Canada Business Corporations Act (R.S.C., 1985, c. C-44)

Marginal note:Officers

121 Subject to the articles, the by-laws or any unanimous shareholder agreement,

• (a) the directors may designate the offices of the corporation, appoint as officers persons of full capacity, specify their duties and delegate to them powers to manage the business and affairs of the corporation, except powers to do anything referred to in subsection 115(3);

• (b) a director may be appointed to any office of the corporation; and

• (c) two or more offices of the corporation may be held by the same person.

Marginal note:Duty of care of directors and officers

• 122 (1) Every director and officer of a corporation in exercising their powers and discharging their duties shall

  • (a) act honestly and in good faith with a view to the best interests of the corporation; and

  • (b) exercise the care, diligence and skill that a reasonably prudent person would exercise in comparable circumstances.

• Marginal note:Best interests of the corporation

  (1.1) When acting with a view to the best interests of the corporation under paragraph (1)(a), the directors and officers of the corporation may consider, but are not limited to, the following factors:

  • (a) the interests of

    • (i) shareholders,

    • (ii) employees,

    • (iii) retirees and pensioners,

    • (iv) creditors,

    • (v) consumers, and

    • (vi) governments;

  • (b) the environment; and

  • (c) the long-term interests of the corporation.

• Marginal note:Duty to comply

  (2) Every director and officer of a corporation shall comply with this Act, the regulations, articles, by-laws and any unanimous shareholder agreement.

• Marginal note:No exculpation

  (3) Subject to subsection 146(5), no provision in a contract, the articles, the by-laws or a resolution relieves a director or officer from the duty to act in accordance with this Act or the regulations or relieves them from liability for a breach thereof.

Marginal note:Dissent

• 123 (1) A director who is present at a meeting of directors or committee of directors is deemed to have consented to any resolution passed or action taken at the meeting unless

  • (a) the director requests a dissent to be entered in the minutes of the meeting, or the dissent has been entered in the minutes;

  • (b) the director sends a written dissent to the secretary of the meeting before the meeting is adjourned; or

  • (c) the director sends a dissent by registered mail or delivers it to the registered office of the corporation immediately after the meeting is adjourned.

• Marginal note:Loss of right to dissent

  (2) A director who votes for or consents to a resolution is not entitled to dissent under subsection (1).

• Marginal note:Dissent of absent director

  (3) A director who was not present at a meeting at which a resolution was passed or action taken is deemed to have consented thereto unless within seven days after becoming aware of the resolution, the director aware or the resolution, the director

  • (a) causes a dissent to be placed with the minutes of the meeting; or

  • (b) sends a dissent by registered mail or delivers it to the registered office of the corporation.

• Marginal note:Defence — reasonable diligence

  (4) A director is not liable under section 118 or 119, and has complied with his or her duties under subsection 122(2), if the director exercised the care, diligence and skill that a reasonably prudent person would have exercised in comparable circumstances, including reliance in good faith on

  • (a) financial statements of the corporation represented to the director by an officer of the corporation or in a written report of the auditor of the corporation fairly to reflect the financial condition of the corporation; or

  • (b) a report of a person whose profession lends credibility to a statement made by the professional person.

• Marginal note:Defence — good faith

  (5) A director has complied with his or her duties under subsection 122(1) if the director relied in good faith on

  • (a) financial statements of the corporation represented to the director by an officer of the corporation or in a written report of the auditor of the corporation fairly to reflect the financial condition of the corporation; or

  • (b) a report of a person whose profession lends credibility to a statement made by the professional person.

Marginal note:Indemnification

• 124 (1) A corporation may indemnify a director or officer of the corporation, a former director or officer of the corporation or another individual who acts or acted at the corporation’s request as a director or officer, or an individual acting in a similar capacity, of another entity, against all costs, charges and expenses, including an amount paid to settle an action or satisfy a judgment, reasonably incurred by the individual in respect of any civil, criminal, administrative, investigative or other proceeding in which the individual is involved because of that association with the corporation or other entity.

• Marginal note:Advance of costs

  (2) A corporation may advance moneys to a director, officer or other individual for the costs, charges and expenses of a proceeding referred to in subsection (1). The individual shall repay the moneys if the individual does not fulfil the conditions of subsection (3).

• Marginal note:Limitation

  (3) A corporation may not indemnify an individual under subsection (1) unless the individual

  • (a) acted honestly and in good faith with a view to the best interests of the corporation, or, as the case may be, to the best interests of the other entity for which the individual acted as director or officer or in a similar capacity at the corporation’s request; and

  • (b) in the case of a criminal or administrative action or proceeding that is enforced by a monetary penalty, the individual had reasonable grounds for believing that the individual’s conduct was lawful.

• Marginal note:Indemnification in derivative actions

  (4) A corporation may with the approval of a court, indemnify an individual referred to in subsection (1), or advance moneys under subsection (2), in respect of an action by or on behalf of the corporation or other entity to procure a judgment in its favour, to which the individual is made a party because of the individual’s association with the corporation or other entity as described in subsection (1) against all costs, charges and expenses reasonably incurred by the individual in connection with such action, if the individual fulfils the conditions set out in subsection (3).

• Marginal note:Right to indemnity

  (5) Despite subsection (1), an individual referred to in that subsection is entitled to indemnity from the corporation in respect of all costs, charges and expenses reasonably incurred by the individual in connection with the defence of any civil, criminal, administrative, investigative or other proceeding to which the individual is subject because of the individual’s association with the corporation or other entity as described in subsection (1), if the individual seeking indemnity

  • (a) was not judged by the court or other competent authority to have committed any fault or omitted to do anything that the individual ought to have done; and

  • (b) fulfils the conditions set out in subsection (3).

• Marginal note:Insurance

  (6) A corporation may purchase and maintain insurance for the benefit of an individual referred to in subsection (1) against any liability incurred by the individual

  • (a) in the individual’s capacity as a director or officer of the corporation; or

  • (b) in the individual’s capacity as a director or officer, or similar capacity, of another entity, if the individual acts or acted in that capacity at the corporation’s request.

• Marginal note:Application to court

  (7) A corporation, an individual or an entity referred to in subsection (1) may apply to a court for an order approving an indemnity under this section and the court may so order and make any further order that it sees fit.

• Marginal note:Notice to Director

  (8) An applicant under subsection (7) shall give the Director notice of the application and the Director is entitled to appear and be heard in person or by counsel.

• Marginal note:Other notice

  (9) On an application under subsection (7) the court may order notice to be given to any interested person and the person is entitled to appear and be heard in person or by counsel.

Marginal note:Remuneration

125 Subject to the articles, the by-laws or any unanimous shareholder agreement, the directors of a corporation may fix the remuneration of the directors, officers and employees of the corporation.

PART XIInsider Trading

Marginal note:Definitions

• 126 (1) In this Part,

  business combination

  business combination means an acquisition of all or substantially all the property of one body corporate by another, or an amalgamation of two or more bodies corporate, or any similar reorganization between or among two or more bodies corporate; (regroupement d’entreprises)

  distributing corporation

  distributing corporation[Repealed, 2001, c. 14, s. 52]

  insider

  insider means, except in section 131,

  • (a) a director or officer of a distributing corporation;

  • (b) a director or officer of a subsidiary of a distributing corporation;

  • (c) a director or officer of a body corporate that enters into a business combination with a distributing corporation; and

  • (d) a person employed or retained by a distributing corporation; (initié)

  officer

  officer means the chairperson of the board of directors, the president, a vice-president, the secretary, the treasurer, the comptroller, the general counsel, the general manager, a managing director, of an entity, or any other individual who performs functions for an entity similar to those normally performed by an individual occupying any of those offices; (dirigeant)

  share

  share means a share carrying voting rights under all circumstances or by reason of the occurrence of an event that has occurred and that is continuing, and includes

  • (a) a security currently convertible into such a share, and

  • (b) currently exercisable options and rights to acquire such a share or such a convertible security. (action)

• Marginal note:Further interpretation

  (2) For the purposes of this Part,

  • (a) a director or an officer of a body corporate that beneficially owns, directly or indirectly, shares of a distributing corporation, or that exercises control or direction over shares of the distributing corporation, or that has a combination of any such ownership, control and direction, carrying more than the prescribed percentage of voting rights attached to all of the outstanding shares of the distributing corporation not including shares held by the body corporate as underwriter while those shares are in the course of a distribution to the public is deemed to be an insider of the distributing corporation;

  • (b) a director or an officer of a body corporate that is a subsidiary is deemed to be an insider of its holding distributing corporation;

  • (c) a person is deemed to beneficially own shares that are beneficially owned by a body corporate controlled directly or indirectly by the person;

  • (d) a body corporate is deemed to own beneficially shares beneficially owned by its affiliates; and

  • (e) the acquisition or disposition by an insider of an option or right to acquire a share is deemed to be a change in the beneficial ownership of the share to which the option or right to acquire relates.

• (3) and (4) [Repealed, 2001, c. 14, s. 52]

127 to 129 [Repealed, 2001, c. 14, s. 53]

Marginal note:Prohibition of short sale

• 130 (1) An insider shall not knowingly sell, directly or indirectly, a security of a distributing corporation or any of its affiliates if the insider selling the security does not own or has not fully paid for the security to be sold.

• Marginal note:Calls and puts

  (2) An insider shall not knowingly, directly or indirectly, sell a call or buy a put in respect of a security of the corporation or any of its affiliates.

• Marginal note:Exception

  (3) Despite subsection (1), an insider may sell a security they do not own if they own another security convertible into the security sold or an option or right to acquire the security sold and, within ten days after the sale, they

  • (a) exercise the conversion privilege, option or right and deliver the security so acquired to the purchaser; or

  • (b) transfer the convertible security, option or right to the purchaser.

• Marginal note:Offence

  (4) An insider who contravenes subsection (1) or (2) is guilty of an offence and liable on summary conviction to a fine not exceeding the greater of one million dollars and three times the profit made, or to imprisonment for a term not exceeding six months or to both.

Marginal note:Definitions

• 131 (1) In this section, insider means, with respect to a corporation,

  • (a) the corporation;

  • (b) an affiliate of the corporation;

  • (c) a director or an officer of the corporation or of any person described in paragraph (b), (d) or (f);

  • (d) a person who beneficially owns, directly or indirectly, shares of the corporation or who exercises control or direction over shares of the corporation, or who has a combination of any such ownership, control and direction, carrying more than the prescribed percentage of voting rights attached to all of the outstanding shares of the corporation not including shares held by the person as underwriter while those shares are in the course of a distribution to the public;

  • (e) a person, other than a person described in paragraph (f), employed or retained by the corporation or by a person described in paragraph (f);

  • (f) a person who engages in or proposes to engage in any business or professional activity with or on behalf of the corporation;

  • (g) a person who received, while they were a person described in any of paragraphs (a) to (f), material confidential information concerning the corporation;

  • (h) a person who receives material confidential information from a person described in this subsection or in subsection (3) or (3.1), including a person described in this paragraph, and who knows or who ought reasonably to have known that the person giving the information is a person described in this subsection or in subsection (3) or (3.1), including a person described in this paragraph; and

  • (i) a prescribed person.

• Marginal note:Expanded definition of security

  (2) For the purposes of this section, the following are deemed to be a security of the corporation:

  • (a) a put, call, option or other right or obligation to purchase or sell a security of the corporation; and

  • (b) a security of another entity, the market price of which varies materially with the market price of the securities of the corporation.

• Marginal note:Deemed insiders

  (3) For the purposes of this section, a person who proposes to make a take-over bid (as defined in the regulations) for securities of a corporation, or to enter into a business combination with a corporation, is an insider of the corporation with respect to material confidential information obtained from the corporation and is an insider of the corporation for the purposes of subsection (6).

• Marginal note:Deemed insiders

  (3.1) An insider of a person referred to in subsection (3), and an affiliate or associate of such a person, is an insider of the corporation referred to in that subsection. Paragraphs (1)(b) to (i) apply in determining whether a person is such an insider except that references to “corporation” in those paragraphs are to be read as references to “person described in subsection (3)”.

• Marginal note:Insider trading — compensation to persons

  (4) An insider who purchases or sells a security of the corporation with knowledge of confidential information that, if generally known, might reasonably be expected to affect materially the value of any of the securities of the corporation is liable to compensate the seller of the security or the purchaser of the security, as the case may be, for any damages suffered by the seller or purchaser as a result of the purchase or sale, unless the insider establishes that

  • (a) the insider reasonably believed that the information had been generally disclosed;

  • (b) the information was known, or ought reasonably to have been known, by the seller or purchaser; or

  • (c) the purchase or sale of the security took place in the prescribed circumstances.

• Marginal note:Insider trading — compensation to corporation

  (5) The insider is accountable to the corporation for any benefit or advantage received or receivable by the insider as a result of a purchase or sale described in subsection (4) unless the insider establishes the circumstances described in paragraph (4)(a).

• Marginal note:Tipping — compensation to persons

  (6) An insider of the corporation who discloses to another person confidential information with respect to the corporation that has not been generally disclosed and that, if generally known, might reasonably be expected to affect materially the value of any of the securities of the corporation is liable to compensate for damages any person who subsequently sells securities of the corporation to, or purchases securities of the corporation from, any person that received the information, unless the insider establishes

  • (a) that the insider reasonably believed that the information had been generally disclosed;

  • (b) that the information was known, or ought reasonably to have been known, by the person who alleges to have suffered the damages;

  • (c) that the disclosure of the information was necessary in the course of the business of the insider, except if the insider is a person described in subsection (3) or (3.1); or

  • (d) if the insider is a person described in subsection (3) or (3.1), that the disclosure of the information was necessary to effect the take-over bid or the business combination, as the case may be.

• Marginal note:Tipping — compensation to corporation

  (7) The insider is accountable to the corporation for any benefit or advantage received or receivable by the insider as a result of a disclosure of the information as described in subsection (6) unless the insider establishes the circumstances described in paragraph (6)(a), (c) or (d).

• Marginal note:Measure of damages

  (8) The court may assess damages under subsection (4) or (6) in accordance with any measure of damages that it considers relevant in the circumstances. However, in assessing damages in a situation involving a security of a distributing corporation, the court must consider the following:

  • (a) if the plaintiff is a purchaser, the price paid by the plaintiff for the security less the average market price of the security over the twenty trading days immediately following general disclosure of the information; and

  • (b) if the plaintiff is a seller, the average market price of the security over the twenty trading days immediately following general disclosure of the information, less the price that the plaintiff received for the security.

• Marginal note:Liability

  (9) If more than one insider is liable under subsection (4) or (6) with respect to the same transaction or series of transactions, their liability is joint and several, or solidary.

• Marginal note:Limitation

  (10) An action to enforce a right created by subsections (4) to (7) may be commenced only within two years after discovery of the facts that gave rise to the cause of action.