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

PART VISale of Constrained Shares

Marginal note:Sale of constrained shares by corporation

• 46 (1) A corporation that has constraints on the issue, transfer or ownership of its shares of any class or series may, for any of the purposes referred to in paragraphs (a) to (c), sell, under the conditions and after giving the notice that may be prescribed, as if it were the owner of the shares, any of those constrained shares that are owned, or that the directors determine in the manner that may be prescribed may be owned, contrary to the constraints in order to

  • (a) assist the corporation or any of its affiliates or associates to qualify under any prescribed law of Canada or a province to receive licences, permits, grants, payments or other benefits by reason of attaining or maintaining a specified level of Canadian ownership or control;

  • (b) assist the corporation to comply with any prescribed law; or

  • (c) attain or maintain a level of Canadian ownership specified in its articles.

• Marginal note:Obligations of directors in sale

  (2) Where shares are to be sold by a corporation under subsection (1), the directors of the corporation shall select the shares for sale in good faith and in a manner that is not unfairly prejudicial to, and does not unfairly disregard the interests of, the holders of the shares in the constrained class or series taken as a whole.

• Marginal note:Effect of sale

  (3) If shares are sold by a corporation under subsection (1), the owner of the shares immediately before the sale shall by that sale be divested of their interest or right in the shares, and the person who, but for the sale, would be the registered owner of the shares or a person who satisfies the corporation that, but for the sale, they could properly be treated as the registered owner or registered holder of the shares under section 51 shall, from the time of the sale, be entitled to receive only the net proceeds of the sale, together with any income earned on the proceeds from the beginning of the month next following the date of the receipt by the corporation of the proceeds of the sale, less any taxes on the proceeds and any costs of administration of a trust fund constituted under subsection 47(1) in relation to the constitution of the fund.

• Marginal note:Subsections 51(4) to (6) apply

  (4) Subsections 51(4) to (6) apply in respect of the person who is entitled under subsection (3) to receive the proceeds of a sale of shares under subsection (1) as if the proceeds were a security and the person were a registered holder or owner of the security.

Marginal note:Proceeds of sale to be trust fund

• 47 (1) The proceeds of a sale by a corporation under subsection 46(1) constitute a trust fund in the hands of the corporation for the benefit of the person entitled under subsection 46(3) to receive the proceeds of the sale, and any such trust fund may be commingled by the corporation with other such trust funds and shall be invested in such manner as may be prescribed.

• Marginal note:Costs of administration

  (2) Reasonable costs of administration of a trust fund referred to in subsection (1) may be deducted from the trust fund and any income earned thereon.

• Marginal note:Appointment of trust company

  (3) Subject to this section, a corporation may transfer any trust fund referred to in subsection (1), and the administration thereof, to a trust company in Canada registered as such under the laws of Canada or a province, and the corporation is thereupon discharged of all further liability in respect of the trust fund.

• Marginal note:Discharge of corporation and trust company

  (4) A receipt signed by a person entitled under subsection 46(3) to receive the proceeds of a sale that constitute a trust fund under subsection (1) shall be a complete discharge of the corporation and of any trust company to which a trust fund is transferred under subsection (3), in respect of the trust fund and income earned thereon paid to such person.

• Marginal note:Vesting in Crown

  (5) A trust fund described in subsection (1), together with any income earned thereon, less any taxes thereon and costs of administration, that has not been claimed by a person entitled under subsection 46(3) to receive the proceeds of a sale that constitute the trust fund for a period of ten years after the date of the sale vests in Her Majesty in right of Canada.

• Marginal note:Escheats Act applies

  (6) Sections 3 to 5 of the Escheats Act apply in respect of a trust fund that vests in Her Majesty in right of Canada under subsection (5).

PART VIISecurity Certificates, Registers and Transfers

Interpretation and General

Marginal note:Application of Part

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

• Marginal note:Definitions

  (2) In this Part,

  adverse claim

  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 or right in the security; (opposition)

  bearer

  bearer means the person in possession of a security payable to bearer or endorsed in blank; (porteur)

  bona fide purchaser

  bona fide purchaser means a purchaser for value in good faith and without notice of any adverse claim who takes delivery of a security in bearer form or order form or of a security in registered form issued or endorsed to the purchaser or endorsed in blank; (acheteur de bonne foi)

  broker

  broker means a person who is engaged, whether or not exclusively, 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; (courtier)

  delivery

  delivery means voluntary transfer of possession; (livraison ou remise)

  fiduciary

  fiduciary means any person who acts in a fiduciary capacity or as the administrator of the property of others and includes a personal representative of a deceased person; (représentant)

  fungible

  fungible, in relation to securities, means securities of which any unit is, by nature or usage of trade, the equivalent of any other like unit; (fongibles)

  genuine

  genuine means free of forgery or counterfeiting; (authentique)

  good faith

  good faith means honesty in fact in the conduct of the transaction concerned; (bonne foi)

  holder

  holder means a person in possession of a security issued or endorsed to the person or the bearer or in blank; (détenteur)

  issuer

  issuer includes a corporation

  • (a) that is required by this Act to maintain a securities register,

  • (b) that, in Quebec, issues securities that confer directly or indirectly rights in its property, or

  • (c) that, elsewhere in Canada, directly or indirectly creates fractional interests in its rights or property and that issues securities as evidence of the fractional interests; (émetteur)

  overissue

  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; (émission excédentaire)

  purchaser

  purchaser means a person who takes an interest or right in a security by sale, mortgage, hypothec, pledge, issue, reissue, gift or any other voluntary transaction; (acquéreur)

  security

  security or security certificate means an instrument issued by a corporation that is

  • (a) in bearer, order or registered form,

  • (b) 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,

  • (c) one of a class or series or by its terms divisible into a class or series of instruments, and

  • (d) evidence of a share, participation or other interest or right in or obligation of a corporation; (valeur mobilière ou certificat de valeur mobilière)

  transfer

  transfer includes transmission by operation of law; (transfert)

  trust indenture

  trust indenture means a trust indenture as defined in section 82; (acte de fiducie)

  unauthorized

  unauthorized, in relation to a signature or an endorsement, means one made without actual, implied or apparent authority and includes a forgery; (non autorisé)

  valid

  valid means issued in accordance with the applicable law and the articles of the issuer, or validated under section 52. (valide)

• Marginal note:Negotiable instruments

  (3) Except where its transfer is restricted and noted on a security in accordance with subsection 49(8), a security is a negotiable instrument.

• Marginal note:Registered form

  (4) A security is in registered form if

  • (a) it specifies a person entitled to the security or to the rights it evidences, and its transfer is capable of being recorded in a securities register; or

  • (b) it bears a statement that it is in registered form.

• Marginal note:Order form

  (5) A debt obligation is in order form where, by its terms, it is payable to the order or assigns of any person therein specified with reasonable certainty or to that person’s order.

• Marginal note:Bearer form

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

• Marginal note:Guarantor for issuer

  (7) A guarantor for an issuer is deemed to be an issuer to the extent of the guarantee whether or not the obligation is noted on the security.

Marginal note:Rights of holder

• 49 (1) Every security holder is entitled at their option to a security certificate that complies with this Act or a non-transferable written acknowledgment of their right to obtain such a security certificate from a corporation in respect of the securities of that corporation held by them.

• Marginal note:Maximum fee for certificate by regulation

  (2) A corporation may charge a fee, not exceeding the prescribed amount, for a security certificate issued in respect of a transfer.

• Marginal note:Joint holders

  (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.

• Marginal note:Signatures

  (4) A security certificate shall be signed by at least one of the following persons, or the signature shall be printed or otherwise mechanically reproduced on the certificate:

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

  • (b) a registrar, transfer agent or branch transfer agent of the corporation, or an individual on their behalf; and

  • (c) a trustee who certifies it in accordance with a trust indenture.

• (5) [Repealed, 2001, c. 14, s. 30]

• Marginal note:Continuation of signature

  (6) If a security certificate contains a printed or mechanically reproduced 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 the person were a director or an officer at the date of its issue.

• Marginal note:Contents of share certificate

  (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 Canada Business Corporations Act” or “subject to the Canada 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.

• Marginal note:Restrictions

  (8) No restriction, charge, lien, hypothec, agreement or endorsement described in the following paragraphs is effective against a transferee of a security, issued by a corporation or by a body corporate before the body corporate was continued under this Act, who has no actual knowledge of the restriction, charge, lien, hypothec, agreement or endorsement unless it or a reference to it is noted conspicuously on the security certificate:

  • (a) a restriction on transfer other than a constraint under section 174;

  • (b) a charge, lien or hypothec in favour of the corporation;

  • (c) a unanimous shareholder agreement; or

  • (d) an endorsement under subsection 190(10).

• Marginal note:Limit on restriction

  (9) A distributing corporation, any of the issued shares of which remain outstanding and are held by more than one person, shall not have a restriction on the transfer or ownership of its shares of any class or series except by way of a constraint permitted under section 174.

• Marginal note:Notation of constraint

  (10) Where the articles of a corporation constrain the issue, transfer or ownership of shares of any class or series in order to assist

  • (a) the corporation or any of its affiliates or associates to qualify under any prescribed law of Canada or a province to receive licences, permits, grants, payments or other benefits by reason of attaining or maintaining a specified level of Canadian ownership or control, or

  • (b) the corporation to comply with any prescribed law,

  the constraint, or a reference to it, shall be conspicuously noted on every security certificate of the corporation evidencing a share that is subject to the constraint where the security certificate is issued after the day on which the share becomes subject to the constraint under this Act.

• Marginal note:Failure to note

  (11) The failure to note a constraint or a reference to it pursuant to subsection (10) shall not invalidate any share or security certificate and shall not render a constraint ineffective against an owner, holder or transferee of the share or security certificate.

• Marginal note:Transitional

  (12) If a body corporate continued under this Act has outstanding security certificates, and if the words “private company” appear on the certificates, those words are deemed to be a notice of a restriction, lien, hypothec, agreement or endorsement for the purpose of subsection (8).

• Marginal note:Particulars of class

  (13) 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 thereto and that the corporation will furnish a shareholder, on demand and without charge, with 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 the same have been fixed by the directors, and

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

• Marginal note:Duty

  (14) Where a share certificate issued by a corporation contains the statement mentioned in paragraph (13)(b), the corporation shall furnish a shareholder, on demand and without charge, with 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 the same have been fixed by the directors; and

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

• Marginal note:Fractional share

  (15) A corporation may issue for each fractional share, a certificate in registered form or scrip certificates in registered form that entitle the holder to receive a certificate for a full share in exchange for scrip certificates equalling a full share.

• Marginal note:Replacement

  (15.1) On the request of a holder of a certificate for a fractional share or of a scrip certificate, a corporation shall, if the certificate is in bearer form and was issued before the coming into force of this subsection, issue in exchange to that holder, in registered form, a certificate for a fractional share or a scrip certificate, as the case may be.

• Marginal note:Scrip certificates

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

  • (a) the scrip certificates become void or, in Quebec, null if not exchanged for a share certificate representing a full share before a specified date; and

  • (b) any shares for which such scrip certificates are exchangeable may, notwithstanding any pre-emptive right, be issued by the corporation to any person and the proceeds thereof distributed rateably to the holders of the scrip certificates.

• Marginal note:Holder of fractional share

  (17) 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.

• Marginal note:Holder of scrip certificate

  (18) A holder of a scrip certificate is not entitled to exercise voting rights or to receive a dividend in respect of the scrip certificate.