registrar is satisfied that a professional corporation has 10

ceased to be the holder of a subsisting permit as a professional corporation issued under The Chartered Accountants Act, The Dental Association Act, The Legal Profession Act or The Medical Profession Act, 1975, he may, on giving notice to the professional corporation of his intention to do so, change the name of the corporation to exclude the words “Professional Corporation” and replace them with the word “Limited” or the abbreviation “Ltd.”. Certificate of amendment13(1) When a corporation has had its name revoked and a name assigned to it under

section 12(7), the Registrar shall issue a certif­ icate of amendment showing the new name of the corporation.

(2) The articles of the corporation are amended accordingly on the date shown in the certificate of amendment. Pre-incorporation contracts14(1) This

section applies unless the person referred to in subsection (2) and all parties to the contract referred to in that subsection (

a) believe that the body corporate exists and is incorporated under, or (

b) intend that the body corporate is to be incorporated under the laws of a jurisdiction other than Alberta.

(2) Except as provided in this section, if a person enters into a written contract in the name of or on behalf of a body corporate before it comes into existence, (

a) that person is deemed to warrant to the other party to the contract (

i) that the body corporate will come into existence within a reasonable time, and (ii) that the contract will be adopted within a reasonable time after the body corporate comes into existence, (

b) that person is liable to the other party to the contract for damages for a breach of that warranty, and (

c) the measure of damages for that breach of warranty shall be the same as if the body corporate existed when the contract was made, the person who made the contract on behalf of the body corporate had no authority to do so and the body corporate refused to ratify the contract.

(3) A corporation may, within a reasonable time after it comes into existence, by any act or conduct signifying its intention to be bound thereby, adopt a written contract made before it came into existence in its name or on its behalf, and on the adoption (

a) the corporation is bound by the contract and is entitled to the benefits of the contract as if the corporation had been in 11

existence at the date of the contract and had been a party to it, and (

b) a person who purported to act in the name of or on behalf of the corporation ceases, except as provided in subsection (5), to be liable under subsection (2) in respect of the contract.

(4) If a person enters into a contract in the name of or on behalf of a corporation before it comes into existence and the contract is not adopted by the corporation within a reasonable time after it comes into existence, that person or the other party to the contract may apply to the Court for an order directing the corporation to restore to the applicant, in specie or otherwise, any benefit received by the corporation under the contract.

(5) Except as provided in subsection (6), whether or not a written contract made before the coming into existence of a corporation is adopted by the corporation, a party to the contract may apply to the Court for an order (

a) fixing obligations under the contract as joint or joint and several, or (

b) apportioning liability between or among the corporation and a person who purported to act in the name of or on behalf of the corporation, and on the application the Court may make any order it thinks fit.

(6) A person who enters into a written contract in the name of or on behalf of a body corporate before it comes into existence is not in any event liable for damages under subsection (2) if the contract expressly provides that he is not to be so liable.

PART 3 CAPACITY AND POWERS Capacity of a corporation15(1) A corporation has the capacity and, subject to this Act, the rights, powers and privileges of a natural person.

(2) A corporation has the capacity to carry on its business, conduct its affairs and exercise its powers in any jurisdiction outside Alberta to the extent that the laws of that jurisdiction permit. Restriction on powers 16(1) It is not necessary for a by-law to be passed in order to confer any particular power on the corporation or its directors.

(2) A corporation shall not carry on any business or exercise any power that it is restricted by its articles from carrying on or exercising, nor shall the corporation exercise any of its powers in a manner contrary to its articles. 12

(3) No act of a corporation, including any transfer of property to or by a corporation, is invalid by reason only that the act or transfer is contrary to its articles or this Act. No constructive notice 17 No person is affected by or is deemed to have notice or knowl­ edge of the contents of a document concerning a corporation by reason only that the document has been filed by the Registrar or is available for inspection at an office of the corporation.

Authority of directors, officers and agents 18 A corporation, a guarantor of an obligation of the corporation or a person claiming through the corporation may not assert against a person dealing with the corporation or dealing with any person who has acquired rights from the corporation (

a) that the articles, by-laws or any unanimous shareholder agreement have not been complied with, (

b) that the persons named in the most recent notice filed by the Registrar under

section 101 or 108 are not the directors of the corporation, (

c) that the place named as the registered office in the most recent notice filed by the Registrar under

section 19 is not the registered office of the corporation, (c.1) that the post office box designated as the address for service by mail in the most recent notice filed by the Registrar under

section 19 is not the address for service by mail of the corporation, (

d) that a person held out by the corporation as a director, an officer or an agent of the corporation (

i) has not been duly appointed, or (ii) has no authority to exercise a power or perform a duty which the director, officer or agent might reasonably be ex­ pected to exercise or perform, (

e) that a document issued by any director, officer or agent of the corporation with actual or usual authority to issue the doc­ ument is not valid or not genuine, or (

f) that financial assistance referred to in

section 42 or a sale, lease or exchange of property referred to in

section 183 was not authorized, unless the person has, or by virtue of his position with or relationship to the corporation ought to have, knowledge of those facts at the relevant time. 13

PART 4 REGISTERED OFFICE, RECORDS AND SEAL Registered office, records office, address for service by mail 19(1) A corporation shall at all times have a registered office within Alberta.

(2) A notice of (

a) the registered office, (

b) a separate records office, if any, and (

c) the post office box designated as the address for service by mail, if any, shall be sent to the Registrar in the prescribed form together with the articles of incorporation.

(3) Subject to subsection (4), the directors of the corporation may at any time (

a) change the address of the registered office within Alberta, (

b) designate, or revoke or change a designation of, a records office within Alberta, or (

c) designate, or revoke or change a designation of, a post office box within Alberta as the address for service by mail of the corporation.

(4) If the directors of a corporation designate a post office box as the corporation’s address for service by mail, they shall by the same resolution revoke any designation of a records office filed with the Registrar.

(5) A corporation shall send to the Registrar, within 15 days of any change under subsection (3) or (4), a notice of that change in the prescribed form, and the Registrar shall file it.

(6) The corporation shall ensure that its registered office and its records office, if any, are (

a) accessible to the public during normal business hours, and (

b) readily identifiable from the address or other description given in the notice referred to in subsection (2).

(7) Unless the directors designate a separate records office, the reg­ istered office of a corporation is also its records office. Corporate records 20(1) A corporation shall prepare and maintain at its records office records containing (

a) the articles and the by-laws, all amendments to the articles 14

and by-laws, a copy of any unanimous shareholder agreement and any amendment to a unanimous shareholder agreement, (

b) minutes of meetings and resolutions of shareholders, (

c) copies of all notices required by

section 101 or 108, (

d) a securities register complying with

section 46, (

e) copies of the financial statements, reports and information referred to in

section 149(1), and (

f) a register of disclosures made pursuant to

section 115.

(2) Notwithstanding subsection (1), a central securities register may be maintained at an office in Alberta of a corporation’s agent referred to in

section 46(2)(a), and a branch securities register may be kept at any place in or out of Alberta designated by the directors.

(3) If a central securities register is maintained under subsection (2) at a place other than the records office, the corporation shall maintain at its records office a record containing the names and addresses of all agents and offices at which those registers are main­ tained and descriptions of all those registers.

(4) A corporation which (

a) complies with

section 22(2), and (

b) maintains in Canada a register or record referred to in

section 20(3) complies with subsection (1).

(5) In addition to the records described in subsection (1), a cor­ poration shall prepare and maintain adequate accounting records and records containing minutes of meetings and resolutions of the direc­ tors and any committee of the directors.

(6) For the purposes of subsections (1)(

b) and (2), if a body corporate is continued under this Act, “records” includes similar records re­ quired by law to be maintained by the body corporate before it was so continued.

(7) The records described in subsection (5) shall be kept at the registered office or records office of the corporation or at any other place the directors think fit and shall at all reasonable times be open to examination by the directors.

(8) If accounting records of a corporation are kept at a place outside Alberta, there shall be kept at the registered office or records office or at any other place in Alberta the directors think fit, accounting records adequate to enable the directors to ascertain the financial position of the corporation with reasonable accuracy on a quarterly 15

basis, and those records shall at all reasonable times be open to examination by the directors.

(9) A corporation that, without reasonable cause, contravenes this

section is guilty of an offence and liable to a fine not exceeding $5000. Access to corporate records21(1) The directors and shareholders of a corporation, their agents and legal representatives may examine the records referred to in

section 20(1) during the usual business hours of the corporation free of charge.

(2) A shareholder of a corporation is entitled on request and without charge to one copy of the articles and by-laws and of any unanimous shareholder agreement, and amendments to them.

(3) Creditors of a corporation and their agents and legal represen­ tatives may examine the records referred to in

section 20(1)(a), (

c) and (d), other than a unanimous shareholder agreement or an amend­ ment to a unanimous shareholder agreement, during the usual busi­ ness hours of the corporation on payment of a reasonable fee and may make copies of those records.

(4) Any person may examine the records referred to in

section 20(1)(

c) and (

d) during the usual business hours of the corporation on payment of a reasonable fee and may make copies of those records.

(5) If the corporation is a distributing corporation, any person, on payment of a reasonable fee and on sending to the corporation or its agent the statutory declaration referred to in subsection (9), may on application require the corporation or its agent to furnish within 10 days from the receipt of the statutory declaration a list (in this

section referred to as the “basic list”) made up to a date not more than 10 days before the date of receipt of the statutory declaration setting out (

a) the names of the shareholders of the corporation, (

b) the number of shares owned by each shareholder, and (

c) the address of each shareholder, as shown on the records of the corporation.

(6) A person requiring a corporation to supply a basic list may, if he states in the statutory declaration referred to in subsection (5) that he requires supplemental lists, require the corporation or its agent on payment of a reasonable fee to furnish supplemental lists setting out any changes from the basic list in the information provided in it for each business day following the date the basic list is made up to.

(7) The corporation or its agent shall furnish a supplemental list required under subsection (6) 16

(

a) on the date the basic list is furnished, if the information relates to changes that took place prior to that date, and (

b) on the business day following the day to which the supple­ mental list relates, if the information relates to changes that take place on or after the date the basic list is furnished.

(8) A person requiring a corporation to supply a basic list or a supplemental list may also require the corporation to include in that list the name and address of any known holder of an option or right to acquire shares in the corporation.

(9) The statutory declaration required under subsection (5) shall state (

a) the name and address of the applicant, (

b) the name and address for service of the body corporate if the applicant is a body corporate, and (

c) that the basic list and any supplemental lists obtained pur­ suant to subsection (6) will not be used except as permitted under subsection (11).

(10) If the applicant is a body corporate, the statutory declaration shall be made by a director or officer of the body corporate.

(11) A list of shareholders obtained under this

section shall not be used by any person except in connection with (

a) an effort to influence the voting of shareholders of the corporation, (

b) an offer to acquire shares of the corporation, or (

c) any other matter relating to the affairs of the corporation.

(12) A person who, without reasonable cause, contravenes this sec­ tion is guilty of an offence and liable to a fine of not more than $5000 or to imprisonment for a term of not more than 6 months or to both. Form of records 22(1) All registers and other records required by this Act to be prepared and maintained may be in a bound or loose-leaf form or in a photographic film form, or may be entered or recorded by any system of mechanical or electronic data processing or any other information storage device that is capable of reproducing any required information in legible written form within a reasonable time.

(2) If a person is entitled to examine any register or record that is maintained by a corporation in a form other than a written form and makes a request of the corporation to do so, the corporation shall (

a) make available to that person within a reasonable time a 17

reproduction of the text of the register or record in legible written form, or (

b) provide facilities to enable that person to examine the text of the register or record in an legible written form otherwise than by providing a reproduction of that text, and shall allow that person to make copies of that register or record.

(3) A corporation and its agents shall take reasonable precautions to (

a) prevent loss or destruction of, (

b) prevent falsification of entries in, and (

c) facilitate detection and correction of inaccuracies in, the registers and other records required by this Act to be prepared and maintained.

(4) A person who, without reasonable cause, contravenes this sec­ tion is guilty of an offence and liable to a fine of not more than $5000 or to imprisonment for a term of not more than 6 months or both. Corporate seal 23(1) A corporation may adopt and change a corporate seal that shall contain the name of the corporation.

(2) A document executed on behalf of a corporation by a director, an officer or an agent of the corporation, is not invalid only because the corporate seal is not affixed to the document.

(3) Share certificates of a corporation may be issued under its cor­ porate seal or a facsimile of that corporate seal.

(4) A document requiring authentication by a corporation may be signed by a director or the secretary or other authorized officer of the corporation and need not be under its corporate seal.

(5) A corporation may adopt a facsimile of its corporate seal for use in any other jurisdiction outside Alberta that complies with the laws of that jurisdiction.

PART 5 CORPORATE FINANCE Shares and classes of shares24(1) Shares of a corporation shall be in registered form and shall be without nominal or par value.

(2) If a body corporate is continued under this Act, a share with 18

nominal or par value issued by the body corporate before it was so continued is, for the purpose of subsection (1), deemed to be a share without nominal or par value.

(3) If a corporation has only one class of shares, the rights of the holders of those shares are equal in all respects and include the rights (

a) to vote at any meeting of shareholders of the corporation, (

b) to receive any dividend declared by the corporation, and (

c) to receive the remaining property of the corporation on dissolution.

(4) The articles may provide for more than one class of shares and, if they so provide, (

a) the rights, privileges, restrictions and conditions attaching to the shares of each class shall be set out in the articles, and (

b) the rights set out in subsection (3) shall be attached to at least one class of shares but all of those rights are not required to be attached to one class.

(5) Subject to

section 27, if a corporation has more than one class of shares, the rights of the holders of the shares of any class are equal in all respects. Issue of shares 25(1) Subject to the articles, the by-laws and any unanimous share­ holder agreement and to

section 28, shares may be issued at the times and to the persons and for the consideration that the directors determine.

(2) Shares issued by a corporation are non-assessable and the holders are not liable to the corporation or to its creditors in respect of those shares.

(3) A share shall not be issued until the consideration for the share is fully paid in money or in property or past service that is not less in value than the fair equivalent of the money that the corporation would have received if the share had been issued for money.

(4) In determining whether property or past service is the fair equiv­ alent of a money consideration, the directors may take into account reasonable charges and expenses of organization and reorganization and payments for property and past services reasonably expected to benefit the corporation.

(5) For the purposes of this section, “property” does not include a promissory note or promise to pay. Stated capital accounts26(1) A corporation shall maintain a separate stated capital account for each class and series of shares it issues. 19

(2) A corporation shall add to the appropriate stated capital account the full amount of any consideration it receives for any shares it issues.

(3) Notwithstanding

section 25(3) and subsection (2) of this section, if a corporation issues shares (

a) in exchange for (

i) property, other than a promissory note or promise to pay, or (ii) issued shares of the corporation of a different class or series, and all the shares issued by the corporation in the exchange are redeemable shares created for that purpose, or shares which the corporation is required to issue pursuant to conversion rights or privileges attached to the shares to be exchanged at the time that they were issued, or (

b) pursuant to (

i) an amalgamation agreement referred to in

section 176 or 180.1, or (ii) an arrangement referred to in

section 186(1)(

b) or (

c) to shareholders of an amalgamating body corporate who receive the shares in addition to or instead of securities of the amalgam­ ated body corporate, the corporation may add to the stated capital accounts maintained for the shares of the classes or series issued the whole or any part of the amount of the consideration it received in the exchange.

(4) On the issue of a share a corporation shall not add to a stated capital account in respect of the share it issues an amount greater than the amount of the consideration it received for the share.

(5) If a corporation proposes to add any amount to a stated capital account it maintains in respect of a class or series of shares and (

a) the amount to be added was not received by the corporation as consideration for the issue of shares, and (

b) the corporation has issued any outstanding shares of more than one class or series, the addition to the stated capital account must be approved by special resolution unless all the issued and outstanding shares are shares of not more than 2 classes of convertible shares referred to in

section 37(5). 20

(6) When a body corporate is continued under this Act, it may add to a stated capital account any consideration received by it for a share it issued.

(7) A corporation at any time may, subject to subsection (5), add to a stated capital account any amount it credited to a retained earn­ ings or other surplus account.

(8) When a body corporate is continued under this Act, subsection (2) does not apply to the consideration received by it before it was so continued unless the share in respect of which the consideration is received is issued after the corporation is so continued.

(9) When a body corporate is continued under this Act, any amount unpaid in respect of a share issued by the body corporate before it was so continued and paid after it was so continued shall be added to the stated capital account maintained for the shares of that class or series.

(10) For the purposes of sections 32(2), 36(3), 40, 42(1) and 179(2)(a), when a body corporate is continued under this Act, its stated capital is deemed to include the amount that would have been included in the stated capital of the body corporate if it had been incorporated under this Act.

(11) A corporation shall not reduce its stated capital or any stated capital account except in the manner provided in this Act. (12) Subsections (1) to (11) and any other provisions of this Act relating to stated capital do not apply to an open-end mutual fund.

(13) In subsection (12), “open-end mutual fund" means a corpo­ ration that makes a distribution to the public of its shares and that carries on only the business of investing the consideration it receives for the shares it issues, and all or substantially all of those shares are redeemable on the demand of a shareholder. Shares in series 27(1) The articles may authorize the issue of any class of shares in one or more series and may authorize the directors to fix the number of shares in each series and to determine the designation, rights, privileges, restrictions and conditions attaching to the shares of each series, subject to the limitations set out in the articles.

(2) If any cumulative dividends or amounts payable on return of capital in respect of a series of shares are not paid in full, the shares of all series of the same class participate rateably in respect of ac­ cumulated dividends and return of capital.

(3) No rights, privileges, restrictions or conditions attached to a series of shares authorized under this

section shall confer on a series a priority in respect of voting, dividends or return of capital over any other series of shares of the same class that are then outstanding. (4) Subsection (3) does not apply to a right or privilege to exchange 21

a share or shares for, or to convert a share or shares into, a share or shares of another class.

(5) Before the issue of shares of a series authorized under this section, the directors shall send to the Registrar articles of amendment in the prescribed form to designate a series of shares.

(6) On receipt of articles of amendment designating a series of shares, the Registrar shall issue a certificate of amendment in ac­ cordance with

section 255.

(7) The articles of the corporation are amended accordingly on the date shown in the certificate of amendment. Shareholder's pre­ emptive right 28(1) If the articles or a unanimous shareholder agreement so pro­ vides, no shares of a class shall be issued unless the shares have first been offered to the shareholders holding shares of that class, and those shareholders have a pre-emptive right to acquire the offered shares in proportion to their holdings of the shares of that class, at the same price and on the same terms as those shares are to be offered to others.

(2) Notwithstanding that the articles provide the pre-emptive right referred to in subsection (1), shareholders have no pre-emptive right in respect of shares to be issued (

a) for a consideration other than money, (

b) as a share dividend, or (

c) pursuant to the exercise of conversion privileges, options or rights previously granted by the corporation. Options and other rights to acquire securities 29(1) A corporation may issue certificates, warrants or other evi­ dences of conversion privileges, options or rights to acquire securities of the corporation, and shall set out their conditions (

a) in the certificates, warrants or other evidences, or (

b) in certificates evidencing the securities to which the con­ version privileges, options or rights are attached.

(2) Conversion privileges, options and rights to purchase securities of a corporation may be made transferable or non-transferable, and options and rights to purchase may be made separable or inseparable from any securities to which they are attached.

(3) If a corporation has granted privileges to convert any securities issued by the corporation into shares, or into shares of another class or series, or has issued or granted options or rights to acquire shares, the corporation shall reserve and continue to reserve sufficient au­ thorized shares to meet the exercise of those conversion privileges, options and rights. 22

Prohibited share holdings 30(1) Except as provided in subsection (2) and sections 31 to 34, a corporation (

a) shall not hold shares in itself or in its holding body corporate, and (

b) shall not permit any of its subsidiary bodies corporate to acquire shares of the corporation.

(2) Not more than 1% of the issued shares of each class of shares of a holding body corporate may be held by all the subsidiaries of the holding body corporate.

(3) Subject to subsections (2) and (4), a corporation shall cause a subsidiary body corporate of the corporation that holds shares of the corporation to sell or otherwise dispose of those shares within 5 years from the date (

a) the body corporate became a subsidiary of the corporation, or (

b) the corporation was continued under this Act. (4) Subsection (3) does not apply to shares acquired by the subsid­ iary body corporate before the commencement of this Act. Exception 31(1) A corporation may in the capacity of a legal representative hold shares in itself or in its holding body corporate unless it or the holding body corporate or a subsidiary of either of them has a ben­ eficial interest in the shares.

(2) A corporation may hold shares in itself or in its holding body corporate by way of security for the purposes of a transaction entered into by it in the ordinary course of a business that includes the lending of money.

(3) A corporation holding shares in itself or in its holding body corporate shall not vote or permit those shares to be voted unless the corporation (

a) holds the shares in the capacity of a legal representative, and (

b) has complied with

section 147. Acquisition by corporation of its own shares 32(1) Subject to subsection (2) and to its articles, a corporation may purchase or otherwise acquire shares issued by it.

(2) A corporation shall not make any payment to purchase or oth­ erwise acquire shares issued by it if there are reasonable grounds for believing that (

a) the corporation is, or would after the payment be, unable to pay its liabilities as they become due, or 23

(

b) the realizable value of the corporation’s assets would after the payment be less than the aggregate of its liabilities and stated capital of all classes.

(3) Subject to any unanimous shareholder agreement, a corporation that is not a distributing corporation shall, within 30 days of the purchase of any of its issued shares, notify its shareholders in ac­ cordance with

section 246 (

a) of the number of shares it has purchased, (

b) of the names of the shareholders from whom it has purchased the shares, (

c) of the price paid for the shares, (

d) if the consideration was other than cash, of the nature of the consideration given and the value attributed to it, and (

e) of the balance, if any, remaining due to shareholders or shareholders from whom it purchased the shares.

(4) Subject to any unanimous shareholder agreement, a shareholder of a corporation other than a distributing corporation is entitled on request and without charge to a copy of the agreement between the corporation and any of its other shareholders under which the cor­ poration has agreed to purchase, or has purchased, any of its own shares. Alternative acquisition by corporation of its own shares 33(1) Notwithstanding

section 32(2), a corporation may, subject to subsection (3) and to its articles, purchase or otherwise acquire shares issued by it to (

a) settle or compromise a debt or claim asserted by or against the corporation, (

b) eliminate fractional shares, or (

c) fulfil the terms of a non-assignable agreement under which the corporation has an option or is obliged to purchase shares owned by a director, an officer or an employee of the corporation.

(2) Notwithstanding

section 32(2), a corporation may purchase or otherwise acquire shares issued by it to (

a) satisfy the claim of a shareholder who dissents under

section 184, or (

b) comply with an order under

section 234.

(3) A corporation shall not make any payment to purchase or acquire under subsection (1) shares issued by it if there are reasonable grounds for believing that 24

(

a) the corporation is, or would after the payment be, unable to pay its liabilities as they become due, or (

b) the realizable value of the corporation’s assets would after the payment be less than the aggregate of its liabilities and the amounts required for payment on a redemption or in a liquidation of all shares the holders of which have the right to be paid prior to the holders of the shares to be purchased or acquired. Redemption of shares 34(1) Notwithstanding

section 32(2) or 33(3), a corporation may, subject to subsection (2) and to its articles, purchase or redeem any redeemable shares issued by it at prices not exceeding the redemption price of those shares stated in the articles or calculated according to a formula stated in the articles.

(2) A corporation shall not make any payment to purchase or redeem any redeemable shares issued by it if there are reasonable grounds for believing that (

a) the corporation is, or would after the payment be, unable to pay its liabilities as they become due, or (

b) the realizable value of the corporation’s assets would after the payment be less than the aggregate of (

i) its liabilities, and (ii) the amount that would be required to pay the holders of shares that have a right to be paid, on a redemption or in a liquidation, rateably with or prior to the holders of the shares to be purchased or redeemed. Donated and escrowed shares35(1) A corporation may accept from any shareholder a share of the corporation (

a) that is surrendered to it as a gift, or (

b) that has been held in escrow pursuant to an escrow agreement required by the Commission and that is surrendered pursuant to that agreement.

(2) The corporation may not extinguish or reduce a liability in re­ spect of an amount unpaid on a share surrendered under subsection (1)(

a) except in accordance with

section 36. Other reduction of stated capital36(1) Subject to subsection (3), a corporation may by special res­ olution reduce its stated capital for any purpose including, without limiting the generality of the foregoing, the purpose of (

a) extinguishing or reducing a liability in respect of an amount unpaid on any share, (

b) distributing to the holders of the issued shares of any class 25

or series of shares an amount not exceeding the stated capital of the class or series, and (

c) declaring its stated capital to be reduced by an amount that is not represented by realizable assets.

(2) A special resolution under this

section shall specify the capital account or accounts from which the reduction of stated capital ef­ fected by the special resolution is to be deducted.

(3) A corporation shall not reduce its stated capital for any purpose, other than the purpose mentioned in subsection (1)(c), if there are reasonable grounds for believing that (

a) the corporation is, or would after the reduction be, unable to pay its liabilities as they become due, or (

b) the realizable value of the corporation’s assets would thereby be less than the aggregate of its liabilities.

(4) A creditor of a corporation is entitled to apply to the Court for an order compelling a shareholder or other recipient (

a) to pay to the corporation an amount equal to any liability of the shareholder that was extinguished or reduced contrary to this section, or (

b) to pay or deliver to the corporation any money or property that was paid or distributed to the shareholder or other recipient as a consequence of a reduction of capital made contrary to this section.

(5) An action to enforce a liability imposed by this

section may not be commenced after 2 years from the date of the action complained of.

(6) This

section does not affect any liability that arises under

section 113. Adjustment of stated capital account 37(1) On a purchase, redemption or other acquisition by a corpo­ ration under

section 32, 33, 34, 43, 184 or 234(3)(

g) of shares or fractions of shares issued by it, the corporation shall deduct from the stated capital account maintained for the class or series of shares purchased, redeemed or otherwise acquired an amount equal to the result obtained by multiplying the stated capital of the shares of that class or series by the number of shares or fractions of shares of that class or series purchased, redeemed or otherwise acquired, divided by the number of issued shares of that class or series immediately before the purchase, redemption or other acquisition.

(2) A corporation shall deduct the amount of a payment made by the corporation to a shareholder under

section 234(3)(

h) from the stated capital account maintained for the class or series of shares in respect of which the payment was made. 26

(3) A corporation shall adjust its stated capital account or accounts in accordance with a special resolution referred to in

section 36(2).

(4) On a conversion or a change under

section 167, 185, 186 or 234 of issued shares of a corporation into shares of another class or series, the corporation shall (

a) deduct from the stated capital account maintained for the class or series of shares converted or changed an amount equal to the result obtained by multiplying the stated capital of the shares of that class or series by the number of shares of that class or series converted or changed, divided by the number of issued shares of that class or series immediately before the conversion or change, and (

b) add the result obtained under clause (

a) and any additional consideration pursuant to the conversion or change to the stated capital account maintained or to be maintained for the class or series of shares into which the shares have been converted or changed.

(5) For the purposes of subsection (4) and subject to its articles, if a corporation issues 2 classes of shares and there is attached to each class a right to convert a share of the one class into a share of the other class and a share of one class is converted into a share of the other class, the amount of stated capital attributable to a share in either class is the aggregate of the stated capital of both classes divided by the number of issued shares of both classes immediately before the conversion.

(6) Shares or fractions of shares issued by a corporation and pur­ chased, redeemed or otherwise acquired by it shall either be cancelled or restored to the status of authorized but unissued shares.

(7) For the purposes of this section, a corporation holding shares in itself as permitted by

section 31(1) and (2) is deemed not to have purchased, redeemed or otherwise acquired those shares.

(8) Shares issued by a corporation and converted pursuant to their terms or changed under

section 167, 185, 186 or 234 into shares of another class or series shall become issued shares of the class or series of shares into which the shares have been converted or changed.

(9) If issued shares of a class or series have become, pursuant to subsection (8), issued shares of another class or series, the number of unissued shares of the first-mentioned class or series shall, unless the articles of amendment or reorganization otherwise provide, be increased by the number of shares that, pursuant to subsection (8), became shares of another class or series. Repayment, acquisition and reissue of debt obligations 37.1(1) Debt obligations issued, pledged, hypothecated or depos­ ited by a corporation are not redeemed by reason only that the in­ debtedness evidenced by the debt obligations or in respect of which 27

the debt obligations are issued, pledged, hypothecated or deposited is repaid.

(2) Debt obligations issued by a corporation and purchased, re­ deemed or otherwise acquired by it may be cancelled or, subject to any applicable trust indenture or other agreement, may be reissued, pledged or hypothecated to secure any obligation of the corporation then existing or thereafter incurred, and any such acquisition and reissue, pledge or hypothecation is not a cancellation of the debt obligations.

Enforceability of contract against corporation 38(1) A contract with a corporation providing for the purchase by it of shares of the corporation is specifically enforceable against the corporation except to the extent that the corporation cannot perform the contract without being in breach of

section 32 or 33.

(2) In an action brought on a contract referred to in subsection (1), the corporation has the burden of proving that performance of the contract is prevented by

section 32 or 33.

(3) Until the corporation has fully performed a contract referred to in subsection (1), the other party to that contract retains the status of a claimant and is entitled to be paid as soon as the corporation is lawfully able to do so or, in liquidation, to be ranked subordinate to the rights of creditors and to the rights of any class of shareholders whose rights were in priority to the rights given to the class of shares which he contracted to sell to the corporation, but in priority to the rights of the other shareholders.

Commission on sale of shares 39 The directors may authorize the corporation to pay a reasonable commission to any person in consideration of his purchasing or agreeing to purchase shares of the corporation from the corporation or from any other person, or procuring or agreeing to procure pur­ chasers for shares of the corporation. Dividends 40 A corporation shall not declare or pay a dividend if there are reasonable grounds for believing that (

a) the corporation is, or would after the payment be, unable to pay its liabilities as they become due, or (

b) the realizable value of the corporation’s assets would thereby be less than the aggregate of its liabilities and stated capital of all classes. Form of dividend 41(1) A corporation may pay a dividend by issuing fully paid shares of the corporation and, subject to

section 40, a corporation may pay a dividend in money or property.

(2) If shares of a corporation are issued in payment of a dividend, the declared amount of the dividend stated as an amount of money shall be added to the stated capital account maintained or to be maintained for the shares of the class or series issued in payment of the dividend. 28

Prohibited financial assistance by corporation 42(1) Except as permitted under subsection (2), a corporation shall not, directly or indirectly, give financial assistance by means of a loan, guarantee or otherwise (

a) to a shareholder or director of the corporation or of an af­ filiated corporation, (

b) to an associate of a shareholder or director of the corporation or of an affiliated corporation, or (

c) to any person for the purpose of or in connection with a purchase of a share issued or to be issued by the corporation or an affiliated corporation, if there are reasonable grounds for believing that (

d) the corporation is, or after giving the financial assistance would be, unable to pay its liabilities as they become due, or (

e) the realizable value of the corporation’s assets, excluding the amount of any financial assistance in the form of a loan or in the form of assets pledged or encumbered to secure a guarantee, after giving the financial assistance, would be less than the ag­ gregate of the corporation’s liabilities and stated capital of all classes.

(2) A corporation may give financial assistance by means of a loan, guarantee or otherwise (

a) to any person in the ordinary course of business if the lending of money is part of the ordinary business of the corporation, (

b) to any person on account of expenditures incurred or to be incurred on behalf of the corporation, (

c) to a holding body corporate if the corporation is a wholly owned subsidiary of the holding body corporate, (

d) to a subsidiary body corporate of the corporation, or (

e) to employees of the corporation or any of its affiliates (

i) to enable or assist them to purchase or erect living ac­ commodation for their own occupation, or (ii) in accordance with a plan for the purchase of shares of the corporation or any of its affiliates to be held by a trustee.

(3) A contract made by a corporation in contravention of this

section may be enforced by the corporation or by a lender for value in good faith without notice of the contravention.

(4) Unless disclosure is otherwise made by a corporation, a financial 29

statement referred to in

section 149(1)(

a) shall contain the following information with respect to each case in which financial assistance is given by the corporation by way of loan, guarantee or otherwise, whether in contravention of this

section or not, to any of the persons referred to in subsection (1)(a), (

b) or (c), if the financial assistance was given during the financial year or period to which the statement relates or remains outstanding at the end of that financial year or period: (

a) the identity of the person to whom the financial assistance was given; (

b) the nature of the financial assistance given; (

c) the terms on which the financial assistance was given; (

d) the amount of the financial assistance initially given and the amount, if any, outstanding. Shareholder immunity 43(1) The shareholders of a corporation are not, as shareholders, liable for any liability, act or default of the corporation except under

section 36(4), 140(7) or 219(4).

(2) Subject to

section 45(8), the articles may provide that the cor­ poration has a lien on a share registered in the name of a shareholder or his legal representative for a debt of that shareholder to the cor­ poration, including an amount unpaid in respect of a share issued by a body corporate on the date it was continued under this Act.

(3) A corporation may enforce a lien referred to in subsection (2) in accordance with its by-laws.

PART 6 SECURITY CERTIFICATES, REGISTERS AND TRANSFERS

Interpretation and General

Definitions and

interpretation44(1) The transfer or transmission of a security shall be governed by this Part.

(2) In this Part, (a) “adverse claim” includes a claim that a transfer was or would be wrongful or that a particular adverse person is the owner of or has an interest in the security; (b) “bearer” means the person in possession of a security pay­ able to bearer or endorsed in blank; (c) “bona fide purchaser” means a purchaser for value in good faith and without notice of any adverse claim who takes delivery 30

of a security in bearer form or order form or of a security in registered form (

i) issued to him, or (ii) endorsed to him or endorsed in blank by an appropriate person as defined in

section 61; (d) “broker” means a person who is engaged for all or part of his time in the business of buying and selling securities and who, in the transaction concerned, acts for, or buys a security from, or sells a security to, a customer; (e) “delivery” means voluntary transfer of possession; (f) “fiduciary” means (

i) a trustee, guardian, committee, curator or tutor, (ii) an executor, administrator or representative of a deceased person, and (iii) any other person acting in a fiduciary capacity; (g) “fungible” means, in relation to securities, securities of which any unit is, by nature or usage of trade, the equivalent of any other like unit; (h) “genuine” means free of forgery or counterfeiting; (i) “good faith” means honesty in fact in the conduct of the transaction concerned; (j) “holder” means a person in possession of a security issued or endorsed to him or to bearer or in blank; (k) “issuer” includes a corporation (

i) that is required by this Act to maintain a securities reg­ ister, or (ii) that directly or indirectly creates fractional interests in its rights or property and that issues securities as evidence of those fractional interests; (l) “overissue” means the issue of securities in excess of any maximum number of securities that the issuer is authorized by its articles or a trust indenture to issue; (m) “purchaser” means a person who takes by sale, mortgage, hypothec, pledge, issue, reissue, gift or any other voluntary trans­ action creating an interest in a security; 31

(n) “security” or “security certificate” means an instrument issued by a corporation that is (

i) in bearer, order or registered form, (ii) of a type commonly dealt in on securities exchanges or markets or commonly recognized in any area in which it is issued or dealt in as a medium for investment, (iii) one of a class or series or by its terms divisible into a class or series of instruments, and (iv) evidence of a share, participation or other interest in or obligation of a corporation; (o) “transfer” includes transmission by operation of law; (p) “trust indenture” means a trust indenture as defined in sec­ tion 77; (q) “unauthorized” in relation to a signature or an endorsement means one made without actual, implied or apparent authority and includes a forgery; (r) “valid” means issued in accordance with the applicable law and the articles of the issuer or validated under

section 48.

(3) A security is a negotiable instrument except when (

a) its transfer is restricted and noted on the security in accord­ ance with

section 45(8), or (

b) it is stated conspicuously on the security certificate that it is non-negotiable.

(4) A security is in registered form if (

a) it specifies a person entitled to the security or to the rights it evidences, and (

b) either its transfer is capable of being recorded in a securities register or the security so states.

(5) A debt obligation is in order form if by its terms it is payable to the order or assigns of any person specified in it with reasonable certainty or to him or his order.

(6) A security is in bearer form if it is payable to bearer according to its terms and not by reason of any endorsement.

(7) A guarantor for an issuer is deemed to be an issuer to the extent of his guarantee whether or not his obligation is noted on the security. Security certificates 45(1) A security holder is entitled at his option to a security cer- 32

tificate that complies with this Act or a non-transferable written acknowledgment of his right to obtain a security certificate from a corporation in respect of the securities of that corporation held by him.

(2) A corporation may charge a fee of not more than $3 for a security certificate issued in respect of a transfer.

(3) A corporation is not required to issue more than one security certificate in respect of securities held jointly by several persons, and delivery of a certificate to one of several joint holders is sufficient delivery to all.

(4) A security certificate shall be signed manually by at least one director or officer of the corporation or by or on behalf of a registrar, transfer agent or branch transfer agent of the corporation, or by a trustee who certifies it in accordance with a trust indenture, and any additional signatures required on a security certificate may be printed or otherwise mechanically reproduced on it.

(5) Notwithstanding subsection (4), a manual signature is not re­ quired on (

a) a security certificate representing (

i) a fractional share, or (ii) an option or a right to acquire a security, or (

b) a scrip certificate.

(6) If a security certificate contains a printed or mechanically re­ produced signature of a person, the corporation may issue the security certificate, notwithstanding that the person has ceased to be a director or an officer of the corporation, and the security certificate is as valid as if he were a director or an officer at the date of its issue.

(7) There shall be stated on the face of each share certificate issued by a corporation (

a) the name of the corporation, (

b) the words “Incorporated under The Business Corporations Act”, (

c) the name of the person to whom it was issued, and (

d) the number and class of shares and the designation of any series that the certificate represents.

(8) If a security certificate issued by a corporation or by a body corporate before the body corporate was continued under this Act is or becomes subject to 33

(

a) a restriction on its transfer other than a constraint under

section 168, or (

b) a lien in favour of the corporation, the restriction or lien is ineffective against a transferee of the security who has no actual knowledge of it unless (

c) it or a reference to it is noted conspicuously on the security certificate, (

d) the security certificate contains a conspicuous statement that it is non-negotiable, or (

e) the transferee is not (

i) a bona fide purchaser, or (ii) a purchaser against whom the owner of the security may not assert the ineffectiveness of an endorsement under

section 64.

(9) A distributing corporation shall not restrict the transfer of its shares except by way of a constraint permitted under

section 168.

(10) There shall be stated legibly on a share certificate issued by a corporation that is authorized to issue shares of more than one class or series (

a) the rights, privileges, restrictions and conditions attached to the shares of each class and series that exists when the share certificate is issued, or (

b) that the class or series of shares that it represents has rights, privileges, restrictions or conditions attached to it and that the corporation will furnish to a shareholder, on demand and without charge, a full copy of the text of (

i) the rights, privileges, restrictions and conditions attached to each class authorized to be issued and to each series in so far as they have been fixed by the directors, and (ii) the authority of the directors to fix the rights, privileges, restrictions and conditions of subsequent series.

(11) If a share certificate issued by a corporation contains the state­ ment mentioned in subsection (10)(b), the corporation shall furnish to a shareholder on demand and without charge a full copy of the text of (

a) the rights, privileges, restrictions and conditions attached to each class authorized to be issued and to each series in so far as they have been fixed by the directors, and 34

(

b) the authority of the directors to fix the rights, privileges, restrictions and conditions of subsequent series.

(12) A corporation may issue a certificate for a fractional share or may issue in its place scrip certificates in a form that entitles the holder to receive a certificate for a full share by exchanging scrip certificates aggregating a full share.

(13) The directors may attach conditions to any scrip certificates issued by a corporation, including conditions that (

a) the scrip certificates become void if they are not exchanged for a share certificate representing a full share before a specified date, and (

b) any shares for which those scrip certificates are exchangeable may, notwithstanding any pre-emptive right, be issued by the corporation to any person and the proceeds of those shares dis­ tributed rateably to the holders of the scrip certificates.

(14) A holder of a fractional share issued by a corporation is not entitled to exercise voting rights or to receive a dividend in respect of the fractional share, unless (

a) the fractional share results from a consolidation of shares, or (

b) the articles of the corporation otherwise provide.

(15) A holder of a scrip certificate is not entitled to exercise voting rights or to receive a dividend in respect of the scrip certificate. Securities records 46(1) A corporation shall maintain a securities register in which it records the securities issued by it in registered form, showing with respect to each class or series of securities (

a) the names, alphabetically arranged, and the latest known address of each person who is or has been a security holder, (

b) the number of securities held by each security holder, and (

c) the date and particulars of the issue and transfer of each security.

(2) A corporation may appoint (

a) one or more trust companies registered under The Trust Com­ panies Act as its agent or agents to maintain a central securities register or registers, and (

b) an agent or agents to maintain a branch securities register or registers.

(3) Registration of the issue or transfer of a security in the central 35

securities register or in a branch securities register is complete and valid registration for all purposes.

(4) A branch securities register shall contain particulars of securities issued or transferred at that branch.

(5) Particulars of each issue or transfer of a security registered in a branch securities register shall also be kept in the corresponding central securities register.

(6) Neither a corporation, nor its agent nor a trustee defined in

section 77(1) is required to produce (

a) a cancelled security certificate in registered form, an instru­ ment referred to in

section 29(1) that is cancelled or a like can­ celled instrument in registered form 6 years after the date of its cancellation, (

b) a cancelled security certificate in bearer form or an instru­ ment referred to in

section 29(1) that is cancelled or a like can­ celled instrument in bearer form after the date of its cancellation, or (

c) an instrument referred to in

section 29(1) or a like instrument, irrespective of its form, after the date of its expiry. Dealings with registered holders and transmission on death 47(1) A corporation or a trustee as defined in

section 77(1) may, subject to sections 128, 129 and 132, treat the registered owner of a security as the person exclusively entitled to vote, to receive notices, to receive any interest, dividend or other payments in respect of the security, and otherwise to exercise all the rights and powers of an owner of the security.

(2) Notwithstanding subsection (1), but subject to a unanimous shareholder agreement, a corporation whose articles restrict the right to transfer its securities shall, and any other corporation may, treat a person as a registered security holder entitled to exercise all the rights of the security holder he represents if that person furnishes evidence as described in

section 72(4) to the corporation that he is (

a) the executor, administrator, heir or legal representative of the heirs of the estate of a deceased security holder, (

b) a guardian, committee, trustee, curator or tutor representing a registered security holder who is an infant, an incompetent person or a missing person, or (

c) a liquidator of, or a trustee in bankruptcy for, a registered security holder.

(3) If a person on whom the ownership of a security devolves by operation of law, other than a person described in subsection (2), furnishes proof of his authority to exercise rights or privileges in respect of a security of the corporation that is not registered in his 36

name, the corporation shall treat that person as entitled to exercise those rights or privileges.

(4) A corporation is not required to inquire into the existence of, or see to the performance or observance of, any duty owed to a 3rd person by a registered holder of any of its securities or by anyone whom it treats, as permitted or required by this section, as the owner or registered holder of the securities.

(5) If an infant exercises any rights of ownership in the securities of a corporation, no subsequent repudiation or avoidance is effective against the corporation.

(6) A corporation shall treat as owner of a security the survivors of persons to whom the security was issued if (

a) it receives proof satisfactory to it of the death of any joint holder of the security, and (

b) the security provides that the persons to whom the security was issued are joint holders with right of survivorship.

(7) Subject to any applicable law relating to the collection of taxes, a person referred to in subsection (2)(

a) is entitled to become a registered holder or to designate a registered holder, if he deposits with the corporation or its transfer agent (

a) the original grant of probate or of letters of administration, or a copy of it certified to be a true copy by (

i) the court that granted the probate or letters of administration, (ii) a trust company incorporated under the laws of Canada or a province, or (iii) a lawyer or notary acting on behalf of the person referred to in subsection (2)(a), or (

b) in the case of transmission by notarial will in the Province of Quebec, a copy of the will authenticated pursuant to the laws of that province, together with (

c) an affidavit, statutory declaration or declaration of trans­ mission made by a person referred to in subsection (2)(a), stating the particulars of the transmission, and (

d) the security certificate that was owned by the deceased holder (

i) in the case of a transfer to a person referred to in sub- 37

section (2)(a), with or without the endorsement of that person, and (ii) in the case of a transfer to any other person, endorsed in accordance with

section 61, and accompanied by any assurance the corporation may require under

section 72.

(8) Notwithstanding subsection (7), if the laws of the jurisdiction governing the transmission of a security of a deceased holder do not require a grant of probate or of letters of administration in respect of the transmission, a legal representative of the deceased holder is entitled, subject to any applicable law relating to the collection of taxes, to become a registered holder or to designate a registered holder, if he deposits with the corporation or its transfer agent (

a) the security certificate that was owned by the deceased holder, and (

b) reasonable proof of the governing laws, of the deceased holder’s interest in the security and of the right of the legal representative or the person he designates to become the regis­ tered holder.

(9) Deposit of the documents required by subsection (7) or (8) em­ powers a corporation or its transfer agent to record in a securities register the transmission of a security from the deceased holder to a person referred to in subsection (2)(

a) or to any person that the person referred to in subsection (2)(

a) may designate and, thereafter, to treat the person who thus becomes a registered holder as the owner of the security. Overissue 48(1) The provisions of this Part that validate a security or compel its issue or reissue do not apply to the extent that validation, issue or reissue would result in overissue, but (

a) if a valid security, similar in all respects to the security involved in the overissue, is reasonably available for purchase, the person entitled to the validation or issue may compel the issuer to purchase and deliver such a security to him against surrender of the security that he holds, or (

b) if a valid security, similar in all respects to the security involved in the overissue, is not reasonably available for pur­ chase, the person entitled to the validation or issue may recover from the issuer an amount equal to the price the last purchaser for value paid for the invalid security.

(2) When an issuer subsequently amends its articles, or a trust in­ denture to which it is a party, to increase its authorized securities to a number equal to or in excess of the number of securities pre­ viously authorized plus the amount of the securities overissued, the securities so overissued are valid from the date of their issue. 38

(3) Subsection (2) does not apply if the issuer has purchased and delivered a security in accordance with subsection (1)(

a) or paid the amount referred to in subsection (1)(b).

(4) A purchase or payment by an issuer under subsection (1) is not a purchase or payment to which

section 32, 33, 34 or 37 applies. Burden of proof in actions 49 In an action on a security, (

a) unless specifically denied in the pleadings, each signature on the security or in a necessary endorsement is admitted, (

b) a signature on the security is presumed to be genuine and authorized but, if the effectiveness of the signature is put in issue, the burden of establishing that it is genuine and authorized is on the party claiming under the signature, (

c) if a signature is admitted or established, production of the instrument entitles a holder to recover on it unless the defendant establishes a defence or a defect going to the validity of the security, and (

d) if the defendant establishes that a defence or defect exists, the plaintiff has the burden of establishing that the defence or defect is ineffective against him or some person under whom he claims. Securities are fungible 50 Unless otherwise agreed, and subject to any applicable law, regulation or stock exchange rule, a person required to deliver se­ curities may deliver any security of the specified issue in bearer form or registered in the name of the transferee or endorsed to him or in blank.

Issue — Issuer Notice of defects 51(1) Even against a purchaser for value and without notice of a defect going to the validity of a security, the terms of the security include those stated on the security and those incorporated in it by reference to another instrument, statute, rule, regulation or order to the extent that the terms so referenced do not conflict with the stated terms, but such a reference is not of itself notice to a purchaser for value of a defect going to the validity of the security, notwithstanding that the security expressly states that a person accepting it admits such notice.

(2) A security is valid in the hands of a purchaser for value without notice of any defect going to its validity.

(3) Except as provided in

section 53, the fact that a security is not genuine is a complete defence even against a purchaser for value and without notice. 39

(4) All other defences of an issuer, including non-delivery and con­ ditional delivery of a security, are ineffective against a purchaser for value without notice of the particular defence. Staleness is notice of defect 52 After an event that creates a right to immediate performance of the principal obligation evidenced by a security, or that sets a date on or after which a security is to be presented or surrendered for redemption or exchange, a purchaser is deemed to have notice of any defect in its issue or of any defence of the issuer, (

a) if the event requires the payment of money or the delivery of securities, or both, on presentation or surrender of the security, and such funds or securities are available on the date set for payment or exchange, and the purchaser takes the security more than one year after that date, or (

b) if the purchaser takes the security more than 2 years after the date set for surrender or presentation or the date on which such performance became due. Unauthorized signature 53 An unauthorized signature on a security before or in the course of issue is ineffective, except that the signature is effective in favour of a purchaser for value and without notice of the lack of authority, if the signing has been done by (

a) an authenticating trustee, registrar, transfer agent or other person entrusted by the issuer with the signing of the security, or of similar securities, or their immediate preparation for sign­ ing, or (

b) an employee of the issuer or of a person referred to in clause (

a) who in the ordinary course of his duties handles the security. Completion or alteration54(1) If a security contains the signatures necessary to its issue or transfer but is incomplete in any other respect, (

a) any person may complete it by filling in the blanks in ac­ cordance with his authority, and (

b) notwithstanding that the blanks are incorrectly filled in, the security as completed is enforceable by a purchaser who took it for value and without notice of the incorrectness.

(2) A completed security that has been improperly altered, even if fraudulently altered, remains enforceable, but only according to its original terms. Warranties of agents 55(1) A person signing a security as authenticating trustee, registrar, transfer agent or other person entrusted by the issuer with the signing of the security, warrants to a purchaser for value without notice that (

a) the security is genuine, 40

(

b) his acts in connection with the issue of the security are within his authority, and (

c) he has reasonable grounds for believing that the security is in the form and within the amount the issuer is authorized to issue.

(2) Unless otherwise agreed, a person referred to in subsection (1) does not assume any further liability for the validity of a security. Purchase Title of purchaser56(1) On delivery of a security, the purchaser acquires the rights in the security that his transferor had or had authority to convey, except that a purchaser who has been a party to any fraud or illegality affecting the security or who as a prior holder had notice of an adverse claim does not improve his position by taking from a later bona fide purchaser.

(2) A bona fide purchaser, in addition to acquiring the rights of a purchaser, also acquires the security free from any adverse claim.

(3) A purchaser of a limited interest acquires rights only to the extent of the interest purchased.

(4) Nothing in subsection (2) confers any rights on a purchaser unless all necessary endorsements are made by an appropriate person as defined in

section 61. Deemed notice of adverse claims57(1) A purchaser of a security, or any broker for a seller or pur­ chaser, is deemed to have notice of all adverse claims if (

a) the security, whether in bearer or registered form, has been endorsed “for collection” or “for surrender” or for some other purpose not involving transfer, or (

b) the security is in bearer form and has on it a statement that it is the property of a person other than the transferor, except that the mere writing of a name on a security is not such a statement.

(2) Notwithstanding that a purchaser or any broker for a seller or purchaser has notice that a security is held for a 3rd person or is registered in the name of or endorsed by a fiduciary, he has no duty to inquire into the rightfulness of the transfer and has no notice of an adverse claim, except that if a purchaser knows that the consid­ eration is to be used for, or that the transaction is for, the personal benefit of the fiduciary or is otherwise in breach of the fiduciary's duty, the purchaser is deemed to have notice of an adverse claim.

Staleness as notice of adverse claims58 An event that creates a right to immediate performance of the principal obligation evidenced by a security or that sets a date on or 41

after which the security is to be presented or surrendered for re­ demption or exchange is not of itself notice of an adverse claim, except in the case of a purchase (

a) after one year from any date set for such presentation or surrender for redemption or exchange, or (

b) after 6 months from any date set for payment of money against presentation or surrender of the security if funds are available for payment on that date. Warranties 59(1) A person who presents a security for registration of transfer or for payment or exchange warrants to the issuer that he is entitled to the registration, payment or exchange, except that a purchaser for value without notice of an adverse claim who receives a new, reissued or re-registered security on registration of transfer warrants only that he has no knowledge of any unauthorized signature in a necessary endorsement.

(2) A person by transferring a security to a purchaser for value warrants only that (

a) the transfer is effective and rightful, (

b) the security is genuine and has not been materially altered, and (

c) he knows of nothing that might impair the validity of the security.

(3) If a security is delivered by an intermediary known by the pur­ chaser to be entrusted with delivery of the security on behalf of another or with collection of a draft or other claim to be collected against such delivery, the intermediary by such delivery warrants only his own good faith and authority even if he has purchased or made advances against the draft or other claim to be collected against the delivery.

(4) A pledgee or other holder for purposes of security who redelivers a security received, or after payment and on order of the debtor delivers that security to a 3rd person, gives only the warranties of an intermediary under subsection (3).

(5) A broker gives (

a) to his customer and to a purchaser the warranties provided in subsection (2), and (

b) to the issuer the warranties provided in subsection (1).

(6) A broker has the rights and privileges of a purchaser under this section.

(7) The warranties of and in favour of a broker acting as an agent 42

are in addition to warranties given by his customer and warranties given in favour of his customer. Right to compel endorsement60 If a security in registered form is delivered to a purchaser without a necessary endorsement, he may become a bona fide purchaser only as of the time the endorsement is supplied, but against the transferor the transfer is complete on delivery and the purchaser has a specif­ ically enforceable right to have any necessary endorsement supplied. Endorsement61(1) In this section, “appropriate person” means (

a) the person specified by the security or by special endorsement to be entitled to the security, (

b) if a person described in clause (

a) is described as a fiduciary but is no longer serving in the described capacity, either that person or his successor, (

c) if the security or endorsement mentioned in clause (

a) spec­ ifies more than one person as fiduciaries and one or more are no longer serving in the described capacity, the remaining fiduciary or fiduciaries, whether or not a successor has been appointed or qualified, (

d) if a person described in clause (

a) is an individual and is without capacity to act by reason of death, incompetence, mi­ nority, or otherwise, his fiduciary, (

e) if the security or endorsement mentioned in clause (

a) spec­ ifies more than one person with right of survivorship and by reason of death all cannot sign, the survivor or survivors, (

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

g) to the extent that a person described in clauses (

a) to (

f) may act through an agent, his authorized agent.

(2) Whether the person signing is an appropriate person is deter­ mined as of the time of signing and an endorsement by such a person does not become unauthorized for the purposes of this Part by reason of any subsequent change of circumstances.

(3) An endorsement of a security in registered form is made when an appropriate person signs, either on the security or on a separate document, an assignment or transfer of the security or a power to assign or transfer it, or when the signature of an appropriate person is written without more on the back of the security.

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

(5) An endorsement in blank includes an endorsement to bearer. 43

(6) A special endorsement specifies the person to whom the security is to be transferred, or who has power to transfer it.

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

(8) Unless otherwise agreed, the endorser by his endorsement as­ sumes no obligation that the security will be honoured by the issuer.

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

(10) Failure of a fiduciary to comply with a controlling instrument or with the law of the jurisdiction governing the fiduciary relation­ ship, including any law requiring the fiduciary to obtain court ap­ proval of a transfer, does not render his endorsement unauthorized for the purposes of this Part. Effect of endorsement without delivery 62 An endorsement of a security, whether special or in blank, does not constitute a transfer until delivery of the security on which it appears or, if the endorsement is on a separate document, until delivery of both the security and that document.

Endorsement in bearer form 63 An endorsement of a security in bearer form may give notice of an adverse claim under

section 57 but does not otherwise affect any right to registration that the holder has. Effect of unauthorized endorsement 64 Unless the owner has ratified an unauthorized endorsement or is otherwise precluded from asserting its ineffectiveness, he may assert its ineffectiveness against the issuer or any purchaser, other than a purchaser for value and without notice of adverse claims, who has in good faith received a new, reissued or re-registered security on registration of transfer. Warranties of guarantees of signatures or endorsements 65(1) A person who guarantees a signature of an endorser of a security warrants that at the time of signing (

a) the signature was genuine, (

b) the signer was an appropriate person as defined in

section 61 to endorse, and (

c) the signer had legal capacity to sign.

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

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

(4) The warranties referred to in this

section are made to any person 44

taking or dealing with the security relying on the guarantee and the guarantor is liable to that person for any loss resulting from breach of warranty. Constructive delivery and constructive ownership 66(1) Delivery to a purchaser occurs when (

a) he or a person designated by him acquires possession of a security, (

b) his broker acquires possession of a security specially en­ dorsed to or issued in the name of the purchaser, (

c) his broker sends him confirmation of the purchase and the broker in his records identifies a specific security as belonging to the purchaser, or (

d) with respect to an identified security to be delivered while still in the possession of a 3rd person, that person acknowledges that he holds it for the purchaser.

(2) A purchaser is the owner of a security held for him by his broker, but a purchaser is not a holder except in the cases referred to in subsection (1)(

b) and (c).

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

(4) Notice of an adverse claim received by a broker or by a purchaser after the broker takes delivery as a holder for value is not effective against the broker or the purchaser, except that, as between the broker and the purchaser, the purchaser may demand delivery of an equiv­ alent security in relation to which no notice of an adverse claim has been received. Delivery of security 67(1) Unless otherwise agreed, if a sale of a security is made on an exchange or otherwise through brokers, (

a) the selling customer fulfils his duty to deliver when (

i) he delivers the security to the selling broker or to a person designated by the selling broker, or (ii) he causes an acknowledgement to be made to the selling broker that the security is held for him, and (

b) the selling broker, including a correspondent broker, acting for a selling customer fulfils his duty to deliver (

i) by delivering the security or a like security to the buying broker or to a person designated by the buying broker, or 45

(ii) by effecting clearance of the sale in accordance with the rules of the exchange on which the transaction took place.

(2) Except as otherwise provided in this

section and unless otherwise agreed, a transferor’s duty to deliver a security under a contract of purchase is not fulfilled until he (

a) delivers the security in negotiable form to a purchaser or to a person designated by the purchaser, or (

b) causes an acknowledgement to be made to the purchaser that the security is held for him.

(3) A sale to a broker purchasing for his own account is subject to subsection (2) and not subsection (1), unless the sale is made on a stock exchange. Right to reclaim possession of security 68(1) A person against whom the transfer of a security is wrongful for any reason, including his incapacity but not including an unau­ thorized endorsement, may against any person except a bona fide purchaser reclaim possession of the security or obtain possession of any new security evidencing all or part of the same rights or claim damages.

(2) If the transfer of a security is wrongful by reason of an unau­ thorized endorsement, the owner may reclaim possession of the se­ curity or obtain possession of a new security even from a purchaser for value and without notice of an adverse claim if the ineffectiveness of the purported endorsement may be asserted against such purchaser under

section 64.

(3) The right to reclaim possession of a security may be specifically enforced, its transfer may be restrained and the security may be impounded pending litigation. Right to requisites of transfer69(1) Unless otherwise agreed, a transferor shall on demand supply a purchaser with proof of his authority to transfer or with any other requisite that is necessary to obtain registration of the transfer of a security, but if the transfer is not for value a transferor need not do so unless the purchaser pays the reasonable and necessary costs of the proof and transfer.

(2) If the transferor fails to comply with a demand under subsection (1) within a reasonable time, the purchaser may reject or rescind the transfer. Seizure of security 70 No seizure of a security of a distributing corporation or other interest evidenced by a security is effective until the person making the seizure obtains possession of the security. No conversion if good faith delivery by agent 70.1 An agent or bailee who in good faith, including observance of reasonable commercial standards if he is in the business of buying, selling or otherwise dealing with securities, has received securities and sold, pledged or delivered them according to the instructions of 46

his principal is not liable for conversion or for participation in breach of fiduciary duty although the principal has no right to dispose of them. Duty to register transfer 71(1) If a security in registered form is presented for registration of transfer, the issuer shall register the transfer if (

a) the security is endorsed by an appropriate person, as defined in

section 61, (

b) reasonable assurance is given that that endorsement is gen­ uine and effective, (

c) the issuer has no duty to inquire into adverse claims or has discharged any such duty, (

d) any applicable law relating to the collection of taxes has been complied with, (

e) the transfer is rightful or is to a bona fide purchaser, and (

f) any fee referred to in

section 45(2) has been paid.

(2) If an issuer has a duty to register a transfer of a security, the issuer is liable to the person presenting it for registration for loss resulting from any unreasonable delay in registration or from failure or refusal to register the transfer. Assurance that endorsement is effective 72(1) An issuer may require an assurance that each necessary en­ dorsement on a security is genuine and effective by requiring a guarantee of the signature of the person endorsing and by requiring (

a) if the endorsement is by an agent, reasonable assurance of the agent’s authority to sign, (

b) if the endorsement is by a fiduciary, evidence of his ap­ pointment or incumbency, (

c) if there is more than one fiduciary, reasonable assurance that all who are required to sign have done so, and (

d) in any other case, assurance that corresponds as closely as practicable to the foregoing.

(2) In subsection (1), “guarantee of the signature” means a guar­ antee signed by or on behalf of a person reasonably believed by the issuer to be a responsible person.

(3) An issuer may adopt reasonable standards to determine respon­ sible persons for the purpose of subsection (2).

(4) In subsection (1)(b), “evidence of appointment or incumbency” means 47

(

a) in the case of a fiduciary appointed by a court, a copy of the order certified in accordance with

section 47(7), and dated not earlier than 60 days before the date a security is presented for transfer, or (

b) in any other case, a copy of a document showing the ap­ pointment or other evidence believed by the issuer to be appropriate.

(5) An issuer may adopt reasonable standards with respect to evi­ dence for the purposes of subsection (4)(b).

(6) An issuer is not deemed to have notice of the contents of any document obtained pursuant to subsection (4) except to the extent that the contents relate directly to appointment or incumbency.

(7) If an issuer demands assurance additional to that specified in this

section for a purpose other than that specified in subsection (4) and obtains a copy of a will, trust or partnership agreement, by-law or similar document, the issuer is deemed to have notice of all matters contained therein affecting the transfer. Limited duty of inquiry as to adverse claims 73(1) An issuer to whom a security is presented for registration of transfer has a duty to inquire into adverse claims if (

a) written notice of an adverse claim is received at a time and in a manner that affords the issuer a reasonable opportunity to act on it before the issue of a new, reissued or re-registered security and the notice discloses the name and address of the claimant, the registered owner and the issue of which the security is a part, or (

b) the issuer is deemed to have notice of an adverse claim from a document that is obtained under

section 72(7).

(2) An issuer may discharge a duty of inquiry by any reasonable means, including notifying an adverse claimant by registered mail sent to the address furnished by him or, if no such address has been furnished, to his residence or regular place of business, that a security has been presented for registration of transfer by a named person, and that the transfer will be registered unless within 30 days from the date of mailing the notice either (

a) the issuer is served with a restraining order or other order of the Court, or (

b) the issuer is provided with an indemnity bond sufficient in the issuer’s judgment to protect the issuer and any registrar, transfer agent or other agent of the issuer from any loss that may be incurred by any of them as a result of complying with the adverse claim.

(3) Unless an issuer is deemed to have notice of an adverse claim from a document that it obtained under

section 72(7) or has received 48

notice of an adverse claim under subsection (1), if a security presented for registration is endorsed by the appropriate person as defined in

section 61 the issuer has no duty to inquire into adverse claims, and in particular, (

a) an issuer registering a security in the name of a person who is a fiduciary or who is described as a fiduciary is not bound to inquire into the existence, extent or correct description of the fiduciary relationship, and thereafter the issuer may assume with­ out inquiry that the fiduciary is no longer acting as such with respect to the particular security, (

b) an issuer registering a transfer on an endorsement by a fi­ duciary has no duty to inquire whether the transfer is made in compliance with the document or with the law of the jurisdiction governing the fiduciary relationship, and (

c) an issuer is not deemed to have notice of the contents of any court record or any registered document even if the record or document is in the issuer’s possession and even if the transfer is made on the endorsement of a fiduciary to the fiduciary himself or to his nominee.

(4) A written notice of adverse claim received by an issuer is ef­ fective for 12 months from the date when it was received and thereon ceases to be effective unless the notice is renewed in writing.

(5) An issuer who registers the transfer of a security on an unau­ thorized endorsement is liable for improper registration. Limitation of issuer's liability74(1) Except as otherwise provided in any applicable law relating to the collection of taxes, the issuer is not liable to the owner or any other person who incurs a loss as a result of the registration of a transfer of a security if (

a) the necessary endorsements were on or with the security, and (

b) the issuer had no duty to inquire into adverse claims or had discharged any such duty.

(2) If an issuer has registered a transfer of a security to a person not entitled to it, the issuer shall on demand deliver a like security to the owner unless (a) subsection (1) applies, (

b) the owner is precluded by

section 75(1) from asserting any claim, or (

c) the delivery would result in overissue, in which case the issuer's liability is governed by

section 48. 49

Rights and obligations on loss or theft 75(1) If (

a) a security has been lost, apparently destroyed or wrongfully taken, and the owner fails to notify the issuer of that fact by giving the issuer written notice of his adverse claim within a reasonable time after he knows of the loss, destruction or taking, and (

b) the issuer has registered a transfer of the security before receiving such notice, the owner is precluded from asserting against the issuer any claim to a new security.

(2) If the owner of a security claims that the security has been lost, destroyed or wrongfully taken, the issuer shall issue a new security in place of the original security if the owner (

a) so requests before the issuer has notice that the security has been acquired by a bona fide purchaser and before a purchaser described in

section 64 has received a new, reissued or re-reg­ istered security, (

b) furnishes the issuer with a sufficient indemnity bond, and (

c) satisfies any other reasonable requirements imposed by the issuer.

(3) If, after the issue of a new security under subsection (2), a bona fide purchaser of the original security presents the original security for registration of transfer, the issuer shall register the transfer unless registration would result in overissue, in which case the issuer’s liability is governed by

section 48.

(4) In addition to any rights on an indemnity bond, the issuer may recover a new security issued under subsection (2) from the person to whom it was issued or any person taking under him other than a bona fide purchaser. Rights, duties, etc. of issuer’s agent76(1) An authenticating trustee, registrar, transfer agent or other agent of an issuer has, in respect of the issue, registration of transfer and cancellation of a security of the issuer, (

a) a duty to the issuer to exercise good faith and reasonable diligence, and (

b) the same obligations to the holder or owner of a security and the same rights, privileges and immunities as the issuer.

(2) Notice to an authenticating trustee, registrar, transfer agent or other agent of an issuer is notice to the issuer with respect to the functions performed by the agent. 50

PART 7 CORPORATE BORROWING Division 1 Trust Indentures

Interpretation and application77(1) In this Division, (a) “event of default” means an event specified in a trust in­ denture on the occurrence of which (

i) a security interest constituted by the trust indenture be­ comes enforceable, or (ii) the principal, interest and other money payable under the trust indenture become or may be declared to be payable before maturity, but the event is not an event of default until all conditions pre­ scribed by the trust indenture in connection with that event for the giving of notice or the lapse of time or otherwise have been satisfied; (b) “trustee” means any person appointed as trustee under the terms of a trust indenture