In a recent ruling Power Corporation du Canada c. Mouvement d'éducation et de défense des actionnaires,[i] the Quebec Court of Appeal addressed certain issues related to section 157(1) of the Canada Business Corporations Act ("CBCA") which requires a corporation to keep a copy of the financial statements of each of its direct and indirect subsidiaries at its registered office. The Court held that the requirement applies even where the accounts of a direct and indirect subsidiary do not have a significant impact on the value of the parent corporation's shares.
All Canadian provinces and territories have a provision similar to section 157(1) of the CBCA in their legislation, except for Quebec, British Columbiaand Prince Edward Island.
This judgment is significant as section 157(2) of the CBCA allows shareholders to examine such financial statements and make extracts free of charge.
Section 157(3) of the CBCA provides a procedure to block such shareholders' request. Unfortunately, the Court did not consider under what circumstances shareholders' access to such financial statements would be denied because Power Corporation, at the suggestion of the trial judge, made only an application for a declaratory judgment under section 157(1) of the CBCA.
Under section 157(3), a court may grant an order barring the right to examine financial statements, if it is satisfied that such examination would be detrimental to the corporation or a subsidiary body corporate. Since the ruling did not address the issue, there will remain little guidance on what might be considered detrimental until such time as judgment is rendered on Power Corporation's motion under section 157(3) of the CBCA, which had been put in abeyance pending a ruling on the application for a declaratory judgment.