The Business Corporations Act (the “New Act”) will come into force in British Columbia on March 29, 2004.  The New Act represents the first significant change to provincial company legislation since 1973 and will materially affect all companies carrying on business in this Province.   

The New Act modernizes and streamlines company law in British Columbia.  The New Act is distinct from corresponding legislation in other Canadian jurisdictions and is intended to attract new business to the Province.  The New Act recognizes advances in technology.  Most corporate filings must be registered on-line under the New Act.  The regulatory authority of the Registrar of Companies is diminished under the New Act.  Greater onus will be placed on the registered and records office of companies.  The following is a brief synopsis of the key features of the New Act.  Please click here for a detailed summary of the provisions of the New Act or contact Jeff Borkowski at (604) 581-4677 or at jmb@hdas.com for more information.

Transition

All pre-existing companies (i.e. companies incorporated under British Columbia’s current Company Act) must be “transitioned” into the New Act by March 28, 2006.  The transition process itself is relatively straightforward.  A resolution authorizing the Company’s transition under the New Act must be passed by the Company’s shareholders or directors.  Corporate records must be updated and a transition application filed on-line.  A small percentage of companies will have to make certain changes to their Articles of Incorporation.  However, the vast majority will not.

If a Company fails to transition within the prescribed time period, it may be dissolved by the Registrar of Companies.  Until a Company has transitioned, it cannot effect a reorganization or take advantage of the options and features permitted under the New Act.

Progressive companies will use the transition procedure to upgrade their Articles of Incorporation and to adopt some of the features only available under the New Act.  We will be contacting our corporate clients in late March regarding the transition process.  

Central Securities Register

Various changes to corporate record keeping requirements are mandated by the New Act. Among these is the requirement for companies to maintain a Central Securities Register, containing a list of the Company’s shareholders, their addresses and details of their shareholdings.  All companies must have a Central Securities Register in place on March 29, 2004. 

Incorporation and Organization

Several key changes have been made to the incorporation process.  Foremost among these is the requirement that companies be incorporated on-line.  Paper filings will no longer be accepted by the Registrar of Companies.  A new online document known as a Notice of Articles replaces the current Memorandum of Association.  Articles of Incorporation are still required but will no longer be filed with the Registrar of Companies. 

Other organizational changes are as follows:

·        Companies may have an unlimited number of shares under the New Act. 

·        Par value may be stated in a foreign currency. 

·        A subsidiary company may hold shares in its parent company. 

·        Companies may issue fractional shares. 

·        Companies can issue shares without first offering them to existing shareholders.

·        Delayed incorporation dates are permitted.

·        Incorporators no longer need to be individuals.  Companies may create new companies.

Financial Assistance

The current Company Act contains elaborate rules limiting the ability of a Company to grant financial assistance to its directors and shareholders.   Under the New Act, a Company may grant financial assistance to any person for any purpose.

Directors and Officers

The directors’ residency requirements have been eliminated under the New Act.  Companies no longer need to appoint a president or secretary.  Companies may appoint officers of any designation or no officers at all.  Directors are no longer required to provide a residential address in corporate records.  A business address will suffice.  Directors may now be appointed retroactively.  Directors’ meetings may be conducted by telephone or any other device that allows persons to communicate with one another.  Directors may delegate management or supervisory duties under the New Act.   The conflict of interest provisions have been expanded and clarified. 

Dividends

Under the New Act dividends may be paid out of profit or capital unless there are reasonable grounds for believing the company is insolvent or the dividend would render the company insolvent.  The “solvency test” has been simplified under the New Act.

Shareholders

Pre-incorporation contracts are valid under the New Act.  Shareholders’ meetings may be conducted by telephone or any other device that allows persons to communicate with one another.  Under the New Act, private companies may waive the production of annual financial statements if so authorized by unanimous resolution.

Voting Requirements

The special resolution voting requirement for a pre-existing company remains at 75%.  The special resolution voting requirement for companies incorporated under the New Act is fixed at 66.6%.  Pre-existing companies may adopt a special resolution threshold anywhere between 2/3 and 3/4 on transition.  A company may specify that certain corporate acts require a unanimous resolution.

Amalgamations and Restorations

Short form amalgamations no longer require court approval and amalgamations between companies of different jurisdictions are permitted under the New Act.  Court approval is no longer required for company restorations under the New Act.

Extraprovincial Companies

Extraprovincial companies may operate under an “assumed name” if their company name is not otherwise available in British Columbia.  Extraprovincial companies carrying on business in the Province must still register with the Registrar.  Failure to register is an offence with a fine of  $100 per day.  The other consequences of failing to register (such as the prohibition against maintaining a lawsuit or owning land) have been eliminated under the New Act. 

Record Keeping Requirements

Much of the supervisory role of the Registrar of Companies has been eliminated in the New Act.  The burden now falls upon the party maintaining the registered and records office of the Company.   The prompt “deposit” and date stamping of corporate records is essential under the New Act.  

Summary

The implementation of the New Act presents an opportunity for existing companies to upgrade the rules and procedures governing their operation.  If you have any questions or concerns as to how the New Act will affect your company, please contact Jeff Borkowski at (604) 581-4677 or jmb@hdas.com.

This article is intended for informational purposes only and should not be taken as legal advice.