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Update on the new Quebec Companies Act PDF Imprimer Envoyer
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Me Gabriel Glazer (Tel Aviv, Israel and Montreal, Canada)

This update relates to the continuation of companies that were incorporated under Part 1A of the Companies Act (Quebec) which the Quebec Companies Act (“QBCA”) replaced this past 14 February, 2011

All Part 1A companies are automatically continued under the QBCA. There are matters which these companies should, however, consider as soon as possible:

1. The adoption of new by-laws to conform to the QBCA. This may be particularly important for companies which have the same individual as their sole shareholder and sole director. Under the QBCA such companies may forego adoption of resolutions, particularly the annual resolutions regarding the appointment of auditors/accountants, directors and officers. The adoption of new by-laws will allow the elimination of any requirements in existing by-laws to hold annual meetings or adopt annual resolutions;

2. The adoption of new forms of share certificates which conform to the QBCA including, and especially, those indicating that the company is governed under the provisions of the QBCA;

3. The notices of shareholding. Instead of issuing share certificates the company can choose to issue notices of shareholdings. There are various advantages and disadvantages in proceeding by way of share certificate or by way of notice of shareholding. Notices of shareholdings are easier to issue and replace than share certificates and may be useful in making it more difficult for shareholders to grant security interest in their shares to third parties. On the other hand, share certificates constitute prima facie proof of the shareholder’s interest in the company;

4. Unanimous shareholders’ agreements. Most importantly, the QBCA has new provisions governing unanimous shareholders’ agreements (“usas”). Usas are defined as agreements under which the powers of the board of directors are restricted or removed (and transferred to the shareholders). The QBCA contains provisions enabling courts to impose modifications of the provision of usas and also to require that the existence of usas be declared to the Registrar of Enterprises. Finally, creditors of the companies are authorized to review the usas. Usually, usas contain provisions not only restricting the powers of the board of directors or removing them but also relating to other financial arrangements between the shareholders including buy-sell arrangements in the event of death or illness, terms of employment, provisions governing disability, etc. In such cases it would be wise to divide existing usas into two agreements. The first restricts or removes the powers of the board of directors and would be subject to court scrutiny and public disclosure; the second agreement which would deal with all other financial arrangements which would be intended to be kept private and confidential.

* The above does not constitute a legal opinion but rather is provided for information purposes only. It is presented as a service to members of AHQ by the undersigned in cooperation with Messrs. Gravenor Beck & Morris Chaikelson.

 

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