Further to our last e-communiqué on Bill-63, the Québec government recently announced that the Business Corporations Act (the “Act”) will come into force on February 14, 2011. When it comes into force, the Act will revamp Parts I and IA of Québec’s Companies Act, a statute which has not been revised in nearly thirty years. The Act has drawn praise as a welcome change to Québec’s business landscape.
Part IA companies (i.e. corporations incorporated subsequent to 1981 under the Companies Act, or continued as Part IA companies) will be automatically governed by the Act on February 14, 2011.
The Act aims to create a modern and comprehensible set of rules, in step with those already adopted by the federal and other provincial governments.
The Act introduces measures that simplify the process of incorporating in Québec. For example, it allows businesses to incorporate online by filing documents electronically with the enterprise registrar. The proposed changes will also allow businesses that are already incorporated under the laws of a foreign jurisdiction to be continued as Québec corporations. Conversely, the Act permits the continuance of Québec corporations in foreign jurisdictions.
Clarification of Directors’ Duties
The Act also clarifies directors’ duties and presents them in an accessible framework. It narrows the current scope of directors’ potential liability by sanctioning the use of a “reasonable diligence” defence and by enhancing directors’ rights to indemnification. Furthermore, directors will no longer be statutorily liable when the corporation grants financial assistance to shareholders.
New Minority Shareholders Rights and Remedies
Under the Act, minority shareholders, like directors, are granted new rights that enhance their protection. For example, shareholders are entitled to have their shares redeemed in the event of a major change to a corporation’s activities or structure (the right of dissent). A host of new statutory remedies, such as the oppression remedy and the derivative action, are also provided for in the Act. Moreover, the Act entitles shareholders to vote by class and submit proposals at annual meetings.
Facilitating the Operation of Small and Medium Enterprises
The Act will cover approximately 300,000 businesses, the majority of which will be small and medium sized enterprises (“SMEs”). The Act provides new rules for SMEs that will facilitate their operation in Québec. For example, single-shareholder corporations will not have to hold annual meetings. Simplified rules are also provided for corporations where shareholders have appropriated all powers from the board of directors.