Canada Business Corporations Regulations, 2001 (SOR/2001-512)

Disclosure Required

74 Each of the following documents issued or published by a constrained share corporation shall indicate conspicuously the general nature of its constrained share provisions:

• (a) a certificate representing a voting share;

• (b) a management proxy circular; and

• (c) a prospectus, statement of material facts, registration statement or similar document.

Powers and Duties of Directors

• 75 (1) The directors of a constrained share corporation that has provisions in its articles imposing a constraint referred to in paragraph (a) or (b) of the definition constraint in section 73 shall refuse to register a transfer of a voting share of the corporation in accordance with the articles if

  • (a) the total number of voting shares held by or on behalf of persons in the constrained class exceeds the maximum aggregate holdings and the transfer is to a person in the constrained class;

  • (b) the total number of voting shares held by or on behalf of persons in the constrained class does not exceed the maximum aggregate holdings and the transfer would cause the number of shares held by persons in the constrained class to exceed the maximum aggregate holdings;

  • (c) the total number of voting shares held by or on behalf of a person in the constrained class exceeds the maximum individual holdings and the transfer is to that person; or

  • (d) the total number of voting shares held by or on behalf of a person in the constrained class does not exceed the maximum individual holdings and the transfer would cause the number of shares held by that person to exceed the maximum individual holdings.

• (2) Despite subsection (1), the directors of a constrained share corporation that is described in that subsection shall register a transfer of a voting share of the corporation to a person in the constrained class if that person establishes that they were the beneficial owner of that share on the day on which the corporation became a constrained share corporation.

• (3) The directors of a constrained share corporation that is described in subsection (1) shall not issue a voting share of the corporation to a person in the constrained class if the directors are required by that subsection to refuse to register a transfer of the share.

• (4) For the purpose of subsection (3), the directors may count as issued shares the voting shares that the corporation is currently offering to its shareholders or prospective shareholders.

76 The directors of a constrained share corporation that has provisions in its articles imposing a constraint referred to in paragraph (c) of the definition constraint in section 73

• (a) shall not issue a share of the corporation to a person

  • (i) whose ownership of the share would be contrary to the constraint,

  • (ii) who, in respect of the issue of the share, has been requested by the corporation to provide it with information referred to in subsection 80(7) and has not provided the information, or

  • (iii) whose ownership of the share the directors have determined, on the basis of information provided to the corporation by that person under a request referred to in subparagraph (ii), may be contrary to the constraint; and

• (b) shall refuse to register a transfer of a share of the corporation if the transfer is to a person

  • (i) whose ownership of the share is contrary to the constraint,

  • (ii) who, in respect of the registration of the share, has been requested by the corporation to provide it with information referred to in subsection 80(7) and has not provided the information, or

  • (iii) whose ownership of the share the directors have determined, on the basis of information provided to the corporation by that person under a request referred to in subparagraph (ii), may be contrary to the constraint.

Limitation on Voting Rights

77 Sections 78 and 79 apply to a constrained share corporation that has provisions in its articles imposing a constraint referred to in paragraph (a) or (b) of the definition constraint in section 73.

• 78 (1) If, on the day on which a corporation becomes a constrained share corporation, the total number of voting shares of the corporation held by or on behalf of a person in the constrained class exceeds the maximum individual holdings, the person or their nominee may only, in person or by proxy, exercise the voting rights attached to the maximum individual holdings so held on that day or on any later day.

• (2) After the total number of shares held by or on behalf of the person referred to in subsection (1) is reduced below the maximum individual holdings, they or their nominee may, in person or by proxy, exercise the voting rights attached to shares held.

• 79 (1) Except as provided in subsection 78(1), if the total number of voting shares of a constrained share corporation held by or on behalf of a person in the constrained class exceeds the maximum individual holdings, no person shall, in person or by proxy, exercise the voting rights attached to those shares.

• (2) If it appears from the securities register of a constrained share corporation that the total number of voting shares held by a shareholder is less than the maximum individual holdings, a proxyholder for the shareholder may vote those shares unless the proxyholder has knowledge that the shares beneficially owned by the shareholder exceed the maximum individual holdings.

• (3) If, after the day on which a corporation becomes a constrained share corporation, a corporation or trust that was not a person in the constrained class becomes a person in the constrained class, the corporation or trust shall not exercise the voting rights attached to any shares it holds in the constrained share corporation while it is a person in the constrained class.

Sale of Constrained Shares

• 80 (1) For the purpose of subsection 46(1) of the Act, before a constrained share corporation concludes that shares of the corporation are owned contrary to a constraint referred to in paragraph (c) of the definition constraint in section 73 or the directors of the corporation determine that shares of the corporation may be owned contrary to the constraint, the corporation shall send by registered mail a written notice in accordance with subsection (5) to the person shown in the securities register of the corporation as the holder of the shares.

• (2) For the purpose of subsection 46(1) of the Act, in determining that shares of a constrained share corporation may be owned contrary to a constraint referred to in paragraph (c) of the definition constraint in section 73, the directors of the corporation shall

  • (a) ascertain whether or not the corporation has received a reply to a request for information referred to in subsection (7) respecting the shares and consider the reply, if any, to the request; and

  • (b) examine and consider any other records of the corporation that contain information that would indicate whether the shares are owned contrary to the constraint.

• (3) For the purpose of subsection 46(1) of the Act, if a constrained share corporation has sent a notice referred to in subsection (1) to a person shown in the securities register of the corporation as the holder of shares and the corporation intends to sell all or some of the shares under subsection 46(1) of the Act, the corporation shall, not less than 90 days but not more than 150 days after sending the notice, send to that person by registered mail a further written notice in accordance with subsection (6) respecting the shares that the corporation intends to sell, if

  • (a) the corporation has concluded that shares in respect of which the notice was sent are owned contrary to a constraint referred to in paragraph (c) of the definition constraint in section 73; or

  • (b) the directors of the corporation have determined in accordance with subsection (2) that shares in respect of which the notice was sent may be owned contrary to the constraint.

• (4) When a corporation sends a notice under subsection (1) or (3), it shall, at the time the notice is sent, enter or cause to be entered in the securities register of the corporation the particulars of the notice, including the date on which it was sent.

• (5) The notice referred to in subsection (1) shall contain

  • (a) the name and address of the holder of the shares as shown in the securities register of the corporation;

  • (b) a statement that identifies the certificate that represents the shares, by certificate number or otherwise;

  • (c) a statement that indicates that all or some of the shares may be sold by the corporation under subsection 46(1) of the Act if the shares are owned, or the directors of the corporation determine in accordance with subsection (2) that the shares may be owned, contrary to a constraint referred to in paragraph (c) of the definition constraint in section 73;

  • (d) a statement that indicates that the corporation may conclude that all or some of the shares are owned contrary to a constraint referred to in paragraph (c) of the definition constraint in section 73;

  • (e) a statement that indicates that the directors of the corporation may determine in accordance with subsection (2) that all or some of the shares may be owned contrary to a constraint referred to in paragraph (c) of the definition constraint in section 73 and that, for the purpose of making the determination, the directors of the corporation will

    • (i) consider the reply, if any, to a request for information referred to in subsection (7) respecting the shares, and

    • (ii) examine and consider any other records of the corporation that contain information that would indicate whether the shares are owned contrary to the constraint;

  • (f) a statement that indicates that no share in respect of which the notice is sent may be sold under subsection 46(1) of the Act if a transfer of the share is registered in the securities register of the corporation after the notice was sent, unless the corporation again complies with the requirements set out in this Part respecting the sale of the share;

  • (g) a statement that indicates that no share in respect of which the notice is sent may be sold under subsection 46(1) of the Act unless not less than 60 days but not more than 150 days have elapsed after the day on which a notice referred to in subsection (3) is sent to the holder of the share;

  • (h) a statement that indicates the earliest date and the latest date on which the corporation may sell the shares, having regard to the requirements of section 82;

  • (i) a statement that indicates that the shares may be sold on any stock exchange if shares of the corporation are listed and posted for trading or, if shares of the corporation are not listed and posted for trading on a stock exchange, in any other manner that the directors of the corporation determine to be appropriate;

  • (j) a statement that indicates that, if not all the shares of the holder represented by a certificate are sold under subsection 46(1) of the Act, a certificate that represents the shares that are not sold will be issued on surrender for cancellation of the certificate that represents the shares sold; and

  • (k) a statement that indicates that, immediately after the sale of the shares under subsection 46(1) of the Act, the corporation will

    • (i) register the transfer or a notice of the sale of the shares or cause the transfer or a notice of the sale of the shares to be registered in the securities register of the corporation, and

    • (ii) send a notice of the sale in accordance with paragraph 83(1)(b) to the person shown in the securities register of the corporation as the holder of the shares at the time of sale.

• (6) The notice referred to in subsection (3) shall contain

  • (a) the name and address of the holder of the shares as shown in the securities register of the corporation;

  • (b) a statement that identifies the certificate that represents the shares, by certificate number or otherwise;

  • (c) a statement that indicates that all or some of the shares may be sold by the corporation under subsection 46(1) of the Act if the shares are owned, or the directors of the corporation determine in accordance with subsection (2) that the shares may be owned, contrary to a constraint referred to in paragraph (c) of the definition constraint in section 73;

  • (d) a statement that indicates that the corporation has concluded that the shares are owned, or that the directors of the corporation have determined in accordance with subsection (2) that the shares may be owned, contrary to a constraint referred to in paragraph (c) of the definition constraint in section 73 and that indicates the reason why the corporation so concluded or the directors so determined, as the case may be;

  • (e) a statement that indicates that the corporation intends to sell all or a specified number of the shares under subsection 46(1) of the Act;

  • (f) a statement that indicates that, if before the sale the corporation changes its conclusion that the shares are owned, or the directors of the corporation change their determination made in accordance with subsection (2) that the shares may be owned, contrary to a constraint referred to in paragraph (c) of the definition constraint in section 73, or there is a change in the reason for the conclusion or determination, the corporation will send a notice in accordance with subsection 81(1) to the person shown in the securities register of the corporation as the holder of the shares;

  • (g) a statement that advises that, unless the person shown in the securities register of the corporation as the holder of the shares receives a notice referred to in paragraph (f), the person and all other interested persons should not assume that

    • (i) the corporation has changed its conclusion that the shares are owned, or the directors of the corporation have changed their determination made in accordance with subsection (2) that the shares may be owned, contrary to a constraint referred to in paragraph (c) of the definition constraint in section 73,

    • (ii) there has been a change in the reason for the conclusion or determination, or

    • (iii) the corporation no longer intends to sell the shares under subsection 46(1) of the Act;

  • (h) a statement that indicates that no share in respect of which the notice is sent may be sold under subsection 46(1) of the Act if a transfer of the share is registered in the securities register of the corporation after the notice referred to in subsection (1) was sent, unless the corporation again complies with the requirements set out in this Part respecting the sale of the share;

  • (i) a statement that indicates that no share in respect of which the notice is sent may be sold under subsection 46(1) of the Act unless not less than 60 days but not more than 150 days have elapsed from the day on which the notice was sent to the holder of the share; and

  • (j) a statement that indicates each of the matters referred to in paragraphs (5)(h) to (k).

• (7) The notice referred to in subsection (1) shall be accompanied by a request for information as to whether or not the shares are owned contrary to a constraint referred to in paragraph (c) of the definition constraint in section 73.

• (8) The notice referred to in subsection (3) shall be accompanied by a request for information referred to in subsection (7), unless the corporation has received the requested information before the notice is sent.

• (9) A request for information referred to in subsection (7) shall be accompanied by instructions for the provision of the information.