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NEW ACT CREATES MORE FLEXIBILITY FOR BUSINESS
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VICTORIA – B.C. will provide greater flexibility to companies and make the province a more attractive place to do business, Finance Minister Gary Collins said today in introducing Bill 47, the business corporations act.
"Outdated legislation has contributed to some companies reincorporating in other jurisdictions that have more up-to-date legislation," Collins said. "With our new act, we've adopted the latest, best ideas from other jurisdictions, clarified rules and embraced technological advancements like electronic filing. We believe this act will better serve existing B.C. businesses and help attract new incorporations to the province."
The new act, which will replace the old Company Act, will come into force following the development of the information systems needed to implement it.
"Our government made a commitment to cut red tape, reduce the regulatory burden and re-establish a thriving private-sector economy," said Collins. "This legislation is the latest of several steps we've taken to rebuild a competitive business environment in B.C."
The new act will:
· Provide greater flexibility for companies, mainly in the areas of corporate governance, finance and fundamental corporate change.
· Maintain the previous act's flexibility and freedom for companies to determine their internal rules of conduct under their articles.
· Reduce the regulatory burden by eliminating regulatory overlap, duplicate filing requirements and unnecessary meetings.
· Clarify the legitimacy of corporate procedures like those that govern the sale of a parent company's shares to a subsidiary.
· Enhance efficiency for companies by enabling online corporate filings.
· Reduce the government's cost of operating the corporate registry by at least $3 million a year, once all its business is conducted online.
Like the old Company Act, the business corporations act provides comprehensive rules for the creation and governance of B.C. companies. Bill 47 represents the first significant updating of this legislation since 1973.
Until the new act comes into force, the registries statutes amendment act will allow the government to increase electronic service delivery for businesses. The act, which was tabled Aprlature, amended the Company Act, Manufactured Home Act, Partnership Act and Personal Property Security Act to allow the registrar of companies to move from a paper-based registration system to an electronic one.
"This is a major step forward in the government's New Era commitment to restore B.C. as a world leader in e-government, to give all citizens and businesses better online access to core services, 24 hours a day, seven days a week," said Collins.
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Contact:
Communications Branch
250 387-3347
BACKGROUNDER
Governance: Current COMPANY ACT
1. A majority of directors must live in Canada, with at least one living in B.C.
2. Requires shareholders meetings to be conducted in person.
3. AGMs must be held in B.C., unless registrar approves another location.
4. Directors with conflict of interest are not required to account for profits if the conflict is disclosed and approved by directors. If disclosure is not timely, or if directors do not approve, the director may still keep the profits if the contract was fair and reasonable to the company and the conflict is approved by special resolution.
5. No ability for companies to waive financial statements.
British Columbia's New BUSINESS CORPORATIONS ACT
1. Removes all directors' residency requirements, creating a more open environment for international investment.
2. Allows for telephonic meetings and the waiver or postponement of AGMs.
3. Allows shareholders meetings to be held outside the province without the need to obtain the registrar's approval.
4. Provides simplified conflict-of-interest rules for directors. A director with a conflict of interest does not have to account for profits if the conflict is disclosed and the directors or shareholders approve, or the court so orders.
5. Allows private companies to waive the preparation of annual financial statements with unanimous consent of shareholders.
Finance: Current COMPANY ACT
1. Allows for both par value shares and shares without par value (unique in Canada).
2. Solvency test for payment of dividends and repurchase of shares, etc. is uncertain - may require that assets exceed liabilities, as well as that company can pay debts.
3. Company's charter must authorize the number of shares of each class that a company may issue, and there is limited flexibility in accounting for no par-value shares in a company's capital.
4. Numerous restrictions on financial assistance.
British Columbia's New BUSINESS CORPORATIONS ACT
1. Retains uniqueness by continuing to allow companies to issue par-value shares as well as shares without par value.
2. Clarifies solvency test - company is solvent so long as it is able to pay its debts.
3. Company's charter no longer has to include authorized share capital.
4. Permits companies to provide financial assistance (but requires disclosure).
Fundamental Corporate Changes:
Current COMPANY ACT
1. Requires all companies that amalgamate to enter into a written amalgamation agreement.
2. All amalgamations must be approved by court order.
3. Registrar has no authority to restore a company that has been dissolved. Restorations must be by court order. As well, there are no specific provisions on revesting of property in a restored company.
4. Provides statutory "pre-emptive" rights (giving the first right to purchase new shares) to shareholders of all private companies.
British Columbia's New BUSINESS CORPORATIONS ACT
1. Simplifies amalgamation procedures for related companies by eliminating the need for an amalgamation agreement.
2. Allows for amalgamations by registrar's order (where creditors not prejudiced) or by court order.
3. Allows for restoration by the court or by registrar's order, and automatic revesting of property in the restored company.
4. Removes pre-emptive rights for new companies, but maintains them for existing companies (with broader list of exceptions, including one that allows pre-emptive rights to be removed by amendment to the company's articles).
Regulatory Burden Reduction: Current COMPANY ACT
1. Articles must be filed at the Corporate Registry and maintained by the company at its records office.
2. Contains governance rules that duplicate and sometimes conflict with Securities Act requirements, and requires reporting issuers to produce different financial statement for securities legislation and Company Act purposes.
3. Paper-based filing only. No future-effective filings authorized. 4. Each extraprovincial company is required to maintain a "head office," containing information on its charter and directors, within the province. Unregistered extraprovincial companies are prohibited from owning land or suing.
British Columbia's New BUSINESS CORPORATIONS ACT
1. Removes the need to file articles at the Corporate Registry. Articles will only be held at the records office.
2. Removes duplicative governance rules, and allows reporting issuers to use financial statements required by securities legislation for business corporations act purposes.
3. Almost all transactions can be done electronically, enabling virtual elimination of paper filings and increasing potential to use future-effective dates.
4. Reduces filing requirements for extra-provincial companies, and eliminates legal disabilities for their failure to register.
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