The Companies Act replaced by the "Quebec Business Corporations Act"

The Quebec Companies Act (QCA) is not any more, the Quebec Business Corporations Act (QBCA) is now in force!

The Quebec Business Corporations Actsignificantly modernizes the law of companies, which will be called from now on "business corporations".

Since February 14th, 2011, all the companies governed by "Part 1A" of the QCA are governed by the provisions of the QBCA.

Nothing obliges to modify the existing articles or to file articles of continuance to comply yourself with the QBCA.

There is thus no formality to be completed or respected in order to be a "business corporation" within the meaning of the QBCA and no filing of documents with the enterprise registrar is required.

There are some exceptions to the application of the QBCA, being the companies of Part 1 of the QCA, the mining companies, the insurance companies and the savings trusts and societies. However, companies governed by Part 1 of the QCA benefit from a time limit of five (5) years to turn into the new regime of the QBCA.

However, it is strongly recommended to proceed to certain steps for upgrading your business corporation in front of the coming into force of the QBCA which are described below.

1. BY-LAWS

Take new by-laws updated with the provisions of the QBCA.

2. SHARE CERTIFICATES, REGISTERS AND ACCEPTANCE OF A NEW PROXY FOR A PROXYHOLDER

The QBCA now allows a business corporation to issue its shares without delivering a certificate and to deliver instead a notice of holding of shares. Similarly, the registers provided in the minute book of the business corporation have experienced modifications.

Adopt a new share certificate containing the new statements required by the QBCA, being:

• the business corporation is governed by the QBCA;
• a mention that the class or series of shares represented by the certificate is matched with rights or restrictions and that the business corporation will supply at no cost to the shareholder the text of these rights and restrictions upon request;
• a right encumbering the issued shares, exists in favor of the business corporation, if applicable;
• the shares are not fully paid, as the case may be.

The business corporation can choose from now on to deliver a notice of holding of shares rather than to proceed to the issuance of a share certificate. This notice is advantageous as for its issuance and its replacement but the certificate has the advantage to constitute a prima facie evidence of the right of its holder as well as in relation with any security which is guaranteed by a movable hypothec with dispossession of shares.

Some upgrades are optional and they are the following ones.

3. IF YOUR BUSINESS CORPORATION HAS A SOLE SHAREHOLDER, TURN IT INTO THE NEW REGIME PROVIDED BY THE QBCA

You can make the conversion your business corporation under the new regime of the business corporation with a sole shareholder provided by the QBCA. Under this new regime, the business corporation could choose to operate without a board of directors and the sole shareholder will see to manage the affairs and activities of the business corporation.

4. IF YOUR BUSINESS CORPORATION WANTS THAT ITS SHARES ARE DEPOSITED BY THEIR HOLDERS WITH A MANDATARY-DEPOSITARY

Given the application of the notion of "protected purchaser" under the Act respecting the transfer of securities and the establishment of security entitlements in Quebec, some business corporations will prefer that the shares issued from their share capital are deposited by their respective holders with a mandatary-depositary.

5. IF YOUR BUSINESS CORPORATION HAS A UNANIMOUS SHAREHOLDER AGREEMENT IN FORCE

It is strongly recommend for business corporations which have a unanimous shareholder agreement ("U.S.A.") that restricts the powers of the directors and contains also clauses of buy-sell or any other clause not affecting the role and powers of the board of directors, to separate the clauses of the U.S.A. (those which remove or restrict the powers of the board of directors) and rather to insert those in a true unanimous shareholder agreement that only deals with this subject and thereafter, to see at the signature of a shareholder agreement that will contain clauses of buy-sell, etc.

Indeed, the QBCA contains numerous provisions allowing the court to modify the provisions of a U.S.A. in force what could come to disturb greatly the balance between the shareholders in presence and counter the will of the parties to the agreement. In short, the greatest caution is recommended at this level. Your notary can help you learn more for this purpose.

Also, the QBCA allows the shareholders who removed all the powers of the directors by means of a U.S.A. (or, in the case of a sole shareholder, a declaration of the sole shareholder) not to constitute a board of directors. The existence of the U.S.A., however, must be declared to the enterprise registrar and the creditors have the right to consult it.

Finally, you will have to adopt new models of resolutions for the modifications to the articles or their correction, the continuation (import / export), the dissolution, the reconstitution, the arrangement, etc.