COVID-19: Bill C-17 to Allow Deadline Extensions for Federal Corporations

Practical Law Canada Legal Update w-026-0299 (Approx. 9 pages)

COVID-19: Bill C-17 to Allow Deadline Extensions for Federal Corporations

by Practical Law Canada Corporate & Securities

Background

The vast majority of federal corporations (other than those created by Special Act) are incorporated or continued under one of the following:

The Canada Business Corporations Act, R.S.C. 1985, c. C-44 (CBCA).
The Canada Not-for-profit Corporations Act, S.C. 2009, c. 23 (CNCA).
The Canada Cooperatives Act, R.S.C. 1998, c. 1 (CCA).
The Boards of Trade Act, R.S.C. 1985, c. B-6.
A statute governing a federal financial institution, namely the:
- Bank Act, S.C. 1991, c. 46;
- Cooperative Credit Associations Act, S.C. 1991, c. 48;
- Insurance Companies Act, S.C. 1991, c. 47; or
- Trust and Loan Companies Act, S.C. 1991, c. 45.

Except for the Boards of Trade Act, each of the other federal corporate statutes is, with respect to various corporate matters, closely modelled on the CBCA. It is, therefore, useful to approach a discussion of the effect of Part 2 of Bill C-17, the Time Limits and Other Periods Act (COVID-19) (New Act) from the vantage of its implications for a CBCA corporation. The implications for CNCA corporations and cooperatives will then follow.

Federal financial institutions are not covered by the proposed New Act, which received first reading in the House of Commons on June 10, 2020.

CBCA Deadlines

Section 133(1)

A CBCA corporation must hold an annual meeting of shareholders each year (section 133(1), CBCA). A special meeting is optional and depends on the reason for calling it (section 133(2), CBCA).

An annual meeting must be held within specified time frames. Excluding a corporation that is holding its first annual meeting, the annual meeting of a CBCA corporation must be:

Called within 15 months after holding the last preceding annual meeting but no later than 6 months after the end of the corporation's preceding financial year.
Held within 6 months from the end of last completed financial year.
(Sections 133(1)(b) and 155(1)(a)(i), CBCA.)

A corporation has 18 months from the date of incorporation to hold its first annual meeting (section 133(1)(a)).

Under the CBCA, a corporation must obtain an extension order from the court if it cannot call the meeting within the earlier of 15 months after the last preceding annual meeting or 6 months after the end of the corporation's preceding financial year (section 133(3), CBCA).

Section 135(1)

Notice of the time and place of a meeting of shareholders must be given to each shareholder and director (and the auditor, if any) between 21 and 60 days before the date of the meeting (section 135(1), CBCA and section 43(2), Canada Business Corporations Regulations, 2001, SOR/2001-512 (CBCR)).

Section 155(1)

Financial statements must be presented to each annual meeting, and, to ensure that financial statements remain meaningful to the business to be conducted at the annual meeting (particularly the election of directors), those statements must relate to the period that ended within six months before the annual meeting or less (section 155(1)(a)(i), CBCA).

Section 159(1)

A corporation must send a copy of the annual financial statements and auditor's report, if any, to each shareholder (other than a shareholder who has informed the corporation that they do not want to receive copies) at least 21days before each annual meeting.

Section 160(1)

Finally, a distributing corporation, any of the issued securities of which remain outstanding and are held by more than one person, must send a copy of the audited financial statements and auditor's report to the Director appointed under the CBCA. This financial information must be sent to the Director:

Within 21 days or less before the annual meeting.
In any event, within 15 months after the last preceding annual meeting and within 6 months or less after the end of the corporation's preceding financial year.

Effect of New Act

Assuming that the New Act is enacted and comes into force, the Minister of Innovation, Science and Industry (Minister) would have the power to make an order suspending or extending the time limits in the CBCA described above or in the CBCR. Any order made under the New Act cannot extend past December 31, 2020. The total duration of a suspension or extension cannot exceed six months and, in all cases, must end on December 31, 2020 or earlier.

An order may, if it so provides, have retrospective effect but not before March 13, 2020 (which is two days after the World Health Organization declared that the 2019 novel coronavirus (COVID-19) was a pandemic).

Therefore, the New Act will enable the Minister to make an order extending the requirements in the CBCA as set out in Table 1:

Table 1: Possible Maximum Extensions of Deadlines Under the CBCA

CBCA Section Reference	Existing Deadline	Maximum Possible Extension
133(1)(a)	A corporation must call its first annual meeting within 18 months from its date of incorporation.	A corporation incorporated on or after September 13, 2018 has until December 31, 2020 to call its annual meeting.
133(1)(b)	A corporation must call any other annual meeting within 15 months from the previous annual meeting and within 6 months from the end of its financial year.	A corporation has until December 31, 2020 to call its annual meeting if its previous annual meeting was held on or after December 13, 2018, and its financial year ended on or after September 13, 2019. See, also, the effect of s. 155(1)(a).
155(1)(a)(i)	The annual financial statements and auditor's report of a corporation submitted to shareholders must be current to within six months of the annual meeting.	The financial statements of the corporation and auditor's report, if any, presented to the 2020 annual meeting must be current to at least September 13, 2019.
160(1)(b)	A distributing corporation must send a copy of its audited financial statements and auditor's report to the Director within 15 months from the previous annual meeting and within six months of the end of its financial year.	The corporation must still file its financial statements at least 21 days before the annual meeting is held (section 160(1)(a), CBCA). There is no change. The ultimate filing deadline in section 160(1)(b) is extended to as far as December 31, 2020 if the annual meeting was held on or after December 13, 2018 and its financial year ended on or after September 13, 2019.

The dates set out in the third column reflect the maximum extensions available by Ministerial order made under the New Act. The Minister might set shorter dates in the order.

It seems unlikely that a suspension or extension will be needed under sections 135(1), 159(1) or 160(1)(a). In each of these cases, the deadline runs off the day that the annual meeting is held. Therefore, if the corporation is permitted an extension to hold its annual meeting, the period for sending notice to shareholders, directors and the auditor, if any, will autocorrect. Similarly, the period for sending financial information to shareholders and the Director will autocorrect. However, there is no harm in empowering the Minister to extend the deadlines even if it is not used.

Deadlines Under the CNCA and the CCA

The discussion above the proposed extension of deadlines under the CBCA applies equally to the extension of deadlines under the CNCA and the CCA. The Table below tracts the provisions of the latter statutes in relation to the discussion of the CBCA.

Table 2: Possible Maximum Extensions of Deadlines under the CNCA and the CCA

CBCA References	CNCA References	CCA References
133(1)(a)	Section 160(1)(a), CNCA; and section 61(1), Canada Not-for-profit Corporations Regulations, SOR/2011-223 (CNCR).	Section 50(1), CCA.
133(1)(b)	Section 160(1)(b), CNCA; and section 61(2), CNCR.	Section 50(1), CCA.
135(1)	Section 162(1), CNCA; and section 63(1), CNCR.	Section 52(1), CCA; and section 23.5, Canada Cooperatives Regulations, SOR/99-256 (CCR).
155(1)	Section 172(1), CNCA.	Section 247(1), CCA.
159(1)	Section 175(1), CNCA; and section 77, CNCR.	Section 251, CCA.
160(1)	Section 176(1), CNCA; and section 78(1) and (2), CNCR. The filing requirement under section 176 only applies to soliciting corporations.	Section 252(1), CCA. The filing requirement under section 252 only applies to a distributing cooperative. The definition of "distributing cooperative" in the CCA is a close analogue of the distributing corporation as defined under the CBCA.

Practical Law Canada will continue to monitor the progress of Bill C-17 and, once enacted and in force, the making of any suspension or extension orders under the CBCA, CNCA, CCA or the Boards of Trade Act.

COVID-19: Bill C-17 to Allow Deadline Extensions for Federal Corporations | Practical Law