While the last significant amendments date back to the 1980s, a major reform of the Quebec Companies Act (hereinafter the “Act”) was introduced on October 7, 2009, when Quebec’s Minister of Finance tabled Bill 63, entitled the Business Corporations Act (hereinafter “Bill 63”).  The purpose of Bill 63 is to replace Part I and Part IA of the current Act with modern, simplified legislation that will provide enhanced protection for minority shareholders.  Many of the proposed changes mirror the Canada Business Corporations Act (hereinafter the “CBCA”).  The following are some of these changes:  

Directors

One of the major amendments proposed by the legislator is the clarification of directors’ duties.  Specifically, Bill 63 will incorporate the duties imposed on directors under the Civil Code.  Moreover, the obligations of directors to act with prudence and diligence as well as with honesty and loyalty in the interest of the corporation are expressly set out in the new legislation.  The legislator has provided additional information regarding these duties and has expanded the defence of reasonable diligence, notably in cases where directors rely in good faith on the report, opinion or information provided by an officer, a legal advisor, an accountant, or other expert retained by the corporation or a committee of the board of directors.  The defence of reasonable diligence introduced under Bill 63 thus resembles that set out in the CBCA. 

Bill 63 also provides directors with a defence of reasonable diligence, similar to that provided by the CBCA, against liability for the issuing of shares and against liability towards employees.  However, Bill 63 does not provide examples of diligent behaviours as does the CBCA, which include reliance on financial statements or the reports of other professionals.  Furthermore, under Bill 63, the legislator confers on the courts the power to exonerate a director if it is of the opinion that the director acted reasonably and with honesty and loyalty and if it is in the interests of justice that the director be exonerated.  How the courts will use this power remains to be seen.

In addition, the new legislation sets out the conditions required for the indemnification of directors and officers against reasonable charges and expenses incurred in the exercise of their functions as well as the possibility for the corporation to take out insurance against the liability of its directors, officers, and other agents.

Minority Shareholders

The interests of minority shareholders will be better protected under Bill 63, which provides for an action to force the corporation to redeem the shares of minority shareholders if they disagree with a major change to the structure or activities of the corporation.  Bill 63 also provides a remedy, similar to the oppression remedy set out in the CBCA, to counter abuses of power and inequities committed by the corporation against minority shareholders.  Bill 63 contains a few differences, however, most notably in that it provides a recourse against threatened abuse or injustice, although it does not provide any recourse for abuse or injustice towards creditors.  Bill 63 also confers upon the courts the power to order the payment of extrajudicial fees.

The interests of minority shareholders will be better protected under Bill 63, which provides for an action to force the corporation to redeem the shares of minority shareholders if they disagree with a major change to the structure or activities of the corporation.  Bill 63 also provides a remedy, similar to the oppression remedy set out in the CBCA, to counter abuses of power and inequities committed by the corporation against minority shareholders.  Bill 63 contains a few differences, however, most notably in that it provides a recourse against threatened abuse or injustice, although it does not provide any recourse for abuse or injustice towards creditors.  Bill 63 also confers upon the courts the power to order the payment of extrajudicial fees.

Modernization and Simplified Administration

Bill 63 simplifies administrative procedures, replacing the administrative formalities currently in place with more flexible rules.  For example, a sole shareholder will have the option of not electing a board of directors.  In order to modernize Quebec corporate law, Bill 63 also seeks to incorporate the use of new technologies, for example by allowing for remote voting and remote participation in meetings of directors and shareholders.  Moreover, the Registraire des enterprises (the Quebec companies’ registrar) is in the process of setting up an electronic platform to support online administrative transactions such as incorporation.

Application

The transitional provisions of Bill 63 provide that companies governed by Part I of the current Act will have a delay of five years from the date the new legislation comes into force to be continued under the new Act.  However, companies governed by Part IA of the current Act will automatically be governed by the new Act upon its coming into force.

Bill 63 was tabled on October 7, 2009, and is currently expected to come into force in 2011.

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