This is an official version. Copyright © 2007: Queen's Printer, Important Information
Statutes of Newfoundland and Labrador
1. Short title PART
I 2. Interpretation 3. Meaning of valid security 4. Notice and knowledge 5. Obligation of good faith 6. Variation of Act by agreement 7. Principles of law and equity apply 8. Clearing agency rules apply 9. Application to Crown 10. Existing proceedings PART
II 11. Share, equity interest 12. Mutual fund security 13. Interest in partnership, limited liability company 14. Bill or exchange, promissory note 15. Depository bill or note 16. Clearing house option 17. Futures contract 18. Security and other financial asset acquisition 19. Notice of adverse claim 20. Notice of transfer 21. Delay 22. Statement on security certificate 23. Registration of financing statement 24. Purchaser's control of certificated security 25. Purchaser's control of uncertificated security 26. Purchaser's control of security entitlement 27. Securities intermediaries control of security entitlement 28. Agreement re: control of uncertificated security 29. Agreement re: control of security entitlement 30. Effectiveness of endorsement 31. Effectiveness of endorsement made by representative 32. Endorsement remains effective 33. Date when effectiveness is determined 34. Warranties on transfer of certificated security 35. Warranties on transfer of uncertificated security 36. Warranties on endorsement of security certificate 37. Warranties on instruction re: uncertificated security 38. Warranty on presentation of security certificate 39. Warranties by agent delivering certificated security 40. Warranties on redelivery of security certificate 41. Broker's warranties 42. Warranties on entitlement order 43. Warranties on security credited to securities account 44. Securities intermediary's warranties 45. Law governing validity of security 46. Matters governed by law of securities intermediary's jurisdiction 47. Adverse claim governed by law of jurisdiction of security certificate 48. Seizure governed by laws re: civil enforcement of judgments 49. Seizure of interest in certificated security 50. Seizure of interest in uncertificated security 51. Seizure of interest in security entitlement 52. Notice of seizure to secured party 53. Enforceability of contracts 54. Rules of evidence re: certificated security 55. Securities intermediary's liability to adverse claimant 56. Securities intermediary as purchaser for value PART
57. Certificated security 58. Enforcement of security 59. Lack of genuineness of certificated security 60. Other defences 61. Right to cancel contract 62. Staleness as notice of defect or defence 63. Effect of issuer's restriction on transfer 64. Completion of security certificate 65. Rights and duties of issuer re: registered owner 66. Warranties by person signing security certificate 67. Issuer's lien 68. Overissue PART
IV 69. Delivery of certificated security 70. Rights of purchaser 71. Protected purchaser 72. Form of endorsement 73. Endorsement of part of a security certificate 74. When endorsement is transfer of security 75. Endorsement missing 76. Notice of adverse claim on endorsement 77. Obligations of endorser 78. Completion of instruction 79. Obligations of person originating an instruction 80. Warranties by guarantor of endorser's signature 81. Warranties by guarantor of signature of originator of instruction 82. Warranties by special guarantor of signature of originator of instruction 83. Warranty re: rightfulness of transfer by guarantor 84. Guarantee may not be condition to registration of transfer 85. Liability of guarantor, endorser and originator 86. Purchaser's right to requisites for registration of transfer PART
V 87. Duty of issuer to register transfer 88. Assurances re endorsement or instruction 89. Demand that issuer not register transfer 90. Duty of issuer re demand to not register transfer 91. Liability of issuer re: demand to not register transfer 92. Wrongful registration of transfer 93. Replacement of security lost certificate 94. Obligation to notify issuer of lost, destroyed or wrongfully taken security certificate 95. Obligation of authenticating trustee, transfer agent, etc. PART
VI 96. Acquisition of security entitlement 97. Protection of entitlement holders from adverse claim 98. Property interest of entitlement holders in financial asset 99. Duty of securities intermediary re: financial asset 100. Duty of securities intermediary re: payments and distributions 101. Duty of securities intermediary to exercise rights 102. Duty of securities intermediary to comply with entitlement order 103. Duty of securities intermediary re: entitlement holder's direction 104. Compliance with other statute 105. Rights of purchaser re: adverse claim 106. Priority of entitlement holders to financial asset PART
107. RSNL1990 cC-36 Amdt. 108. SNL1995 cC-37.1 Amdt. 109. SNL1996 cJ-1.1 Amdt. 110. SNL1998 cP-7.1 Amdt. 111. RSNL1990 cS-13 Amdt. PART
VIII 112. Commencement Be it enacted by the Lieutenant-Governor and
House of Assembly in Legislative Session convened, as follows: Short title 1. This
Act may be cited as the Securities
Transfer Act. PART I Interpretation 2. (1) In this Act (a) "adverse claim" means a claim that (i) the claimant has a property interest in a
financial asset, and (ii) it is a violation of the rights of the claimant for another person to hold, transfer or deal with the financial asset; (b) "appropriate person" means, (i) with respect to an endorsement, the person
specified by a security certificate or by an effective special endorsement to
be entitled to the security, (ii) with respect to an instruction, the registered
owner of an uncertificated security, (iii) with respect to an entitlement order, the
entitlement holder, (iv) in the case of a person referred to in
subparagraph (i), (ii) or (iii), being deceased, that person's successor taking
under the law, other than this Act, or that person's personal representative
acting for the estate of the deceased person, and (v) in the case of a person referred to in subparagraph (i), (ii) or (iii) lacking capacity, that person's guardian or other similar representative who has power under the law, other than this Act, to transfer the security or other financial asset; (c) "bearer form" means, in respect of a certificated security, a form in which the security is payable to the bearer of the security certificate according to the security certificate's terms but not by reason of an endorsement; (d) "broker" means a dealer as defined in the Securities Act; (e) "certificated security" means a security that is represented by a certificate; (f) "clearing agency" means a person (i) that carries on a business or
activity as a clearing agency or clearing house within the meaning of the Securities
Act or the securities regulatory law of another province or territory in (ii) that is recognized or otherwise regulated as a
clearing agency or clearing house by the superintendent or by a securities regulatory
authority of another province or territory in (iii) that is a securities and derivatives clearing house for the purposes of section 13.1 of the Payment Clearing and Settlement Act (Canada) or whose clearing and settlement system is designated under Part I of that Act; (g) "communicate" and "communication" means (i) sending a signed writing, and (ii) transmitting information by another means agreed by the person transmitting the information and the person receiving the information; (h) "control" has the meaning set out in sections 24 to 27; (i) "corporation" means a corporation whether or not it is incorporated under the laws of the province; (j) "delivery", with respect to a certificated or uncertificated security, has the meaning set out in section 69, and "deliver" has a corresponding meaning; (k) "effective", in relation to an endorsement, instruction or entitlement order, has the meaning set out in sections 30 to 33, and "effectiveness", "ineffective" and "ineffectiveness" have corresponding meanings; (l) "endorsement" means a signature that, alone or accompanied by other words, is made on a security certificate in registered form or on a separate document for the purpose of assigning, transferring or redeeming the security or granting a power to assign, transfer or redeem the security; (m) "entitlement holder" means a person identified in the records of a securities intermediary as the person having a security entitlement against the securities intermediary and includes a person who acquires a security entitlement by virtue of paragraph 96(1)(b) or (c); (n) "entitlement order" means a notice communicated to a securities intermediary directing the transfer or redemption of a financial asset to which the entitlement holder has a security entitlement; (o) "financial asset" means, except as
otherwise provided in sections 11 to 17, (i) a security, (ii) an obligation of a person that, (A) is, or is of a type, dealt in or traded on
financial markets, or (B) is recognized in another market or area in
which it is issued or dealt in as a medium for investment, (iii) a share, participation or other interest in a
person, or in property or an enterprise of a person, that, (A) is, or is of a type, dealt in or traded on
financial markets, or (B) is recognized in another market or area in
which it is issued or dealt in as a medium for investment, (iv) a property that is held by a securities
intermediary for another person in a securities account if the securities
intermediary has expressly agreed with the other person that the property is to
be treated as a financial asset under this Act, or (v) a credit balance in a securities account, unless the securities intermediary has expressly agreed with the person for whom the account is maintained that the credit balance is not to be treated as a financial asset under this Act; (p) "genuine" means free of forgery or counterfeiting; (q) "government" means, (i) the Crown in right of (ii) the government of a territory in (iii) a municipality in (iv) the government of a foreign country or of a political subdivision of it; (r) "in collusion" means in concert, by conspiratorial arrangement or by agreement for the purpose of violating a person's rights in respect of a financial asset; (s) "instruction" means a notice communicated to the issuer of an uncertificated security that directs that the transfer of the security be registered or that the security be redeemed; (t) "issuer", with respect to a registration of a transfer of a security, means a person on whose behalf transfer books are maintained, and, with respect to an obligation on or a defence to a security, includes, (i) a person who places or authorizes the placing of the person's name on a security certificate, other than as authenticating trustee, registrar, transfer agent or another like person, to evidence a share, participation or other interest in the person's property or in an enterprise or the person's duty to perform an obligation represented by the security certificate, (ii) a person who creates a share, participation or other interest in the person's property or in an enterprise, or undertakes an obligation, that is an uncertificated security, (iii) a person who directly or indirectly creates a fractional interest in the person's rights or property, if the fractional interest is represented by a security certificate, (iv) a guarantor, to the extent of the guarantor's guarantee, whether or not the guarantor's obligation is noted on a security certificate, and (v) a person that becomes responsible for, or in place of, another person described as an issuer in this definition; (u) "knowledge", "know" and "known" means actual knowledge and actual knowing; (v) "overissue" means the issue of securities in excess of the amount that the issuer is authorized to issue; (w) "person" means an individual, including an individual in his or her capacity as trustee, executor, administrator or other representative, a sole proprietorship, a partnership, an unincorporated association, an unincorporated syndicate, an unincorporated organization, a trust, including a business trust, a corporation, a government or agency of a government or another legal or commercial entity; (x) "protected purchaser" means a
purchaser of a certificated or uncertificated security, or of an interest in
the security, who (i) gives value, (ii) does not have notice of an adverse claim to
the security, and (iii) obtains control of the security; (y) "purchase" means a taking by sale, discount, negotiation, mortgage, hypothec, pledge, security interest, issue or reissue, gift or any other voluntary transaction that creates an interest in property; (z) "purchaser" means a person who takes by purchase; (aa) "registered form" means, in respect
of a certificated security, a form in which (i) the security certificate specifies a person
entitled to the security, and (ii) a transfer of the security may be registered on books maintained for that purpose by or on behalf of the issuer, or the security certificate states that it may be so registered; (bb) "representative" means a person empowered to act for another, including an agent, an officer of a corporation or association and a trustee, executor or administrator of an estate; (cc) "secured party" means a secured party as defined in the Personal Property Security Act; (dd) "securities account" means an account to which a financial asset is or may be credited in accordance with an agreement under which the person maintaining the account undertakes to treat the person for whom the account is maintained as entitled to exercise the rights that constitute the financial asset; (ee) "securities intermediary" means (i) a clearing agency, or (ii) a person, including a broker, bank or trust company, that in the ordinary course of its business maintains securities accounts for others and is acting in that capacity; (ff) "security" means, except as
otherwise provided in sections 11 to 17, an obligation of an issuer or a share,
participation or other interest in an issuer or in property or an enterprise of
an issuer, (i) that is represented by a security certificate
in bearer form or registered form, or the transfer of which may be registered
on books maintained for that purpose by or on behalf of the issuer, (ii) that is one of a class or series, or by its
terms is divisible into a class or series, of shares, participations, interests
or obligations, and (iii) that, (A) is, or is of a type, dealt in or traded on
securities exchanges or securities markets, or (B) is a medium for investment and by its terms expressly provides that it is a security for the purposes of this Act; (gg) "security certificate" means a certificate representing a security, but does not include a certificate in electronic form; (hh) "security entitlement" means the rights and property interest of an entitlement holder with respect to a financial asset specified in Part VI; (ii) "security interest" means a security interest as defined in the Personal Property Security Act; (jj) "superintendent" means the
superintendent as defined in the Securities
Act; (kk) "unauthorized" means, when used with reference to a signature or endorsement, a signature or endorsement that is made without actual, implied or apparent authority or that is forged; (ll) "uncertificated security" means a security that is not represented by a certificate; and (mm) "value" means a consideration
sufficient to support a simple contract and includes an antecedent debt or
liability. (2) Notwithstanding paragraph (1)(o), as the
context requires, "financial asset" means either the interest itself
or the means by which a person's claim to it is evidenced, including a
certificated or uncertificated security, a security certificate and a security
entitlement. (3) The characterization of a person, business or transaction for the purposes of this Act does not determine the characterization of the person, business or transaction for the purposes of any other statute, law, regulation or rule. Meaning of valid security 3. A
security is valid where it is issued in accordance with the applicable law
described in subsection 45(1) and constating provisions governing the issuer. Notice and knowledge 4. (1) For
the purposes of this Act, a person has notice of a fact if, (a) the person has knowledge of it; (b) the person has received notice of it; or (c) information comes to the person's attention
under circumstances in which a reasonable person would take cognizance of it. (2) A person gives notice to another person by
taking those steps that may be reasonably required to inform the other person
in the ordinary course, whether or not the other person actually comes to know
of it. (3) A person receives notice or knowledge when, (a) the notice or knowledge comes to the person's
attention; (b) in the case of a notice under a contract,
the notice is duly delivered to the place of business through which
the contract was made; or (c) the notice is duly delivered to another place
held out by that person as the place for receipt of those notices. (4) Notice, knowledge or a notice received by an
organization is effective for a particular transaction from the time when it is
brought to the attention of the individual conducting that transaction and from
the time when it would have been brought to the attention of that individual if
the organization had exercised due diligence. (5) For the purpose of subsection (4), an
organization exercises due diligence if it maintains reasonable routines for
communicating significant information to the individual conducting the
transaction and there is reasonable compliance with those routines. (6) For the purpose of subsection (4), due
diligence does not require an individual acting for the organization to
communicate information unless, (a) that communication is part of the individual's
regular duties; or (b) the individual has reason to know of the transaction
and that the transaction would be materially affected by the information. Obligation of
good faith 5. (1) A
contract to which this Act applies and a duty imposed by this Act imposes an
obligation of good faith in its performance or enforcement. (2) In this section "good faith" means
honesty in fact and the observance of reasonable commercial standards of fair
dealing. Variation of Act
by agreement 6. (1) The
effect of provisions of this Act may be varied by agreement. (2) Notwithstanding subsection (1), the
obligations of good faith, diligence, reasonableness and care imposed by this
Act may not be disclaimed by agreement, but the parties may by
agreement determine the standards by which the performance of those obligations
is to be measured so long as those standards are not manifestly unreasonable. Principles of law
and equity apply 7. Except
in so far as they are inconsistent with this Act, the principles of law and
equity supplement this Act and continue to apply, including, (a) the law merchant; (b) the law relating to the capacity to contract,
principal and agent, estoppel, fraud, misrepresentation, duress, coercion and
mistake; and (c) other validating or invalidating rules of law. Clearing agency
rules apply 8. A
rule adopted by a clearing agency governing rights and obligations between the
clearing agency and its participants or between participants in the clearing
agency is effective even where the rule conflicts with this Act or the Personal
Property Security Act and affects another person who does not consent to
the rule. Application to
Crown 9. (1) This
Act applies to the Crown. (2) Nothing in this Act limits the application of
the Proceedings Against the Crown Act. Existing proceedings 10. This
Act shall not affect a legal proceeding that was commenced before this section
comes into force. PART II Share, equity
interest 11. A
share or similar equity interest issued by a corporation, business trust or
similar entity is a security. Mutual fund security 12. (1) A
mutual fund security is a security. (2) In this section, (a) "mutual fund security" means a
share, unit or similar equity interest issued by an open-end mutual fund, but
does not include an insurance policy, endowment policy or annuity contract
issued by an insurance company; and (b) "open-end mutual fund" means an
entity that makes a distribution to the public of its shares, units or similar
equity interests and that carries on the business of investing the consideration
it receives for the shares, units or similar equity interests it issues, all or
substantially all of which shares, units or similar equity interests are
redeemable on the demand of their holders or owners. Interest in partnership, limited liability company 13. (1) An
interest in a partnership or limited liability company is not a security
unless, (a) that interest is dealt in or traded on
securities exchanges or in securities markets; (b) the terms of that interest expressly provide
that the interest is a security for the purposes of this Act; or (c) that interest is a mutual fund security within
the meaning of section 11. (2) An interest in a partnership or limited
liability company is a financial asset if it is held in a securities account. (3) In this section "limited liability company" means an unincorporated association, other than a partnership, formed under the laws of another jurisdiction, that grants to each of its members limited liability with respect to the liabilities of the association. Bill or exchange,
promissory note 14. A
bill of exchange or promissory note to which the Bills of Exchange Act
( Depository bill
or note 15. A
depository bill or depository note to which the Depository Bills and Notes
Act ( Clearing house
option 16. (1) A
clearing house option or similar obligation is not a security, but is a
financial asset. (2) In this section "clearing house
option" means an option, other than an option on futures, issued by a
clearing house to its participants. Futures contract 17. (1) A
futures contract is not a security or a financial asset. (2) In this section "futures contract"
means a futures contract as defined in the Personal
Property Security Act. Security and
other financial asset acquisition 18. (1) A
person acquires a security or an interest in a security under this Act where, (a) the person is a purchaser to whom a security
is delivered under section 69; or (b) the person acquires a security entitlement to
the security under section 96. (2) A person acquires a financial asset, other
than a security, or an interest in a financial asset under this Act if the
person acquires a security entitlement to the financial asset. (3) A person who acquires a security entitlement
to a security or other financial asset has the rights specified in Part VI, but
is a purchaser of a security, security entitlement or other financial asset
held by a securities intermediary only to the extent provided in section 98. (4) Unless the context of another statute, law,
regulation, rule or agreement shows that a different meaning is intended, a
person who is required by that statute, law, regulation, rule
or agreement to transfer, deliver, present, surrender, exchange or otherwise
put in the possession of another person a security or other financial asset
satisfies that requirement by causing the other person to acquire an interest
in the security or other financial asset as set out in
subsection (1) or (2). Notice of adverse
claim 19. A
person has notice of an adverse claim if (a) the person knows of the adverse claim; (b) the person is aware of facts sufficient to
indicate that there is a significant probability that the adverse claim exists
and deliberately avoids information that would establish the existence of the
adverse claim; or (c) the person has a duty, imposed by statute or
regulation, to investigate whether an adverse claim exists and the investigation,
if carried out, would establish the existence of the adverse claim. Notice of
transfer 20. (1) Having
knowledge that a financial asset, or an interest in a financial asset, is being
or has been transferred by a representative does not impose a duty of inquiry
into the rightfulness of the transaction and is not notice of an adverse claim. (2) Notwithstanding subsection (1), a person has
notice of an adverse claim if that person knows that, (a) a representative has transferred a financial
asset, or an interest in a financial asset, in a transaction; and (b) the transaction is, or the
proceeds of the transaction are being used, (i) for the individual benefit of the representative,
or (ii) otherwise in breach of a duty owed by the
representative. Delay 21. An
act or event that creates a right to immediate performance of the principal
obligation represented by a security certificate, or that sets a date on or
after which a security certificate is to be presented or surrendered for
redemption or exchange, does not by itself constitute notice of an adverse
claim except in the case of a transfer that takes place more than, (a) one year after a date set for presentation or
surrender for redemption or exchange; or (b) 6 months after a date set for payment of money
against presentation or surrender of the security certificate, where money was
available for payment on that date. Statement on security
certificate 22. (1) A
purchaser of a certificated security has notice of an adverse claim where the
security certificate, (a) whether in bearer form or registered form, has
been endorsed "for collection" or "for surrender" or for
some other purpose not involving a transfer; or (b) is in bearer form and has on it an unambiguous
statement that it is the property of a person other than the transferor. (2) For the purposes of paragraph (1)(b), the mere
writing of a name on a security certificate does not by itself constitute an
unambiguous statement that the security certificate is the property of a person
other than the transferor. Registration of
financing statement 23. The
registration of a financing statement under the Personal Property Security
Act is not notice of an adverse claim. Purchaser's
control of certificated security 24. (1) A
purchaser has control of a certificated security that is in bearer form where
the certificated security is delivered to the purchaser. (2) A purchaser has control of a certificated
security that is in registered form where the certificated security is
delivered to the purchaser and, (a) the security certificate is endorsed to the
purchaser or in blank by an effective endorsement; or (b) the security certificate is registered in the
name of the purchaser at the time of the original issue or registration of
transfer by the issuer. Purchaser's
control of uncertificated security 25. (1) A
purchaser has control of an uncertificated security where, (a) the uncertificated security is delivered to
the purchaser; or (b) the issuer has agreed that the issuer will
comply with instructions that are originated by the purchaser without the
further consent of the registered owner. (2) A purchaser to whom subsection (1) applies in
relation to an uncertificated security has control of the uncertificated
security, even if the registered owner retains the right, (a) to make substitutions for the uncertificated
security; (b) to originate instructions to the issuer; or (c) to otherwise deal with the uncertificated security. Purchaser's
control of security entitlement 26. (1) A
purchaser has control of a security entitlement where, (a) the purchaser becomes the entitlement holder; (b) the securities intermediary has agreed that it
will comply with entitlement orders that are originated by the purchaser
without the further consent of the entitlement holder; or (c) another person has control of the security
entitlement on behalf of the purchaser or, having previously obtained control
of the security entitlement, acknowledges that the person has control on behalf
of the purchaser. (2) A purchaser to whom subsection (1) applies in
relation to a security entitlement has control of the security entitlement even
where the entitlement holder retains the right to (a) make substitutions for the security
entitlement; (b) originate entitlement orders to the securities
intermediary; or (c) otherwise deal with the security entitlement. Securities intermediaries control of security entitlement 27. Where
an interest in a security entitlement is granted by the entitlement holder to
the entitlement holder's own securities intermediary, the securities
intermediary has control of the security entitlement. Agreement re:
control of uncertificated security 28. (1) An
issuer shall not enter into an agreement of the kind referred to in paragraph
25(1)(b) without the consent of the registered owner. (2) An issuer that has entered
into an agreement of the kind referred to in paragraph 25(1) (b) is not
required to confirm the existence of the agreement to another person unless
requested to do so by the registered owner. (3) An issuer is not required to enter into an
agreement of the kind referred to in paragraph 25(1)(b) even where the
registered owner requests the agreement. Agreement re: control
of security entitlement 29. (1) A
securities intermediary shall not enter into an agreement of the kind referred
to in paragraph 26(1)(b) without the consent of the entitlement holder. (2) A securities intermediary that has entered
into an agreement of the kind referred to in paragraph 26(1)(b) is not required
to confirm the existence of the agreement to another person unless requested to
make that confirmation by the entitlement holder. (3) A securities intermediary is not required to
enter into an agreement of the kind referred to in paragraph 26(1)(b) even
where the entitlement holder requests the agreement. Effectiveness of
endorsement 30. An
endorsement, instruction or entitlement order is effective where, (a) it is made by the appropriate person; (b) it is made by a person who, in the case of an
endorsement or instruction, has the power under the law of agency to transfer
the security, or in the case of an entitlement order, has the power under the
law of agency to transfer the financial asset, on behalf of the appropriate
person, including, (i) in the case of an instruction referred to in
paragraph 25(1)(b), the person who has control of the uncertificated security,
or (ii) in the case of an entitlement order referred
to in paragraph 26(1)(b), the person who has control of the security entitlement;
or (c) the appropriate person has ratified it or is
otherwise precluded from asserting its ineffectiveness. Effectiveness of
endorsement made by representative 31. An
endorsement, instruction or entitlement order made by a representative is
effective even where, (a) the representative has failed to comply with a
controlling instrument or with the law of the jurisdiction governing the
representative's rights and duties, including any law requiring the
representative to obtain court approval of the transaction; or (b) the representative's action in making the
endorsement, instruction or entitlement order or using the proceeds of the
transaction is otherwise a breach of duty owed by the representative. Endorsement remains
effective 32. Where
a security is registered in the name of or specially endorsed to a person described
as a representative, or where a securities account is maintained in the name of
a person described as a representative, an endorsement, instruction or
entitlement order made by the person is effective even if the person is no
longer serving in that capacity. Date when effectiveness
is determined 33. (1) The
effectiveness of an endorsement, instruction or entitlement order is determined
as of the date that the endorsement, instruction or entitlement order is made. (2) An endorsement, instruction or entitlement
order does not become ineffective by reason of a later change of circumstances. Warranties on
transfer of certificated security 34. A
person who transfers a certificated security to a purchaser for value warrants
to the purchaser and, where the transfer is by endorsement, also warrants to a
subsequent purchaser, that, (a) the security certificate is
genuine and has not been materially altered; (b) the transferor does not know of a fact that
might impair the validity of the security; (c) there is no adverse claim to the security; (d) the transfer does not violate a restriction on
transfer; (e) where the transfer is by endorsement, the
endorsement is made by the appropriate person or, where the endorsement is by
an agent, the agent has actual authority to act on behalf of the appropriate
person; and (f) the transfer is otherwise effective and
rightful. Warranties on transfer
of uncertificated security 35. (1) A
person who originates an instruction for registration of transfer of an
uncertificated security to a purchaser for value warrants to the purchaser
that, (a) the instruction is made by the appropriate
person or, where the instruction is made by an agent, the agent has actual authority
to act on behalf of the appropriate person; (b) the security is valid; (c) there is no adverse claim to the security; and (d) at the time that the instruction is presented
to the issuer, (i) the purchaser will be entitled to the
registration of transfer, (ii) the transfer will be registered by the issuer
free from all liens, security interests, restrictions and claims other than
those specified in the instruction, (iii) the transfer will not violate a restriction on
transfer, and (iv) the transfer will otherwise be effective and
rightful. (2) A person who transfers an uncertificated
security to a purchaser for value and does not originate an instruction in
connection with the transfer warrants to the purchaser that, (a) the security is valid; (b) there is no adverse claim to the security; (c) the transfer does not violate a restriction on
transfer; and (d) the transfer is otherwise effective and
rightful. Warranties on
endorsement of security certificate 36. A
person who endorses a security certificate warrants to the issuer that (a) there is no adverse claim to the security; and (b) the endorsement is effective. Warranties on
instruction re: uncertificated security 37. A
person who originates an instruction for the registration of transfer of an
uncertificated security warrants to the issuer that, (a) the instruction is effective; and (b) at the time that the instruction is presented
to the issuer, the purchaser will be entitled to the registration of transfer. Warranty on presentation
of security certificate 38. A
person who presents a certificated security for the registration of transfer or
for payment or exchange warrants to the issuer that the person is entitled to
the registration, payment or exchange, but a purchaser for value and without
notice of adverse claims to whom transfer is registered warrants to the issuer
only that the person has no knowledge of an unauthorized signature in a
necessary endorsement. Warranties by
agent delivering certificated security 39. Where, (a) a person acts as agent of another person in
delivering a certificated security to a purchaser; (b) the identity of the principal was known to the
person to whom the security certificate was delivered; and (c) the security certificate delivered by the
agent was received by the agent from the principal or from another person at
the direction of the principal, the person delivering the security
certificate warrants, to the purchaser, only that the
delivering person has authority to act for the principal and does not know of
an adverse claim to the certificated security. Warranties on
redelivery of security certificate 40. A
secured party who redelivers a security certificate received, or after payment
and on order of the debtor delivers the security certificate to another person,
makes only the warranties of an agent set out in section 39. Broker's
warranties 41. (1) Except
as otherwise provided in section 39, a broker acting for a customer makes to
the issuer and a purchaser the warranties set out in sections 34 to 38. (2) A broker that delivers a security certificate
to the broker's customer makes to the customer the warranties set out in
section 34 and has the rights and privileges of a purchaser provided under
sections 34, 39 and 40. (3) A broker that causes the broker's customer to
be registered as the owner of an uncertificated security makes to the customer
the warranties set out in section 35 and has the rights and privileges of a purchaser
provided under section 35. (4) The warranties of and in favour of the broker
acting as an agent are in addition to applicable warranties given by and in
favour of the customer. Warranties on
entitlement order 42. A
person who originates an entitlement order to a securities intermediary
warrants to the securities intermediary, (a) that the entitlement order is made by the
appropriate person or, if the entitlement order is made by an agent, that the
agent has actual authority to act on behalf of the appropriate person; and (b) that there is no adverse claim to the security
entitlement. Warranties on
security credited to securities account 43. (1) A
person who delivers a security certificate to a securities intermediary for
credit to a securities account makes to the securities intermediary the
warranties set out in section 34. (2) A person who originates an instruction with
respect to an uncertificated security directing that the uncertificated
security be credited to a securities account makes to the securities
intermediary the warranties set out in section 35. Securities intermediary's
warranties 44. (1) Where
a securities intermediary delivers a security certificate to its entitlement
holder, the securities intermediary makes to the entitlement holder the
warranties set out in section 34. (2) Where a securities intermediary causes its
entitlement holder to be registered as the owner of an uncertificated security,
the securities intermediary makes to the entitlement holder the warranties set
out in section 35. Law governing
validity of security 45. (1) The
validity of a security is governed by the following laws: (a) where the issuer is incorporated under a law
of (b) where the issuer is the Crown in right of (c) where the issuer is the Crown in right of a
province in (d) where the issuer is the Commissioner of a
territory in (e) in another case, the law, other than the conflict
of law rules, of the jurisdiction under which the issuer is incorporated or
otherwise organized. (2) The law of the issuer's jurisdiction governs (a) the rights and duties of the issuer with
respect to the registration of transfer; (b) the effectiveness of the registration of
transfer by the issuer; (c) whether the issuer owes duties to an adverse
claimant to a security; and (d) whether an adverse claim can be asserted
against a person, (i) to whom the transfer of a certificated or
uncertificated security is registered, or (ii) who obtains control of an uncertificated
security. (3) The following issuers may specify the law of
another jurisdiction as the law governing the matters referred to in paragraphs
(2) (a) to (d): (a) an issuer incorporated or otherwise organized
under the law of the province; and (b) the Crown in right of the province. (4) Whether a security is enforceable against an issuer notwithstanding a defence or defect described in sections 58 to 60 is governed by the following laws: (a) where the issuer is incorporated under a law
of (b) where the issuer is the Crown in right of (c) where the issuer is the Crown in right of
another province in (d) where the issuer is the Commissioner of a
territory in (e) in another case, the law, other than the conflict of law rules, of the jurisdiction under which the issuer is incorporated or otherwise organized. (5) In this section "issuer's jurisdiction" means the jurisdiction determined in accordance with the following rules: (a) where the issuer is incorporated under a law of Canada, the law, other than the conflict of law rules, of the province or territory in Canada in which the issuer has its registered or head office, if permitted by the law of Canada, the law of another jurisdiction specified by the issuer; (b) where the issuer is the Crown in right of (c) where the issuer is the Crown in right of
another province in (d) where the issuer is the Commissioner of a territory in Canada, the law, other than the conflict of law rules, of the territory or if permitted by the law of that territory, the law of another jurisdiction specified by the issuer; and (e) in another case, the law, other than the
conflict of law rules, of the jurisdiction under which the issuer is
incorporated or otherwise organized or, if permitted by the law of that jurisdiction,
the law of another jurisdiction specified by the issuer. Matters governed
by law of securities intermediary's jurisdiction 46. (1) The
law, other than the conflict of law rules, of the securities intermediary's
jurisdiction governs, (a) acquisition of a security entitlement from the
securities intermediary; (b) the rights and duties of the securities
intermediary and entitlement holder arising out of a security entitlement; (c) whether the securities intermediary owes a
duty to a person asserting an adverse claim to a security entitlement; and (d) whether an adverse claim may be asserted
against a person who, (i) acquires a security entitlement from the
securities intermediary, or (ii) purchases a security entitlement, or interest
in it, from an entitlement holder. (2) In this section, "securities
intermediary's jurisdiction" means the jurisdiction determined in
accordance with the following rules where (a) an agreement between a securities intermediary
and its entitlement holder governing the securities account expressly provides
that a particular jurisdiction is the securities intermediary's jurisdiction
for the purposes of the law of that jurisdiction, this Act or a provision of
this Act, the jurisdiction expressly provided for is the securities
intermediary's jurisdiction; (b) paragraph (a) does not apply and an agreement
between the securities intermediary and its entitlement holder governing the
securities account expressly provides that the agreement is governed by the law
of a particular jurisdiction, that jurisdiction is the securities
intermediary's jurisdiction; (c) neither paragraph (a) nor (b) applies and an
agreement between a securities intermediary and its entitlement holder
governing the securities account expressly provides that the securities account
is maintained at an office in a particular jurisdiction, that jurisdiction is
the securities intermediary's jurisdiction; (d) none of the preceding paragraphs applies, the
securities intermediary's jurisdiction is the jurisdiction in which the office
identified in an account statement as the office serving the entitlement
holder's account is located; and (e) none of the preceding paragraphs applies, the
securities intermediary's jurisdiction is the jurisdiction in which the chief
executive office of the securities intermediary is located. (3) In determining a securities intermediary's
jurisdiction, the following matters shall not be taken into account: (a) the physical location of certificates
representing financial assets; (b) where an entitlement holder has a security
entitlement with respect to a financial asset, the jurisdiction in which the issuer
of the financial asset is incorporated or otherwise organized; and (c) the location of facilities for data processing
or other record keeping concerning the securities account. Adverse claim
governed by law of jurisdiction of security certificate 47. The
law, other than the conflict of law rules, of the jurisdiction in which a
security certificate is located at the time of delivery governs whether an
adverse claim may be asserted against a person to whom the security certificate
is delivered. Seizure governed
by laws re: civil enforcement of judgments 48. Subject
to the necessary modifications for the purposes of permitting the operation of
sections 49 to 52, the laws governing the civil enforcement of judgments apply
to seizures described in those sections. Seizure of
interest in certificated security 49. (1) Except
as otherwise provided in subsection (2) and in section 52, the interest of a
judgment debtor in a certificated security may be seized only by actual seizure
of the security certificate by a sheriff. (2) A certificated security for which the security
certificate has been surrendered to the issuer may be seized by a sheriff serving
a notice of seizure on the securities intermediary. Seizure of
interest in uncertificated security 50. Except
as otherwise provided in section 52, the interest of a judgment debtor in an
uncertificated security may be seized only by a sheriff serving a notice of
seizure on the issuer at the issuer's chief executive office. Seizure of
interest in security entitlement 51. Except
as otherwise provided in section 52, the interest of a judgment debtor in a
security entitlement may be seized only by a sheriff serving a notice of
seizure on the securities intermediary with whom the judgment debtor's
securities account is maintained. Notice of seizure
to secured party 52. The
interest of a judgment debtor in one or more of the following may be seized by
a sheriff serving a notice of seizure on the secured party: (a) a certificated security for which the security
certificate is in the possession of a secured party; (b) an uncertificated security registered in the
name of a secured party; and (c) a security entitlement maintained in the name
of a secured party. Enforceability of
contracts 53. A
contract or modification of a contract for the sale or purchase of a security
is enforceable whether or not there is some writing signed or record
authenticated by a person against whom enforcement is sought. Rules of evidence
re: certificated security 54. (1) The
evidentiary rules set out in this section apply to a legal proceeding on a
certificated security against the issuer of that security. (2) Unless specifically denied in the pleadings, a
signature on a security certificate or in a necessary endorsement shall be
admitted. (3) A signature on a security is presumed to be
genuine and authorized but, if the effectiveness of the signature is put in
issue, the burden of establishing that it is genuine and authorized is on the
party claiming under the signature. (4) Where signatures on a security certificate are
admitted or established, the production of the security certificate entitles a
holder to recover on the security certificate unless the defendant establishes
a defence or defect that goes to the validity of the security. (5) Where it is shown that a defence or defect
that goes to the validity of the security exists, the plaintiff has the burden
of establishing that the defence or defect cannot be asserted against, (a) the plaintiff; or (b) a person under whom the plaintiff claims. (6) In this section, (a) "defendant" includes respondent; and (b) "plaintiff" means a person
attempting to recover on a security certificate
in a legal proceeding, whether described in that proceeding as a plaintiff,
appellant, claimant, petitioner, applicant or another term. Securities intermediary's
liability to adverse claimant 55. (1) A
securities intermediary that has transferred a financial asset in accordance
with an effective entitlement order is not liable to a person having an adverse
claim to, or a security interest in, the financial asset. (2) A broker or other agent or bailee who has
dealt with a financial asset at the direction of a customer or principal is not
liable to a person having an adverse claim to, or a security interest in, the
financial asset. (3) Notwithstanding subsections (1) and (2), a
securities intermediary referred to in subsection (1) or a broker or other
agent or bailee referred to in subsection (2) is liable to a person having an
adverse claim to, or a security interest in, the financial asset if the
securities intermediary, broker or other agent or bailee did one or more of the
following: (a) took the action described in subsection (1) or
(2) after having been served with an injunction, restraining order or other
legal process issued by a court of competent jurisdiction enjoining the
securities intermediary, broker or other agent or bailee from doing so and
after having had a reasonable opportunity to obey or otherwise abide by the
injunction, restraining order or other legal process; (b) acted in collusion with the wrongdoer in
violating the rights of the person who has the adverse claim or the person who
has the security interest; and (c) in the case of a security certificate that has
been stolen, acted with notice of the adverse claim. Securities intermediary
as purchaser for value 56. (1) A
securities intermediary that receives a financial asset and establishes a
security entitlement to the financial asset in favour of an entitlement holder
is a purchaser for value of the financial asset. (2) A securities intermediary that acquires a
security entitlement to a financial asset from another securities intermediary
acquires the security entitlement for value if the securities intermediary
acquiring the security entitlement establishes a security entitlement to the
financial asset in favour of an entitlement holder. PART Certificated
security 57. (1) Even
against a purchaser for value and without notice, the terms of a certificated
security include, (a) the terms stated on the security certificate;
and (b) terms made part of the security by reference
on the security certificate to another instrument, indenture or other document
or to a statute, regulation, rule or order, to the extent that those terms do
not conflict with the terms stated on the security certificate. (2) A reference described in paragraph (1) (b)
does not by itself constitute notice to a purchaser for value of a defect that
goes to the validity of the security, even where the security certificate
expressly states that a person accepting it admits notice. (3) The terms of an uncertificated security
include those stated in any instrument, indenture or other document or in a
statute, regulation, rule, order or the like under which the security is
issued. Enforcement of
security 58. (1) An
unauthorized signature placed on a security certificate before or in the course
of issue is ineffective except that the signature is effective in favour of a
purchaser for value of the certificated security if the purchaser is without
notice of the lack of authority and the signing has been done by, (a) an authenticating trustee, registrar, transfer
agent or other person entrusted by the issuer with the signing of the security
certificate or of any similar security certificate or with the immediate
preparation for signing of any of those security certificates; or (b) an employee of the issuer, or of persons referred to in paragraph (a), entrusted with responsible handling of the security certificate. (2) Except as provided in subsection (3), a security issued with a defect going to its validity is enforceable where it is held by a purchaser for value without notice of the defect. (3) Subsection (2) does not apply to a security issued by a government or agency of it unless (a) there has been substantial compliance with the legal requirements governing the issue; or (b) the issuer has received all or a substantial
part of the consideration for the issue as a whole or for the particular
security and the purpose of the issue is one for which the issuer has power to
borrow money or issue the security. Lack of
genuineness of certificated security 59. Except
as otherwise provided in subsection 58(1), lack of genuineness of a
certificated security is a complete defence, even against a purchaser for value
and without notice of the lack of genuineness. Other defences 60. All
other defences of the issuer of a security that are not referred to in sections
57 to 59, including non-delivery and conditional delivery of a security, are
ineffective against a purchaser for value who has taken the security without
notice of the particular defence. Right to cancel
contract 61. Nothing
in sections 57 to 60 affects the right of a party to a
"when, as and if issued" contract or a "when distributed"
contract to cancel the contract in the event of a material change in the
character of the security that is the subject of the contract or in the plan or
arrangement under which the security is to be issued or distributed. Staleness as
notice of defect or defence 62. (1) After
an act or event that creates a right to immediate performance of the principal
obligation represented by a certificated security or that sets a date on or
after which the security is to be presented or surrendered for redemption or
exchange, a purchaser shall be considered to have notice of a defect in the
security's issue or of a defence of the issuer, (a) where, (i) the act or event requires that, on
presentation or surrender of the security certificate, money be paid, a certificated
security be delivered or a transfer of an uncertificated security be
registered, (ii) the money or security is available on the date
set for payment or exchange, and (iii) the purchaser takes delivery of the security
more than one year after the date referred to in subparagraph (ii); or (b) where, (i) the act or event is not one to which paragraph
(a) applies, and (ii) the purchaser takes delivery of the
security more than two years after the date on which performance became due or
the date set for presentation or surrender. (2) Subsection (1) does not apply to a call that
has been revoked. Effect of
issuer's restriction on transfer 63. A
restriction on the transfer of a security imposed by the issuer, even where
otherwise lawful, is ineffective against a person without knowledge of the
restriction unless, (a) the security is a certificated security and
the restriction is noted conspicuously on the security certificate; or (b) the security is an uncertificated security and
the registered owner has received notice of the restriction by a person required
to give that notice in order to make the restriction effective. Completion of
security certificate 64. (1) Where
a security certificate contains the signatures necessary to the security's
issue or transfer but is incomplete in another respect, (a) a person may complete the security certificate
by filling in the blanks in accordance with the person's authority; and (b) even where a blank is incorrectly filled in,
the security certificate as completed is enforceable by a purchaser who took
the security certificate for value and without notice of the incorrectness. (2) A complete security certificate that has been
improperly altered, even if fraudulently, remains enforceable, but only
according to its original terms. Rights and duties
of issuer re: registered owner 65. (1) Before
due presentation for registration of transfer of a certificated security in
registered form or the receipt of an instruction requesting registration of
transfer of an uncertificated security, an issuer or indenture trustee may
treat the registered owner as the person exclusively entitled, (a) to vote; (b) to receive notices; (c) to receive an interest, dividend or other
payments; and (d) to otherwise exercise all the rights and
powers of an owner. (2) Nothing in this Act affects the liability of
the registered owner of a security for a call, assessment or other like act. Warranties by
person signing security certificate 66. (1) A
person signing a security certificate as authenticating trustee, registrar,
transfer agent or other like person warrants to a purchaser for value of the
certificated security, if the purchaser is without notice of a particular
defect in respect of that security, that, (a) the security certificate is genuine; (b) the person's own participation in the issue of
the security is within the person's capacity and within the scope of the authority
received by the person from the issuer; and (c) the person has reasonable grounds to believe
that the certificated security is in the form and within the amount the issuer
is authorized to issue. (2) Unless otherwise agreed, a person signing a
security certificate under subsection (1) does not assume responsibility for the
validity of the security in a respect other than that set out
in subsection (1). Issuer's lien 67. A
lien in favour of an issuer on a certificated security is valid against a
purchaser only where the right of the issuer to the lien is noted conspicuously
on the security certificate. Overissue 68. (1) Except
as otherwise provided in subsections (2) and (3), the provisions of this Act
that make a security enforceable against an issuer, notwithstanding a defence
or defect that compels a security's issue or reissue, do not apply to the
extent that the application of that provision would
result in an overissue. (2) Where an identical security not constituting
an overissue is reasonably available for purchase, a person entitled to the issue
of a security or a person entitled to enforce a security against an issuer notwithstanding
a defence or defect as provided under section 58, 59 or 60 or under a similar
law of another jurisdiction may compel the issuer to purchase the security and
deliver it, if certificated, or register its transfer, if uncertificated,
against surrender of a security certificate the person holds. (3) Where an identical security not constituting
an overissue is not reasonably available for purchase, a person entitled to
issue of a security or a person entitled to enforce a security against an
issuer notwithstanding a defence or defect as provided under section 58, 59 or
60 or under a similar law of another jurisdiction may recover from the issuer
the price that the last purchaser for value paid for the security with interest
from the date of the person's demand. (4) An overissue shall be considered not to have
occurred if appropriate action has cured the overissue. PART IV Delivery of
certificated security 69. (1) Delivery
of a certificated security to a purchaser occurs when, (a) the purchaser acquires possession of the
security certificate; (b) another person, other than a securities
intermediary, either, (i) acquires possession of the security
certificate on behalf of the purchaser, or (ii) having previously acquired possession of the
security certificate, acknowledges that the person holds the security
certificate for the purchaser; or (c) a securities intermediary acting on behalf of
the purchaser acquires possession of the security certificate, the security
certificate is in registered form and the security certificate is, (i) registered in the name of the purchaser, (ii) payable to the order of the purchaser, or (iii) specially endorsed to the purchaser by an
effective endorsement and has not been endorsed to the securities intermediary
or in blank. (2) Delivery of an uncertificated security to a
purchaser occurs when, (a) the issuer registers the purchaser as the
registered owner, on the original issue or the registration of transfer; or (b) another person, other than a securities
intermediary, either, (i) becomes the registered owner of the
uncertificated security on behalf of the purchaser, or (ii) having previously become the registered owner,
acknowledges that the person holds the uncertificated security for the
purchaser. Rights of
purchaser 70. (1) Except
as otherwise provided in subsections (2) and (3), a purchaser of a certificated
or uncertificated security acquires all rights in the security that the
transferor had or had power to transfer. (2) A purchaser of a limited interest in a
security acquires rights only to the extent of the interest purchased. (3) A purchaser of a certificated security who as
a previous holder had notice of an adverse claim does not improve that
purchaser's position by virtue of taking from a protected purchaser. Protected
purchaser 71. A
protected purchaser, in addition to acquiring the rights of a purchaser, also
acquires the purchaser's interest in the security free of an adverse claim. Form of endorsement 72. (1) An
endorsement may be in blank or special. (2) An endorsement in blank includes an
endorsement to bearer. (3) For an endorsement to be a special
endorsement, the endorsement must specify to whom the security is to be
transferred or who has power to transfer the security. (4) A holder may convert an endorsement in blank
to a special endorsement. Endorsement of
part of a security certificate 73. An
endorsement of a security certificate, if the endorsement purports to be in
respect of only some of the units represented by the certificate, is effective
to the extent of the endorsement if the units are intended by the issuer to be
separately transferable. When endorsement
is transfer of security 74. An
endorsement of a security certificate, whether special or in blank, does not
constitute a transfer of the security, (a) until the delivery of the security certificate
on which the endorsement appears; or (b) if the endorsement is on a separate document,
until the delivery of both the security certificate and the document on which
the endorsement appears. Endorsement missing 75. Where
a security certificate in registered form has been delivered to a purchaser
without a necessary endorsement, the purchaser may become a protected purchaser
only when the endorsement is supplied, but against the transferor, the transfer
is complete on delivery and the purchaser has a specifically enforceable right
to have any necessary endorsement supplied. Notice of adverse
claim on endorsement 76. A
purported endorsement of a security certificate in bearer form may constitute
notice of an adverse claim to the security certificate, but
the purported endorsement does not otherwise affect any right that the holder
has. Obligations of
endorser 77. Unless
otherwise agreed, a person making an endorsement makes only the warranties set
out in sections 34 and 36 and does not warrant that the security will be
honoured by the issuer. Completion of
instruction 78. Where
an instruction has been originated by the appropriate person but is incomplete
in another respect, a person may complete the instruction in accordance with
the person's authority and the issuer may rely on the instruction as completed,
even where it has been completed incorrectly. Obligations of
person originating an instruction 79. Unless
otherwise agreed, a person originating an instruction makes only the warranties
set out in sections 35 and 37 and does not warrant that the
security will be honoured by the issuer. Warranties by
guarantor of endorser's signature 80. A
person who guarantees a signature of an endorser of a security certificate
warrants that, at the time of signing, (a) the signature was genuine; (b) the signer was the appropriate person to
endorse or, if the signature is by an agent, the agent had actual authority to
act on behalf of the appropriate person; and (c) the signer had legal capacity to sign. Warranties by
guarantor of signature of originator of instruction 81. (1) A
person who guarantees a signature of the originator of an instruction warrants
that, at the time of signing, (a) the signature was genuine; (b) where a person specified in the instruction as
being the registered owner was, in fact, the registered owner, the signer was
the appropriate person to originate the instruction or, if the signature is by
an agent, the agent had actual authority to act on behalf of the appropriate
person; and (c) the signer had legal capacity to sign. (2) A person who guarantees a signature of the
originator of an instruction does not by that guarantee warrant that the person
who is specified in the instruction as the registered owner is in fact the registered
owner. Warranties by
special guarantor of signature of originator of instruction 82. A
person who specially guarantees the signature of an originator of an
instruction makes the warranties of a signature guarantor under section 81 and
also warrants that, at the time that the instruction is presented to the
issuer, (a) the person specified in the instruction as the
registered owner of the uncertificated security will be the registered owner;
and (b) the transfer of the uncertificated security
requested in the instruction will be registered by the issuer free from all
liens, security interests, restrictions and claims other than those specified
in the instruction. Warranty re: rightfulness
of transfer by guarantor 83. (1) A
guarantor under section 80 or 81 or a special guarantor under section 82 does
not otherwise warrant the rightfulness of the transfer. (2) A person who guarantees an endorsement of a
security certificate makes the warranties of a signature guarantor under
section 80 and also warrants the rightfulness of the transfer in all respects. (3) A person who guarantees an instruction that
requests the transfer of an uncertificated security makes the warranties of a
special signature guarantor under section 82 and also warrants the rightfulness
of the transfer in all respects. Guarantee may not
be condition to registration of transfer 84. An
issuer shall not require a special guarantee of signature, a
guarantee of endorsement or a guarantee of instruction as a condition to the
registration of transfer. Liability of
guarantor, endorser and originator 85. (1) The
warranties under sections 80 to 83 are made to a person taking or dealing with
the security in reliance on the guarantee and the guarantor is liable to the
person for a loss resulting from a breach of those warranties. (2) An endorser or an originator of an instruction
whose signature, endorsement or instruction has been guaranteed is liable to a
guarantor for a loss suffered by the guarantor resulting from any breach of the
warranties of the guarantor. Purchaser's right
to requisites for registration of transfer 86. (1) Unless
otherwise agreed, the transferor of a security shall, on demand, supply the
purchaser with proof of authority to transfer or with another requisite
necessary to obtain registration of the transfer of the security. (2) Notwithstanding subsection (1), where the
transfer is not for value, a transferor need not comply with a demand made
under subsection (1) unless the purchaser pays the necessary expenses. (3) Where the transferor fails within a reasonable
time to comply with the demand made under subsection (1), the purchaser may
reject or rescind the transfer. PART V Duty of issuer to
register transfer 87. (1) Where
a certificated security in registered form is presented to an issuer with a
request to register a transfer of the certificated security or an instruction
is presented to an issuer with a request to register a transfer of an
uncertificated security, the issuer shall register the transfer as requested
if, (a) under the terms of the security, the proposed
transferee is eligible to have the security registered in that person's name; (b) the endorsement or instruction is made by the
appropriate person or by an agent who has actual authority to act on behalf of
the appropriate person; (c) reasonable assurance is given that the
endorsement or instruction is genuine and authorized; (d) an applicable law relating to the collection
of taxes had been complied with; (e) the transfer does not violate a restriction on
transfer imposed by statute or by the issuer in accordance with section 63; (f) in the case of a demand made under section 89
that the issuer not register a transfer, (i) the demand has not become effective under
section 90, or (ii) the issuer has complied with section 90, but
legal process has not been obtained or an indemnity bond has not been provided
to the issuer in accordance with section 91; and (g) the transfer is rightful or is to a protected
purchaser. (2) Where, under subsection (1), an issuer is
under a duty to register a transfer of a security, the issuer is liable to a
person presenting a certificated security or an instruction for registration,
or to that person's principal, for a loss resulting from unreasonable delay in
registration or the failure or refusal to register the transfer. Assurances re
endorsement or instruction 88. (1) An
issuer may require the following assurance that each necessary endorsement or
each instruction is genuine and authorized: (a) in all cases, a guarantee of the signature of
the person making the endorsement or originating the instruction, including, in
the case of an instruction, reasonable assurance of identity; (b) where the endorsement is made or the
instruction is originated by an agent, appropriate assurance of actual
authority to act; (c) where the endorsement is made or the
instruction is originated by a fiduciary or successor referred to in subparagraph
(iv) or (v) of the definition of "appropriate person" in paragraph 2(1)(b),
appropriate evidence of appointment or incumbency; (d) where there is more than one fiduciary or
successor referred to in subparagraph (iv) or (v) of the definition of
"appropriate person" in paragraph 2(1)(b), reasonable assurance that
all who are required to sign have done so; and (e) where the endorsement is made or the instruction
is originated by a person not referred to in paragraph (b), (c) or (d), assurance
appropriate to the case corresponding as nearly as may be to the assurance
required by paragraph (b), (c) or (d). (2) An issuer may elect to require reasonable
assurance beyond that specified in this section. (3) In this section, (a) "appropriate evidence of appointment or
incumbency" means, (i) in the case of a fiduciary appointed or
qualified by a court, a document issued by or under the direction or
supervision of the court or an officer of the court and dated within 60 days
before the date of presentation for transfer, (ii) in another case, (A) a copy of a document showing the appointment, (B) a certificate certifying the appointment
issued by or on behalf of a person reasonably believed by the issuer to be a
responsible person, or (C) in the absence of a document or certificate
referred to in clause (A) or (B) other evidence that the issuer reasonably
considers appropriate; (b) "fiduciary" means a person acting in
a fiduciary capacity, and includes a personal representative acting for the
estate of a deceased person; and (c) "guarantee" means a guarantee signed
by or on behalf of a person reasonably believed by the issuer to be a
responsible person. (4) For the purposes of the definition of
"guarantee" in subsection (3), an issuer may adopt standards with
respect to responsibility so long as those standards are not
manifestly unreasonable. Demand that
issuer not register transfer 89. (1) A
person who is the appropriate person to make an endorsement or to originate an
instruction may demand that the issuer not register a transfer of a security by
communicating a notice to the issuer setting out, (a) the identity of the registered owner; (b) the issue of which the security is a part; and (c) an address of the person making the demand to
which communications may be sent. (2) A demand made under subsection (1) becomes
effective when the issuer has had a reasonable opportunity to act on the
demand, having regard to the time and manner of receipt of the demand by the
issuer. Duty of issuer re
demand to not register transfer 90. (1) Where,
after a demand made under section 89 becomes effective,
a certificated security in registered form is presented to an issuer
with a request to register a transfer or an instruction is presented to an
issuer with a request to register a transfer of an uncertificated security, the
issuer shall promptly give a notice as described in subsection (2) to the
following persons: (a) the person who initiated the demand, at the
address provided in the demand; and (b) the person who presented the security for the
registration of transfer or originated the instruction requesting the registration
of transfer. (2) A notice given by an issuer under subsection
(1) must state (a) that the certificated security has been
presented for the registration of transfer or the instruction for the
registration of transfer of the uncertificated security has been received; (b) that a demand that the issuer not register a
transfer had previously been received; and (c) that the issuer will withhold registration of
transfer for a period of time stated in the notice in
order to provide the person who initiated the demand an opportunity to obtain legal
process or to provide an indemnity bond referred to in section 91. (3) The period of time that may be provided for
under paragraph (2)(c) shall not exceed 30 days from the date the notice was
given and the issuer may specify a shorter period of time in the notice so long
as the shorter period of time being specified is not
manifestly unreasonable. Liability of
issuer re: demand to not register transfer 91. (1) An
issuer is not liable, to a person who initiated a demand under section 89 that
the issuer not register a transfer, for any loss that the person suffers as a
result of the registration of a transfer in accordance with an
effective endorsement or instruction if the person who initiated the demand
does not, within the time stated in the issuer's notice
given under section 90, either, (a) obtain an appropriate restraining order,
injunction or other process from a court of competent jurisdiction enjoining
the issuer from registering the transfer; or (b) provide the issuer with an indemnity bond
sufficient in the issuer's judgment to protect the issuer and a transfer agent,
registrar or other agent of the issuer involved from any loss that those
persons may suffer by refusing to register the transfer. (2) Nothing in subsection (1) or in section 89 or 90
relieves an issuer from liability for registering a transfer under an
endorsement or instruction that was not effective. Wrongful registration
of transfer 92. (1) Except
as otherwise provided in section 94, an issuer is liable for wrongful
registration of transfer where, (a) the issuer has registered a transfer of a
security to a person not entitled to the security; and (b) the transfer was registered by the issuer, (i) under an ineffective endorsement or
instruction, (ii) after a demand that the issuer not register a
transfer became effective under section 89 and the issuer did not comply with
section 90, (iii) after the issuer had been served with an
injunction, restraining order or other legal process referred to in section 91
enjoining the issuer from registering the transfer and the issuer had a
reasonable opportunity to obey or otherwise abide by the injunction,
restraining order or other legal process, or (iv) acting in collusion with the
wrongdoer. (2) An issuer that is liable for the wrongful
registration of transfer under subsection (1) shall, on demand, provide the
person entitled to the security with, (a) a like certificated or uncertificated
security; and (b) payments or distributions that the person did
not receive as a result of the wrongful registration. (3) Where the provision of a security under
subsection (2) would result in an overissue, the issuer's liability to provide
the person with a like security is governed by section 68. (4) Except as otherwise provided in subsection (1)
or in another applicable law of Canada or of a province or territory of Canada
relating to the collection of taxes, an issuer is not liable to an owner or
other person suffering loss as a result of the registration of transfer of a
security if the registration was made under an effective
endorsement or instruction. Replacement of
security lost certificate 93. (1) Where
an owner of a certificated security, whether in registered form or bearer form,
claims that the security certificate has been lost, destroyed or wrongfully
taken, the issuer shall issue a new security certificate if the owner, (a) makes a request for that issue before the
issuer has notice that the lost, destroyed or wrongfully taken security
certificate has been acquired by a protected purchaser; (b) provides the issuer with an indemnity bond
sufficient in the issuer's judgment to protect the issuer from any loss that
the issuer may suffer by issuing a new certificate; and (c) satisfies other reasonable requirements
imposed by the issuer. (2) Where, after the issue of a new security
certificate, a protected purchaser of the original security certificate
presents the original security certificate for the registration of transfer,
the issuer, (a) shall register the transfer unless the
registration would result in an overissue, in which case the issuer's liability
is governed by section 68; (b) may exercise the rights the issuer may have
under the indemnity bond referred to in paragraph(1)(b); and (c) may recover the new security certificate from
a person to whom it was issued or from a person, other than a protected
purchaser, taking under that person. Obligation to
notify issuer of lost, destroyed or wrongfully taken security certificate 94. An
owner of a security may not assert against the issuer a claim for wrongful
registration of transfer under section 92 or a claim to a new security
certificate under section 93 if, (a) a security certificate has been lost,
apparently destroyed or wrongfully taken and the owner fails to give a notice
to the issuer of that fact within a reasonable time after the
owner has notice of it; and (b) the issuer registers a transfer of the
security before receiving a notice of the loss, apparent
destruction or wrongful taking of the security certificate. Obligation of authenticating
trustee, transfer agent, etc. 95. A
person acting as authenticating trustee, registrar, transfer agent or other
agent for an issuer in the registration of a transfer of the issuer's
securities, in the issue of new security certificates or uncertificated
securities or in the cancellation of surrendered security certificates has the
same obligation to the holder or owner of a certificated or uncertificated
security with regard to the particular function performed as the issuer has in
regard to that function. PART VI Acquisition of security
entitlement 96. (1) Except
as otherwise provided in subsections (3) and (4), a person acquires a security
entitlement where a securities intermediary, (a) indicates by book entry that a financial asset
has been credited to the person's securities account; (b) receives a financial asset from the person or
acquires a financial asset for the person and, in either case, accepts it for
credit to the person's securities account; or (c) becomes obligated under another statute, law,
regulation or rule to credit a financial asset to the person's securities account. (2) Where a condition of subsection (1) has been
met, a person has a security entitlement even if the securities intermediary does
not itself hold the financial asset. (3) A person shall be treated as holding a
financial asset directly rather than as having a security entitlement with
respect to the financial asset where a securities intermediary holds the
financial asset for that person and the financial asset, (a) is registered in the name of, payable to the
order of or specially endorsed to that person; and (b) has not been endorsed to the securities
intermediary or in blank. (4) Issuance of a security is not establishment of
a security entitlement. Protection of entitlement
holders from adverse claim 97. A
legal proceeding based on an adverse claim to a financial asset, however
framed, shall not be brought against a person who acquires a security
entitlement under section 96 for value and without notice of the adverse claim. Property interest
of entitlement holders in financial asset 98. (1) To
the extent necessary for a securities intermediary to satisfy all security
entitlements with respect to a particular financial asset, all interests in
that financial asset held by the securities intermediary, (a) are held by the securities intermediary for
the entitlement holders; (b) are not the property of the securities
intermediary; and (c) are not subject to claims of creditors of the
securities intermediary, except as otherwise provided in section 106. (2) An entitlement holder's property interest with
respect to a particular financial asset under subsection (1) is a proportionate
property interest in all interests in that financial asset held by the
securities intermediary, without regard to, (a) the time that the entitlement holder acquired
the security entitlement; or (b) the time that the securities intermediary
acquired the interest in that financial asset. (3) An entitlement holder's property interest with
respect to a particular financial asset under subsection (1) may be enforced
against the securities intermediary only by the exercise of the entitlement
holder's rights under sections 100 to 103. (4) An entitlement holder's property interest with
respect to a particular financial asset under subsection (1) may be enforced
against a purchaser of the financial asset, or interest in it, only where, (a) bankruptcy or insolvency proceedings have been
initiated by or against the securities intermediary; (b) the securities intermediary does not have
sufficient interests in the financial asset to satisfy the security
entitlements of all of its entitlement holders to that financial asset; (c) the securities intermediary violated its
obligations under section 99 by transferring the financial asset, or interest
in it, to the purchaser; and (d) the purchaser is not protected under
subsection (7). (5) For the purposes of subsection (4), a trustee
or other liquidator acting on behalf of all entitlement holders having security
entitlements with respect to a particular financial asset may recover the financial
asset, or interest in it, from the purchaser. (6) Where the trustee or other liquidator elects
not to pursue the right provided under subsection (5), an entitlement holder
whose security entitlement remains unsatisfied has the right to recover the
entitlement holder's interest in the financial asset from the purchaser. (7) A legal proceeding based on the entitlement
holder's property interest with respect to a particular financial asset under
subsection (1), however framed, may not be brought against a purchaser of a financial
asset, or interest in it, who, (a) gives value; (b) obtains control or possession; and (c) does not act in collusion with the securities
intermediary in violating the securities intermediary's obligations under section
99. Duty of
securities intermediary re: financial asset 99. (1) A
securities intermediary shall promptly obtain and then maintain a financial
asset in a quantity corresponding to the aggregate of all security entitlements
that the securities intermediary has established in favour of its entitlement
holders with respect to that financial asset. (2) The securities intermediary may maintain the
financial assets referred to in subsection (1) directly or through one or more
other securities intermediaries. (3) Except to the extent otherwise agreed to by
its entitlement holder, a securities intermediary shall not grant a security
interest in a financial asset it is obligated to maintain under subsection (1). (4) A securities intermediary satisfies the duty
imposed under subsection (1) where, (a) the securities intermediary acts with respect
to the duty as agreed to by the entitlement holder and the securities intermediary;
or (b) in the absence of an agreement referred to in paragraph
(a), the securities intermediary exercises due care in accordance with
reasonable commercial standards to obtain and maintain the financial asset. (5) This section does not apply to a clearing
agency that is itself the obligor of an option or similar obligation to which
its entitlement holders have security entitlements. Duty of
securities intermediary re: payments and distributions 100. (1) A
securities intermediary shall take action to obtain a payment or distribution
made by the issuer of a financial asset. (2) A securities intermediary is obligated to its
entitlement holder for a payment or distribution made by the issuer of a
financial asset if the payment or distribution is received by the securities
intermediary. (3) A securities intermediary satisfies the duty
imposed under subsection (1) where, (a) the securities intermediary acts with respect
to the duty as agreed to by the entitlement holder and the securities intermediary;
or (b) in the absence of an agreement referred to in paragraph
(a), the securities intermediary exercises due care in accordance with
reasonable commercial standards to attempt to obtain the payment or
distribution. Duty of securities
intermediary to exercise rights 101. (1) A
securities intermediary shall exercise rights with respect to a financial asset
where directed to do so by an entitlement holder. (2) A securities intermediary satisfies the duty
imposed under subsection (1) where, (a) the securities intermediary acts with respect
to the duty as agreed to by the entitlement holder and the securities intermediary;
or (b) in the absence of an agreement referred to in paragraph
(a), the securities intermediary either, (i) places the entitlement holder in a position to
exercise the rights directly, or (ii) exercises due care in accordance with
reasonable commercial standards to follow the direction of the entitlement
holder. Duty of
securities intermediary to comply with entitlement order 102. (1) A
securities intermediary shall comply with an entitlement order where, (a) the entitlement order is originated by the
appropriate person; (b) the securities intermediary has had a
reasonable opportunity to assure itself that the entitlement order is genuine
and authorized; and (c) the securities intermediary has had a
reasonable opportunity to comply with the entitlement order. (2) Where a securities intermediary transfers a
financial asset under an ineffective entitlement order, the securities
intermediary shall, (a) re-establish a security entitlement in favour
of the person entitled to it; and (b) pay or credit payments or distributions that
the person did not receive as a result of the wrongful transfer. (3) Where a securities intermediary does not
re-establish a security entitlement in accordance with subsection (2), the
securities intermediary is liable to the entitlement holder for damages. (4) A securities intermediary satisfies the duty
imposed under subsection (1) where, (a) the securities intermediary acts with respect
to the duty as agreed to by the entitlement holder and the securities intermediary;
or (b) in the absence of an agreement referred to in
paragraph (a), the securities intermediary exercises due care in accordance
with reasonable commercial standards to comply with the entitlement order. Duty of
securities intermediary re: entitlement holder's direction 103. (1) A
securities intermediary shall act at the direction of an entitlement holder, (a) to change a security entitlement into another
available form of holding for which the entitlement holder is eligible; or (b) to cause the financial asset to be transferred
to a securities account of the entitlement holder with another securities intermediary. (2) A securities intermediary satisfies the duty
imposed under subsection (1) if, (a) the securities intermediary acts with respect
to the duty as agreed to by the entitlement holder and the securities intermediary;
or (b) in the absence of an agreement referred to in paragraph
(a), the securities intermediary exercises due care in accordance with
reasonable commercial standards to follow the direction of the entitlement
holder. Compliance with
other statute 104. (1) If
the substance of a duty imposed on a securities intermediary under section 99,
100, 101, 102 or 103 is the subject of another statute, regulation or rule,
compliance with that other statute, regulation or rule satisfies the duty. (2) The obligation of a securities intermediary to
perform the duties imposed under sections 99 to 103 is subject to, (a) the rights of the securities intermediary
arising out of a security interest, whether that security interest arises under
a security agreement with the entitlement holder or otherwise; and (b) the rights of the securities intermediary
under another statute, law, regulation, rule or agreement to withhold performance
of its duties as a result of unfulfilled obligations of the entitlement holder
to the securities intermediary. (3) Nothing in sections 99 to 103 requires a
securities intermediary to take an action that is prohibited by another
statute, regulation or rule. (4) To the extent that specific standards for the
performance of duties of a securities intermediary or the exercise of the rights
of an entitlement holder are not specified by another statute, regulation or
rule or by agreement between the securities intermediary and the entitlement
holder, the securities intermediary shall perform its duties and the
entitlement holder shall exercise the entitlement holder's rights in a
commercially reasonable manner. Rights of
purchaser re: adverse claim 105. (1) In
a case not covered by the priority rules under the Personal Property
Security Act or the rules set out in subsection (3), a legal proceeding
based on an adverse claim to a financial asset or a security entitlement,
however framed, may not be brought against a person who purchases a security
entitlement, or interest in it, from an entitlement holder if that purchaser, (a) gives value; (b) does not have notice of the adverse claim; and (c) obtains control. (2) If a legal proceeding based on an adverse
claim could not have been brought against an entitlement holder under section 97,
a legal proceeding based on an adverse claim may not be brought against a
person who purchases a security entitlement, or interest in it, from the
entitlement holder. (3) In a case not covered by the priority rules
under the Personal Property Security Act, the following rules apply: (a) a purchaser for value of a security
entitlement, or interest in it, who obtains control has priority over a
purchaser of a security entitlement, or interest in it, who does not obtain control;
and (b) except as otherwise provided in subsection
(4), purchasers who have control rank according to priority in time of (i) the purchaser's becoming the person for whom
the securities account in which the securities entitlement is carried is
maintained, if the purchaser obtained control under paragraph 26(1)(a), (ii) the securities intermediary's agreement to
comply with the purchaser's entitlement orders with respect to security
entitlements carried or to be carried in the securities account in which the
security entitlement is carried, if the purchaser obtained control under paragraph
26(1)(b), or (iii) if the purchaser obtained control through
another person under paragraph 26(1)(c), the time on which priority would be
based under this subsection if the other person were the purchaser. (4) A securities intermediary as purchaser has
priority over a conflicting purchaser who has control unless otherwise agreed
by the securities intermediary. Priority of
entitlement holders to financial asset 106. (1) Except
as otherwise provided in subsections (2) and (3), where a securities intermediary
does not have sufficient interests in a particular financial asset to satisfy
both the securities intermediary's obligations to entitlement holders who have
security entitlements to that financial asset and the securities intermediary's
obligation to a creditor of the securities intermediary who has a security
interest in that financial asset, the claims of entitlement holders, other than
the creditor, have priority over the claim of the creditor. (2) A claim of a creditor of a securities intermediary
who has a security interest in a financial asset held by a securities
intermediary has priority over claims of the securities intermediary's
entitlement holders who have security entitlements with respect to that
financial asset if the creditor has control over the financial asset. (3) If a clearing agency does not have sufficient
financial assets to satisfy both the clearing agency's obligations to
entitlement holders who have security entitlements with respect to a financial
asset and the clearing agency's obligation to a creditor of the clearing agency
who has a security interest in that financial asset, the claim of the creditor
has priority over the claims of entitlement holders. PART RSNL1990 cC-36 Amdt.
107. (1) Section 2 of the Corporations Act is amended by adding immediately after paragraph (w) the following: (w.1) "registered form" means registered
form as defined in the Securities
Transfer Act; (2) Sections 85 and 86 of the Act are repealed and the following substituted: Transfers of securities 85. Except
as otherwise provided in this Act and the Judgment
Enforcement Act, the transfer or transmission of a security shall be governed
by the Securities Transfer Act. (3) Section 89 of the Act is repealed. (4) Subsection 90(1) of the Act is amended by adding immediately after the word "series" the words "or shares convertible into that class or series". (5) Subsection 102(1) of the Act is amended by adding immediately after the number and comma "223," the words "and the Judgment Enforcement Act". (6) Subsection 102(2) of the Act is amended by deleting the subsection reference "136(4)" and substituting the subsection reference and words "88(3) of the Securities Transfer Act". (7) Paragraph 106(1)(b) of the Act is repealed and the following substituted: (b) the following documents, namely: (i) an affidavit or declaration of transmission made by a person referred to in paragraph 102(2)(a) stating the particulars of the transmission, and (ii) the security certificate that was owned by the deceased holder (A) in the case of a transfer to a person referred to in paragraph 102(2)(a), with or without the endorsement of the person, and (B) in the case of a transfer to another person, endorsed in accordance with section 30 of the Securities Transfer Act, and accompanied by an assurance the corporation may require under section 88 of the Securities Transfer Act. (8) Sections 107 to 144 of the Act are repealed and the following substituted: Overissue 107. (1) Where there has been an overissue within the meaning of the Securities Transfer Act and the corporation subsequently amends its articles or trust indenture to which it is a party, to increase its authorized securities to a number equal to or in excess of the number of securities previously authorized plus the amount of the overissued securities, the overissued securities are valid from the date of their issue. (2) Subsection (1) does not apply if the issuer
has purchased and delivered a security in accordance with subsection 68(2) or
(3) of the Securities Transfer Act. (3) A purchase or payment in accordance with subsection 68(2) or (3) of the Securities Transfer Act is not a payment to which section 62, 63, 64, 68, 69, 70, 71 or 72 applies. (9) Section 245 of the Act is repealed and the following substituted: Unanimous shareholder agreement 245. (1) A unanimous shareholder agreement may provide for (a) the regulation of the rights and liabilities of the shareholders, as shareholders, among themselves or between themselves and another party to the agreement; (b) the regulation of the election of directors; (c) the management of the business and affairs of the corporation, including the restriction or abrogation, in whole or in part, of the powers of the directors; and (d) another matter that may be contained in a unanimous shareholder agreement under another provision of this Act. (2) Where a person who is the beneficial owner of
all the issued shares of a corporation makes a written declaration that restricts
in whole or in part the powers of the directors to manage the business and
affairs of the corporation, the declaration constitutes a unanimous shareholder
agreement. (3) Where a unanimous shareholder agreement is in effect at the time a share is issued by a corporation to a person other than an existing shareholder, (a) that person shall be considered to be a party to the agreement whether or not the person had actual knowledge of it when the share certificate was issued; (b) the issue of the share certificate does not operate to terminate the agreement; and (c) where that person is a purchaser in good faith without actual knowledge of the unanimous shareholder agreement, that person may rescind the contract under which the shares were acquired by giving a notice to that effect to the corporation within a reasonable time after the person receives actual knowledge of the unanimous shareholder agreement. (4) Where a unanimous shareholder agreement is in effect when a person who is not a party to the agreement acquires a share of the corporation, other than under subsection (3), (a) the person who acquired the share shall be considered to be a party to the agreement whether or not the person had actual knowledge of it when the person acquired the share; and (b) neither the acquisition of the share nor the registration of that person as a shareholder operates to terminate the agreement. (5) Where (a) a person referred to in subsection (4) is a protected purchaser as defined in the Securities Transfer Act and did not have actual knowledge of the unanimous shareholder agreement, and (b) the person's transferor's share certificate did not contain a reference to the unanimous shareholder agreement, that person may, within 30 days after the person acquires actual knowledge of the existence of the agreement, send to the corporation a notice of objection to the agreement. (6) Where a person sends a notice of objection under subsection (5), (a) the person is entitled to be paid by the corporation the fair value of the shares held by the person, determined as of the close of business on the day on which the person became a shareholder; and (b) subsection 305(5) and sections 308 to 313 apply, with the necessary changes, as if the notice of objection under subsection (5) were a written objection sent to the corporation under subsection 304(6). (7) A transferee who is entitled to be paid the fair value of the transferee's shares under subsection (6) also has the right to recover from the transferor by action, the amount by which the value of the consideration paid for the transferee's shares exceeds the fair value of those shares. (8) A shareholder who is a party or is considered to be a party to a unanimous shareholder agreement has all the rights, powers and duties and incurs all the liabilities of a director of the corporation to which the agreement relates to the extent that the agreement restricts the powers of the directors to manage the business and affairs of the corporation and the directors are thereby relieved of their duties and liabilities. (9) A unanimous shareholder agreement shall not be amended without the written consent of all those who are shareholders at the effective date of the amendment. (10) A unanimous shareholder agreement may exclude the application of the agreement to all but not part of this section. (11) Where a unanimous shareholder agreement is
executed or terminated, written notice of that fact together with the date of
the execution or termination of it shall be filed with the registrar within 15
days. (10) Section 319 of the Act is repealed and the following substituted: Takeover bid notice 319. In the case of a take-over bid, concurrently with sending the offeror's notice under section 318, the offeror shall send or deliver to the offeree corporation a copy of the offeror's notice, which constitutes a demand under subsection 89(1) of the Securities Transfer Act, that the offeree corporation not register a transfer with respect to each share held by a dissenting offeree. SNL1995 cC-37.1 Amdt. 108. The Credit Union Act is amended by adding immediately after section 58 the following: Application of Securities Transfer Act 58.1 The Securities Transfer Act applies,
with the necessary changes, with respect to the transfer of securities, other
than membership shares. SNL1996 cJ-1.1 Amdt. 109. (1) Paragraph 2(1)(g) of the Judgment Enforcement Act is repealed. (2) Paragraph 2(1)(ee) of the Act is repealed. (3) Subsection 2(1) of the Act is amended by adding immediately after paragraph (ww) the following: (ww.1) "security" means a security as defined in the Securities Transfer Act; (4) Paragraph 2(1)(xx) of the Act is repealed and the following substituted: (xx) "security certificate" means a
security certificate as defined in the Securities
Transfer Act; (5) Subsection 54(4) of the Act is repealed. (6) Section 55 of the Act is repealed and the following substituted: Protected purchaser of security 55. A person who is a protected purchaser of a security within the meaning of the Securities Transfer Act has priority over a notice of judgment that binds the security where that person did not have knowledge of the notice of judgment at the time the person obtained control of the security. (7) Subsection 74(6) of the Act is repealed and the following substituted: (6) This section does not apply to property held by a securities intermediary, as defined in the Securities Transfer Act, if the debtor has a security entitlement, as defined in the Securities Transfer Act, against the securities intermediary with respect to that property. (8) Subparagraph 81(i)(iv) of the Act is amended by deleting the word "market". (9) Section 84 of the Act is amended by deleting the word "market" wherever it occurs. (10) Sections 89 to 99 of the Act are repealed and the following substituted: Definitions 89. (1) In sections 90 to 98, "private company" means a corporation other than a distributing corporation within the meaning of the Corporations Act. (2) In sections 90 to 98, "appropriate person', "endorsement", "entitlement order", "instruction", "issuer", "securities intermediary" and "security entitlement" have the same meanings as in the Securities Transfer Act. Effecting seizure 90. (1) The sheriff may seize the interest of a debtor in a security or a security entitlement in accordance with sections 48 to 52 of the Securities Transfer Act. (2) Notwithstanding section 49 of the Securities Transfer Act the sheriff may seize the interest of a debtor in a security issued by a private company by serving a notice of seizure on the issuer at the issuer's chief executive office. (3) Where a seizure under this section is by notice to an issuer or a securities intermediary, the seizure becomes effective when the issuer or the securities intermediary has had a reasonable opportunity to act on the seizure, having regard to the time and manner of the receipt of the notice. (4) Where a debtor's interest in a security or a security entitlement is seized in accordance with this section and that interest is subject to a prior security interest, (a) the seizure does not affect the prior security interest; and (b) notwithstanding sections 91 to 97, the ability of the sheriff to deal with the security or security entitlement is limited to those rights and powers that the debtor would have had but for the seizure. Powers of sheriff on seizure 91. (1) Where a debtor's interest in a security or a security entitlement is seized in accordance with section 90, the sheriff is the appropriate person for the purposes of dealing with or disposing of the seized property and, for the duration of the seizure, the debtor is not the appropriate person for the purposes of dealing with or disposing of the seized property. (2) Upon seizure of a debtor's interest in a security entitlement under section 90, the sheriff may (a) do an act or thing that would otherwise have to be done by the debtor; or (b) execute or endorse a document that would otherwise have to be executed or endorsed by the debtor. (3) An endorsement, instruction or entitlement order made by the sheriff as the appropriate person under subsection (1) or by a receiver must be accompanied by a certificate of the sheriff or the receiver stating that the endorsement, instruction or entitlement order has been made by the sheriff or the receiver under this Act. Duties of private company 92. A private company that has been served with a notice of seizure with respect to a security of which the debtor is the registered holder shall (a) send to the sheriff documents and allow the sheriff to inspect records that the debtor, as the registered holder of the security, is entitled to receive or inspect; (b) pay to the sheriff a dividend or other payment in respect of the security that would otherwise be payable by the private company to the debtor; and (c) comply with a direction given by the sheriff with respect to the seized security where the private company would be required to comply with the direction if that direction was given by the debtor while the security was not under seizure. Sheriff may deal with seized property 93. Where the sheriff has seized a debtor's interest in a security entitlement by serving a notice of seizure on a securities intermediary whose securities intermediary's jurisdiction within the meaning of the Securities Transfer Act is the province, the following applies: (a) the sheriff is entitled to receive information or documents relating to the security entitlement that the securities intermediary is required to give to the debtor; (b) the securities intermediary shall pay to the sheriff a distribution, dividend or other payment in respect of the security entitlement that would otherwise be payable by the securities intermediary to the debtor; and (c) the sheriff is entitled to give a direction to the securities intermediary with respect to the seized security entitlement that the debtor would otherwise be entitled to give. Liability of private company or securities intermediary 94. A private company or securities intermediary who fails to comply with a duty under section 92 or 93 is liable for a pecuniary loss suffered by the creditors as a result of the failure. Liquidation of security 95. (1) The sheriff may liquidate a seized security by a means that the nature of the security permits. (2) A restriction on the transfer of a security issued by a private company shall not apply to the transfer of the security by the sheriff under this Act. (3) A restriction on the transfer of a security issued by a co-operative, other than a restriction under paragraph 99(1)(g) of the Co-operatives Act applies to the transfer of that security by the sheriff under this Act. Liquidation procedure re private company shares 96. (1) This section applies only to shares that are issued by a private company. (2) Where a private company has been served with a notice of seizure with respect to certain shares, the private company shall inform a person of that service where he or she requests information from the private company regarding the debtor's ownership of or ability to transfer those shares. (3) On being instructed to sell seized shares, the sheriff shall serve a notice of the method of sale in the required form on (a) the private company; (b) a person who, to the knowledge of the sheriff, would have a preferential right to acquire the shares on a voluntary sale of the shares by the debtor; and (c) every registered shareholder of the private company, if there are not more than 15 registered shareholders. (4) The notice of the method of sale under subsection (3) shall set out the procedure the sheriff intends to follow in selling the shares. (5) After complying with subsection (3), the sheriff shall not take further steps to sell the shares until 15 days have elapsed from the day that the notice was served under that subsection. (6) The sheriff shall, in selling shares, use a method of sale that (a) follows as closely as possible a procedure that the debtor would be required to follow in order to sell the shares; and (b) provides to the private company and the existing shareholders of the private company a reasonable opportunity to buy or redeem the shares before they are offered for sale to another person. (7) The sheriff is not required to comply with subsection (6) to the extent that the method of sale referred to in that subsection would prevent the shares from being sold at all or prevent them from being sold within a reasonable time or at a reasonable price. (8) A person who would otherwise be entitled to acquire or redeem the shares for a predetermined price or at price fixed by reference to a predetermined formula is entitled to buy or redeem the shares from the sheriff for that price unless the court determines that a sale at that price would unfairly prejudice the debtor or the creditor. (9) Before the shares are sold by the sheriff, a person referred to in subsection (3) may pay to the sheriff an amount sufficient to discharge all related notices of judgment and outstanding sheriff's fees or charges and the taxable fees and disbursements of the instructing creditor, and on paying that amount to the sheriff that person has a lien on the shares for the amount paid to the sheriff, plus interest. (10) Interest under subsection (9) shall be calculated in the same manner as for interest under the Judgment Interest Act. (11) The sheriff or an interested person may apply to the court for an order that it considers appropriate with respect to the method of liquidating seized shares and, notwithstanding subsection (6), including an order (a) respecting the method of sale, a term of a proposed sale or a proposed method of realising the value of the shares other than through sale; (b) suspending sale proceedings; or (c) directing that the private company that issued the shares be liquidated and its proceeds disposed of according to law. (12) Where the sheriff has sent a notice of an intended sale to the persons mentioned in subsection (3) and an application is not made under subsection (11) before the shares are sold, the method of sale set out in the notice of intended sale shall be considered to have met the requirements of subsection (6). Missing security certificate 97. The court on application by the sheriff may require the private company to acknowledge a transfer or other disposition of the security without presentation of the security certificate where (a) liquidation of the debtor's interest in a security issued by the private company would ordinarily require presentation of a security certificate to the private company or its transfer agent; (b) the security certificate appears to have been lost, destroyed or wrongfully taken; and (c) the instructing creditor has made satisfactory provision for identification of the private company against a liability that the private company may incur in respect of the security certificate. Effect of transfer 98. (1) In addition to an agreement to which a transferee is considered under section 245 of the Corporations Act to be a party, a transferee of a security from the sheriff shall be considered to be a party to a shareholders' agreement with respect to (a) the management of the affairs of the private company; or (b) the exercise of voting rights attached to the seized shares, to which the debtor was a party at the time of the seizure and of which the transferee had knowledge at the time of the transfer if the shareholders' agreement contains provisions intended to have the effect of precluding the debtor from transferring the security except to a person who agrees to be a party to that shareholders' agreement. (2) Notwithstanding subsection (1) and section 245
of the Corporations Act, the court
may grant a declaration that the transferee is not bound by a term or provision
of an agreement, bylaw or article that discriminates against the transferee
because of the transferee acquiring the securities through notice of judgment
proceedings. (11) Subparagraph 111(b)(ii) of the Act is amended by deleting the word "market". SNL1998 cP-7.1 Amdt. 110. (1) Section 2 of the Personal Property Security Act is amended by renumbering it as subsection 2(1). (2) Paragraph 2(b) of the Act is repealed and the following substituted: (b) "account" means a monetary obligation not evidenced by chattel paper, a security or an instrument, whether or not the obligation has been earned by performance, but does not include investment property; (3) Section 2 of the Act is amended by adding immediately after paragraph (c) the following: (c.1) "broker" means a broker as defined in the Securities Transfer Act; (4) Section 2 of the Act is amended by adding immediately after paragraph (e) the following: (e.1) "certificated security" means a certificated security as defined in the Securities Transfer Act; (5) Section 2 of the Act is amended by adding immediately after paragraph (f) the following: (f.1) "clearing house" means an organization through which trades in options or standardized futures are cleared and settled; (f.2) "clearing house option" means an option, other than an option on futures, issued by a clearing house to its participants; (6) Section 2 of the Act is amended by adding immediately after paragraph (o) the following: (o.1) "entitlement holder" means an entitlement holder as defined in the Securities Transfer Act; (o.2) "entitlement order" means an entitlement order as defined in the Securities Transfer Act; (7) Section 2 of the Act is amended by adding immediately after paragraph (p) the following: (p.1) "financial asset" means a financial asset as defined in the Securities Transfer Act; (8) Section 2 of the Act is amended by adding immediately after paragraph (t) the following: (t.1) "futures account" means an account maintained by a futures intermediary in which a futures contract is carried for a futures customer; (t.2) "futures contract" means a standardized future or an option on futures, other than a clearing house option, that is (i) traded on or subject to the rules of a futures exchange recognized or otherwise regulated by the superintendent as defined in the Securities Act or by a securities regulatory authority of another province or territory of Canada, or (ii) traded on a foreign futures exchange and
carried on the books of a futures intermediary for a futures customer; (t.3) "futures customer" means a person for which a futures intermediary carries a futures contract on its books; (t.4) "futures exchange" means an association or organization operated to provide the facilities necessary for the trading of standardized futures or options on futures; (t.5) "futures intermediary" means a person that, (i) is registered as a dealer permitted to trade in futures contracts, whether as principal or agent, under the securities laws or commodity futures laws of a province or territory of Canada, or (ii) is a clearing house recognized or otherwise regulated by the superintendent as defined in the Securities Act or by a securities regulatory authority of another province or territory of Canada; (9) Paragraph 2(u) of the Act is amended by deleting the words "a security" and substituting the words "investment property". (10) Paragraphs 2(v) and (w) of the Act are amended by deleting the words "a security" wherever they occur and substituting the words "investment property". (11) Section 2 of the Act is amended by adding immediately after paragraph (x) the following: (x.1) "investment property" means a security, whether certificated or uncertificated, security entitlement, securities account, futures contract or futures account; (12) Section 2 of the Act is amended by adding immediately after paragraph (bb) the following: (bb.1) "option" means an agreement that provides the holder with the right, but not the obligation, to do one or more of the following on terms or at a price established by or determinable by reference to the agreement at or by a time established by the agreement: (i) receive an amount of cash determinable by reference to a specified quantity of the underlying interest of the option, (ii) purchase a specified quantity of the underlying interest of the option, and (iii) sell a specified quantity of the underlying interest of the option; (bb.2) "option on futures" means an option the underlying interest of which is a standardized future; (13) Paragraph 2(dd) of the Act is amended by
deleting the words "a security" and substituting the words "investment
property". (14) Paragraph 2(ff) of the Act is repealed and the following substituted: (ff) "proceeds" means, (i) identifiable or traceable personal property
that is derived directly or indirectly from a dealing with collateral or proceeds
of collateral and in which the debtor acquires an interest, (ii) an insurance or other payment that represents indemnity or compensation for loss of or damage to collateral or proceeds of collateral, or a right to that payment, (iii) a payment made in total or partial discharge or redemption of chattel paper, an instrument, an intangible or investment property, and (iv) rights arising out of, or property collected on, or distributed on account of, collateral that is investment property; (15) Paragraph 2(hh) of the Act is amended by adding immediately after the word "collateral" wherever it occurs a comma and the phrase and comma "other than investment property,". (16) Section 2 of the Act is amended by adding immediately after paragraph (mm) the following: (mm.1) "securities account" means a
securities account as defined in the Securities Transfer Act; (mm.2) "securities intermediary" means a securities intermediary as defined in the Securities Transfer Act; (17) Paragraph 2(nn) of the Act is repealed and the following substituted: (nn) "security" means a security as
defined in the Securities Transfer Act; (18) Section 2 of the Act is amended by adding immediately after paragraph (oo) the following: (oo.1) "security certificate" means a
security certificate as defined in the Securities Transfer Act; (oo.2) "security entitlement" means a security entitlement as defined in the Securities Transfer Act; (19) Paragraph 2(qq) of the Act is repealed. (20) Section 2 of the Act is amended by adding immediately after paragraph (rr) the following: (rr.1) "standardized future" means an
agreement traded on a futures exchange under standardized conditions contained
in the by-laws, rules or regulations of the futures exchange, and cleared and
settled by a clearing house, to do one or more of the following at a price
established by or determinable by reference to the agreement and at or by a
time established by or determinable by reference to the agreement: (i) make or take delivery of the underlying interest of the agreement, or (ii) settle the obligation in cash instead of
delivery of the underlying interest; (21) Section 2 of the Act is amended by adding immediately after paragraph (ss) the following: (ss.1) "uncertificated security" means an
uncertificated security as defined in the Securities Transfer Act; and (22) Section 2 of the Act is amended by adding immediately after subsection (1) the following: (2) For the purposes of this Act, (a) a secured party has control of a certificated
security if the secured party has control in the manner provided under section
24 of the Securities Transfer Act; (b) a secured party has control of an
uncertificated security if the secured party has control in the manner provided
under section 25 of the Securities Transfer Act; (c) a secured party has control of a security
entitlement if the secured party has control in the manner provided under section
26 or 27 of the Securities Transfer Act; (d) a secured party has control of a futures
contract if, (i) the secured party is the futures intermediary
with which the futures contract is carried, or (ii) the futures customer, the secured party and the futures intermediary have agreed that the futures intermediary will apply a value distributed on account of the futures contract as directed by the secured party without further consent by the futures customer; and (e) a secured party having control of all security
entitlements or futures contracts carried in a securities account or futures account
has control over the securities account or futures account. (23) Subsection 3(4) of the Act is repealed. (24) Paragraph 5(b) of the Act is amended by deleting the words "contract of annuity or". (25) Section 5 of the Act is amended by adding immediately after paragraph (b) the following: (b.1) a transfer of an interest in a claim in or
under a contract of annuity other than a contract of annuity held by a
securities intermediary for another person in a securities account; (26) Paragraph 5(f) of the Act is amended by deleting the words "a security" and substituting the words "investment property". (27) Paragraph 6(1)(b) of the Act is amended by deleting the words and comma "a security,". (28) Subsection 6(2) of the Act is repealed. (29) Subsection 8(1) of the Act is amended by adding immediately after the word "section" the words and number "and section 8.1". (30) Paragraphs 8(2)(c) and (4)(b) of the Act are amended by deleting the words and comma "a security,". (31) The Act is amended by adding immediately after section 8 the following: Conflict of laws, validity of security interest in investment property 8.1 (1) The
validity of a security interest in investment property is governed by the law
at the time the security interest attaches (a) of the jurisdiction where the certificate is
located if the collateral is a certificated security; (b) of the issuer's jurisdiction if the collateral
is an uncertificated security; (c) of the securities intermediary's jurisdiction
if the collateral is a security entitlement or a securities account; and (d) of the futures intermediary's jurisdiction if
the collateral is a futures contract or a futures account. (2) Except as otherwise provided in subsection (5),
perfection, the effect of perfection or nonperfection and the priority of a
security interest in investment property is governed by the law of the (a) jurisdiction in which the certificate is
located if the collateral is a certificated security; (b) issuer's jurisdiction if the collateral is an
uncertificated security; (c) securities intermediary's jurisdiction if the
collateral is a security entitlement or a securities account; or (d) futures intermediary's jurisdiction if the
collateral is a futures contract or a futures account. (3) For the purposes of this section, (a) the location of a debtor is determined by subsection
8(1); (b) the issuer's jurisdiction is determined under subsection
45(5) of the Securities Transfer Act; and (c) the securities intermediary's jurisdiction is
determined under subsection 46(2) of the Securities Transfer Act. (4) For the purposes of this section, the
following rules determine a futures intermediary's jurisdiction: (a) if an agreement between the futures
intermediary and futures customer governing the futures account expressly provides
that a particular jurisdiction is the futures intermediary's jurisdiction the
jurisdiction expressly provided for in the agreement is the
futures intermediary's jurisdiction; (b) if paragraph (a) does not apply and an
agreement between the futures intermediary and futures customer governing the
futures account expressly provides that the agreement is governed by the law of
a particular jurisdiction, that jurisdiction is the futures intermediary's
jurisdiction; (c) if neither paragraph (a) nor (b) applies and
an agreement between the futures intermediary and futures customer governing
the futures account expressly provides that the futures account is maintained
at an office in a particular jurisdiction, that jurisdiction is the futures
intermediary's jurisdiction; (d) if none of the preceding paragraphs applies,
the futures intermediary's jurisdiction is the jurisdiction in which the office
identified in an account statement as the office serving the futures customer's
account is located; and (e) if none of the preceding paragraphs applies,
the futures intermediary's jurisdiction is the jurisdiction in which the chief
executive office of the futures intermediary is located. (5) The law of the jurisdiction in which the
debtor is located governs, (a) perfection of a security interest in
investment property by registration; (b) perfection of a security interest in
investment property granted by a broker or securities intermediary where the secured
party relies on attachment of the security interest as perfection; and (c) perfection of a security interest in a futures
contract or futures account granted by a futures intermediary where the secured
party relies on attachment of the security interest as perfection. (6) A security interest perfected under the law of
the jurisdiction designated in subsection (5) remains perfected until the
earliest of, (a) 60 days after the day the debtor relocates to
another jurisdiction; (b) 15 days after the day the secured party knows
the debtor has relocated to another jurisdiction; and (c) the day that perfection ceases under the
previously applicable law. (7) A security interest in investment property
which is perfected under the law of the issuer's jurisdiction, the securities
intermediary's jurisdiction or the futures intermediary's jurisdiction, as
applicable, remains perfected until the earliest of, (a) 60 days after a change of the applicable
jurisdiction to another jurisdiction; (b) 15 days after the day the secured party knows
of the change of the applicable jurisdiction to another jurisdiction; and (c) the day that perfection ceases under the previously applicable law. (8) Notwithstanding section 8, this section applies to security interests in investment property. Law of jurisdiction 8.2 For
the purposes of section 8.1, a reference to the law of a jurisdiction means the
internal law of that jurisdiction excluding the conflict of law rules. (32) Subsections 9(1) and (2) of the Act are amended by deleting the numbers and word "7 and 8" and substituting the numbers, comma and word "7, 8 and 8.1". (33) Subsection 11(1) of the Act is repealed and the following substituted: Enforceability of security interest 11. (1) A security interest is enforceable against a third party only where (a) the collateral is (i) not a certificated security and is in the possession of the secured party, (ii) a certificated security in registered form and the security certificate has been delivered to the secured party under section 69 of the Securities Transfer Act under the debtor's security agreement, or (iii) investment property and the secured party has control under subsection 2(2) in accordance with the debtor's security agreement; or (b) the debtor has signed a security agreement that contains (i) a description of the collateral by item or kind as "goods', "chattel paper", "investment property", "documents of title", "instruments", "money" or "intangibles", (ii) a description of collateral that is a security entitlement, securities account, or futures account if it describes the collateral by those terms or as an "investment property" or if it describes the underlying financial asset or futures contract, (iii) a statement that a security interest is taken in all of the debtor's present and after-acquired personal property, or (iv) a statement that a security interest is taken in all of the debtor's present and after-acquired personal property except specified items or kinds of personal property or except personal property described as "goods", "chattel paper", "investment property", "documents of title", "instruments", "money" or "intangibles". (34) Section 13 of the Act is repealed and the following substituted: Attachment required to enforce security interest 13. (1) A security interest, including a security interest in the nature of a floating charge, attaches when (a) value is given; (b) the debtor has rights in the collateral or power to transfer rights in the collateral to a secured party; and (c) except for the purpose of enforcing rights as between the parties to the security agreement, the security interest becomes enforceable within the meaning of section 11. (2) Notwithstanding subsection (1), where the parties have specifically agreed to postpone the time of attachment, the security interest attaches at the agreed time. (3) For the purposes of paragraph (1)(b) and without limiting other rights which the debtor has in the goods, a lessee under a lease for a term of more than one year or a consignee under a commercial consignment has rights in the goods when the lessee or consignee obtains possession of them under the lease or consignment. (4) For the purposes of paragraph (1)(b), a debtor has no rights in (a) crops, until they become growing crops; (b) the young of animals, until they are conceived; (c) minerals, until they are extracted; and (d) trees, other than crops, until they are severed. (5) The attachment of a security interest in a
securities account is also attachment of a security interest in the security
entitlements carried in the securities account. (6) The attachment of a security interest in a futures account is also attachment of a security interest in the futures contracts carried in the futures account. Securities attachment 13.1 (1) A
security interest in favour of a securities intermediary attaches to a person's
security entitlement if, (a) the person buys a financial asset through the
securities intermediary in a transaction in which the person is obligated to
pay the purchase price to the securities intermediary at the time of the
purchase; and (b) the securities intermediary credits the financial asset to the buyer's securities account before the buyer pays the securities intermediary. (2) The security interest described in subsection
(1) secures the person's obligation to pay for the financial asset. (3) A security interest in favour of a person that
delivers a certificated security or other financial asset represented by a
writing attaches to the security or other financial asset if, (a) the security or other financial asset is, (i) in the ordinary course of business transferred
by delivery with any necessary endorsement or assignment, and (ii) delivered under an agreement between persons
in the business of dealing with such securities or financial assets; and (b) the agreement calls for delivery against payment. (4) The security interest described in subsection (3) secures the obligation to make payment for the delivery. (35) Subsection 18(1) of the Act is amended by
adding immediately after the word "section" the words and number "and
section 18.1". (36) Subsection 18(2) of the Act is repealed and the following substituted: (2) A secured party or the sheriff as defined in
the Judgment Enforcement Act shall
use reasonable care in the custody and preservation of collateral in the
secured party's possession and, unless otherwise agreed, in the case of chattel
paper or an instrument, reasonable care includes taking necessary steps to
preserve rights against other persons. (37) The Act is amended by adding immediately after section 18 the following: Rights of secured party with control of investment property as collateral 18.1 (1) Unless otherwise agreed by the parties and notwithstanding section 18, a secured party having control under subsection 2(2) of investment property as collateral, (a) may hold as additional security proceeds received from the collateral; (b) shall either apply money or funds received from the collateral to reduce the secured obligation or remit that money or those funds to the debtor; and (c) may create a security interest in the collateral. (2) Notwithstanding subsection (1) and section 18, a secured party having control under subsection 2(2) of investment property as collateral may sell, transfer, use or otherwise deal with the collateral in the manner and to the extent provided in the security agreement. (38) The Act is amended by adding immediately after section 20 the following: Securities account 20.1 (1) Perfection of a security interest in a securities account also perfects a security interest in the security entitlements carried in the securities account. (2) Perfection of a security interest in a futures account also perfects a security interest in the futures contracts carried in the futures account. Perfection on attachment 20.2 (1) A security interest arising in the delivery of a financial asset under subsection 13.1(3) is perfected when it attaches. (2) A security interest in investment property created by a broker or securities intermediary is perfected when it attaches. (3) A security interest in a futures contract or a futures account created by a futures intermediary is perfected when it attaches. (39) Section 25 of the Act is amended by (a) repealing paragraph (1)(d); and (b) adding immediately after subsection (2) the following: (3) Subject to section 20, a secured party may
perfect a security interest in a certificated security by taking delivery of
the certificated security under section 69 of the Securities Transfer Act. (4) Subject to section 20, a security interest in a certificated security in registered form is perfected by delivery when delivery of the certificated security occurs under section 69 of the Securities Transfer Act, and remains perfected by delivery until the debtor obtains possession of the security certificate. (40) The Act is amended by adding immediately after section 25 the following: Perfection by control of collateral 25.1 (1) Subject to section 20, a security interest in investment property may be perfected by control of the collateral under subsection 2(2). (2) Subject to section 20, a security interest in investment property is perfected by control under subsection 2(2) from the time the secured party obtains control and remains perfected by control until, (a) the secured party does not have control; and (b) one of the following occurs: (i) if the collateral is a certificated security,
the debtor has or acquires possession of the security certificate, (ii) if the collateral is an uncertificated security, the issuer has registered or registers the debtor as the registered owner, or (iii) if the collateral is a security entitlement,
the debtor is or becomes the entitlement holder. (41) Subsection 27(1) of the Act is repealed and the following substituted: Temporary perfection 27. (1) Where a security interest in an instrument or a security is perfected under section 25 and the secured party delivers the instrument or certificated security to the debtor for the purpose of (a) ultimate sale or exchange; (b) presentation, collection or renewal; or (c) registration of a transfer, the security interest remains perfected
notwithstanding section 10 for the first 15 days after the collateral comes
under the control of the debtor. (42) Section 29 of the Act is amended by adding immediately after subsection (2) the following: (2.1) The limitation of the amount secured by a security interest as provided in subsection (1) does not apply where the collateral is investment property. (43) The Act is amended by adding immediately after section 31 the following: Priority re: investment property 31.1 (1) A
purchaser of a security, other than a secured party, who (a) gives value; (b) does not know that the transaction constitutes a breach of a security agreement granting a security interest in the security to a secured party that does not have control of the security; and (c) obtains control of the security, acquires the security free from the security interest. (2) A purchaser referred to in subsection (1) is not required to determine whether a security interest has been granted in the security or whether the transaction constitutes a breach of a security agreement. (3) An action based on a security agreement creating a security interest in a financial asset, however framed, may not be brought against a person who acquires a security entitlement under section 96 of the Securities Transfer Act for value and did not know that there has been a breach of the security agreement. (4) A person who acquires a security entitlement under section 96 of the Securities Transfer Act is not required to determine whether a security interest has been granted in a financial asset or whether there has been a breach of the security agreement. (5) If an action based on a security agreement creating a security interest in a financial asset could not be brought against an entitlement holder under subsection (3), it may not be asserted against a person who purchases a security entitlement, or an interest in it, from the entitlement holder. (44) Subsection 32(3) of the Act is amended (a) by deleting the words "or a security"; and (b) at paragraph (c) by deleting the words "or security". (45) Subsection 32(5) of the Act is amended by
deleting the words "or a security". (46) The Act is amended by adding immediately after section 32 the following: Rights under Security Transfer Act 32.1 (1) This
Act does not limit the rights that a protected purchaser of a security has under
the Securities Transfer Act. (2) The interest of a protected purchaser of a security under the Securities Transfer Act takes priority over an earlier security interest, even if perfected, to the extent provided in that Act. (3) This Act does not limit the rights of or
impose liability on a person to the extent that the person is protected against
the assertion of a claim under the Securities
Transfer Act. (47) The Act is amended by adding immediately after section 36 the following: Priority among conflicting security interests 36.1 (1) The
rules in this section govern priority among conflicting security interests in
the same investment property. (2) A security interest of a secured party having
control of investment property under subsection 2(2) has priority over a
security interest of a secured party that does not have control of the
investment property. (3) A security interest in a certificated security
in registered form which is perfected by taking delivery under subsection 25(3)
and not by control under section 25.1 has priority over a conflicting security
interest perfected by a method other than control. (4) Conflicting security interests of secured
parties each of which has control under subsection 2(2) rank according to
priority in time of, (a) if the collateral is a security, obtaining
control; (b) if the collateral is a security entitlement
carried in a securities account, (i) the secured party's becoming the person for
which the securities account is maintained, if the secured party obtained
control under paragraph 26(1)(a) of the Securities Transfer Act, (ii) the securities intermediary's agreement to
comply with the secured party's entitlement orders with respect to security
entitlements carried or to be carried in the securities account, if the secured
party obtained control under paragraph 26(1)(b) of the Securities Transfer
Act, or (iii) if the secured party obtained control through
another person under paragraph 26(1)(c) of the Securities Transfer Act,
when the other person obtained control; or (c) if the collateral is a futures contract
carried with a futures intermediary, the satisfaction of the requirement for
control specified in subparagraph 2(2)(d)(ii) with respect to futures contracts
carried or to be carried with the futures intermediary. (5) Notwithstanding subsection (4), a security
interest held by a securities intermediary in a security entitlement or a
securities account maintained with the securities intermediary has priority
over a conflicting security interest held by another secured party. (6) Notwithstanding subsection (4), a security
interest held by a futures intermediary in a futures contract or a futures
account maintained with the futures intermediary has priority over a
conflicting security interest held by another secured party. (7) Conflicting security interests granted by a broker, securities intermediary or futures intermediary which are perfected without control under subsection 2(2) rank equally. (8) In all other cases, priority among conflicting
security interests in investment property is governed by section 36. (48) The Act is amended by adding immediately after subsection 51(10) the following: (11) Where there is no outstanding secured
obligation, and the secured party is not committed to make advances, incur
obligations or otherwise give value, a secured party having control of
investment property under paragraph 26(1)(b) of the Securities Transfer Act
or subparagraph 2(2)(d)(ii) of this Act shall, within 10 days after
receipt of a written demand by the debtor, send to the securities intermediary
or futures intermediary with which the security entitlement or futures contract
is maintained a written record that releases the securities intermediary or
futures intermediary from further obligation to comply with entitlement orders
or directions originated by the secured party. (49) Paragraph 57(2)(c) of the Act is amended by (a) adding immediately after the word "possession" the words "or control"; and (b) adding immediately after the number "18", the word and number "and 18.1". (50) Paragraph 57(3)(c) of the Act is amended by deleting the word and number "section 18" and substituting the words and numbers "sections 18 and 18.1". (51) Subsection 57(4) of the Act is amended by (a) adding immediately after the word, number and comma "sections 18," the number and comma "18.1,"; and (b) adding immediately after the word and number "section
18", a comma and the number "18.1". (52) The Act is amended by adding immediately after section 75 the following: Transition re: Securities Transfer Act 75.1 (1) The
provisions of the Securities Transfer Act, including amendments made
to this Act by section 110 of that Act do not affect an action or proceeding
commenced before the coming into force of the Securities Transfer Act. (2) No further action is required to continue
perfection of a security interest in a security if, (a) the security interest in the security was a
perfected security interest immediately before the coming into force of the Securities Transfer Act; and (b) the action by which the security interest was
perfected would suffice to perfect the security interest under this Act. (3) A security interest in a security remains
perfected for a period of 4 months after the coming into force of section 110
of the Securities Transfer Act and
continues to be perfected after that 4 month period where appropriate action to
perfect the security interest under this Act is taken within that period if, (a) the security interest in the security was a perfected security interest immediately before the coming into force of section 110 of the Securities Transfer Act; but (b) the action by which the security interest was perfected would not suffice to perfect the security interest under this Act. (4) A financing statement or financing change statement may be registered under this Act within the 4 month period referred to in subsection (3) to continue that perfection, or after that 4 month period to perfect the security interest, if, (a) the security interest was a perfected security interest immediately before the coming into force of section 110 of the Securities Transfer Act; and (b) the security interest can be perfected by registration under this Act. RSNL1990 cS-13 Amdt. 111. Paragraph 2(1)(c) of the Securities Act is repealed and the following substituted: (c) "clearing
agency" means a person or company that, (i) acts
as an intermediary in paying funds or delivering securities, or both, in
connection with trades and other transactions in securities, (ii) provides
centralized facilities for the clearing of trades and other transactions in
securities, including facilities for comparing data respecting the terms of
settlement of a trade or transaction, or (iii) provides
centralized facilities as a depository of securities, but does not include, (iv) the
Canadian Payments Association or its successors, (v) a
stock exchange or a quotation and trade reporting system, (vi) a
registered dealer, or (vii) a
bank, trust company, loan corporation, insurance company, treasury branch,
credit union or caisse populaire that, in the normal course of its authorized
business in Canada, engages in an activity described in subparagraph (i), but
does not also engage in an activity described in subparagraph (ii) or (iii); PART VIII Commencement 112. This Act comes into force on a date to be proclaimed by the Lieutenant-Governor in Council. ©Earl G. Tucker, Queen's Printer |