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On March 29,
2004, the new Business
Corporations Act (BCA) took
effect in BC after many years of
discussion. It makes extensive
changes to corporate law and also
"modernizes" some aspects of
corporate law in British Columbia.
Some of the more significant corporate law
changes are in the following areas:
Incorporation Process
One or more persons (called
'incorporators' in the BCA) by entering
into an incorporation agreement can apply
to incorporate a corporation. The
agreement, together with the Articles,
will now form the contract between the
various shareholders and the corporation.
The Notice of Articles. takes the place
of the Memorandum under the old Act.
This is the only document that is filed
with the Registrar of Companies. The
Articles of the corporation are kept on
file at the records office together with
the Incorporation Agreement and other
corporate documents such as the central
securities register.
The Notice of Articles must be filed
electronically through the internet portal
set up by the Registrar of Companies.
Paper applications for incorporation will
no longer be accepted. The new
service allows for incorporation on
demand: as soon as you complete the Notice
of Articles and submit it over the
internet, the new corporation is
established.
For a more detailed discussion on how
to incorporate a corporation, see the
article How
to Incorporate.
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Directors and Officers
There is no residency requirement for
directors and officers of a corporation.
The BCA permits directors to show a
'prescribed address' as the address where
notices and other documents can be
delivered or served on them..
A corporation no longer needs to have a
president and a secretary. A
president does not have to be a director.
The Articles of the corporation can now
transfer, in whole or in part, the powers
of the directors to manage and supervise
the affairs of the corporation. The
person to whom the powers are transferred
will have all the powers, rights, duties
and liabilities of a director. Once
the power is transferred, the directors
are relieved of liability, rights and
duties to the extent the powers are
transferred.
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Corporate & Capital Alterations
The articles can specify what type of
resolution must be passed in order to make
certain types of corporate alteration. For
example, the articles could specify that
only a 2/3 majority resolution is required
for an alteration of the share capital.
If the articles contain provisions
dealing with corporate alterations, then
most such alterations can be done by
simply passing the required resolution.
The resolution, and the new share capital
provisions are not filed with the
Registrar of Companies. The
corporation only has to file a Notice of
Alteration which would specify the new
share capital..
Amalgamations
It will be much easier to do
amalgamations. Both vertical and
horizontal amalgamations can be done. Also, it will be
possible to do an amalgamation between a
British Columbia corporation and a
non-British Columbia corporation. In
many situations, the shareholders and the
corporations involved will not have to
enter into an amalgamation agreement.
Amalgamations can be done without court
approval if creditors of the corporation
will not be materially affected and the
proper amalgamation procedures are
followed.
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Financial Assistance
Under the old Company Act, a
corporation was limited in providing
financial assistance. The assets of the
corporation could not be used for
the financial assistance of others except
in certain limited situations. Under
the new BCA, the restrictions on financial
assistance are removed. A corporation will
be able to provide financial assistance to
any person by any means and for any
purpose. In some circumstances, the
fact the corporation has provided
financial assistance must be disclosed in
the records office.
Transition
By March 29, 2006, every corporation
must do the following:
- file the transition
application
- if necessary, change the existing articles to
comply with the new legislation;
- move certain provisions from the
memorandum to the articles;
- set up a central securities
register;
- provide the prescribed address for
each officer and director.
If a corporation does not complete the
transition by March 29, 2006, then that
corporation could be dissolved by the
Registrar of Companies and cease to
exist. Dissolution of a corporation
has serious consequences so it is
important that every existing corporation
complete the transition.
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