1998/99 Legislative Session: 3rd Session, 36th Parliament
FIRST READING


The following electronic version is for informational purposes only.
The printed version remains the official version.


BILL 85 -- 1999

COMPANY ACT

... continued ...

 
Part 4 -- Securities, Registers and Transfers

Division 1 -- Interpretation and General

Definitions and application

106 (1) In this Part:

"adverse claim" includes a claim that a transfer of a security was or would be wrongful or that a particular adverse person is the owner of or has an interest in the security;

"appropriate person" means the person specified by the security or by a special endorsement to be entitled to the security, and includes

(a) if the person specified is described as a fiduciary but is no longer serving in the described capacity, that person or that person's successor,

(b) if 2 or more persons are specified and are collectively described as fiduciaries and one or more of the persons so described no longer serve in the described capacity, the remaining fiduciary or fiduciaries, whether or not a successor has been appointed or is qualified,

(c) if the person specified is an individual who is without capacity to act by reason of death, incompetence, infancy or otherwise, the person's fiduciary,

(d) if 2 or more persons are specified and are described as joint tenants or as having a right of survivorship and if, by reason of the death of one or more of them, all cannot sign, the survivor or survivors,

(e) a person having power to sign under applicable law or a power of attorney, and

(f) to the extent that the person specified, or any of the persons referred to in paragraph (a), (b), (c), (d) or (e), may act through an agent, the person's authorized agent;

"bearer" means the person in possession of a security that is in bearer form or that is endorsed in blank;

"bearer form", in relation to a security, means a security that specifies that it is payable to bearer;

"broker" means a person who is engaged for all or part of the person's time in the business of buying and selling securities and who, in the transaction concerned, acts for, buys a security from or sells a security to a customer;

"clearing agency" has the same meaning as in the Securities Act;

"delivery" means voluntary transfer of possession;

"fiduciary" means a trustee, a guardian, a committee, a curator, a tutor, an executor, an administrator or a legal representative of a deceased person, or any other person acting in a fiduciary capacity;

"fungible", in relation to securities, means securities of which any unit is, by nature or usage of trade, the equivalent of any other like unit;

"genuine" means free of forgery or counterfeiting;

"good faith" means honesty in fact in the conduct of the transaction concerned;

"good faith purchaser" means a purchaser for value in good faith and without notice of any adverse claim

(a) who takes delivery of a security in bearer form or order form or of a security in registered form issued to the purchaser or endorsed to the purchaser or endorsed in blank, or

(b) who, as a result of an entry in the records of a clearing agency under section 120 (1), is a transferee or pledgee or is a secured party with a security interest in a security;

"holder" means

(a) a person who is in possession of a security

(i) issued to the person,

(ii) endorsed to the person,

(iii) issued in bearer form, or

(iv) endorsed in blank, or

(b) if the context permits, a transferee, pledgee or secured party who is deemed to be in possession of a security as provided in section 120 (3) (b);

"issuer" means a company that directly or indirectly creates fractional interests in its property, rights and interests, and issues securities to represent those fractional interests;

"order form", in relation to a security that is a debt obligation, means a security under the terms of which the debt obligation is payable to

(a) a person specified, with reasonable certainty, in the security,

(b) the order of a person specified, with reasonable certainty, in the security, or

(c) the assigns of a person specified, with reasonable certainty, in the security or their order;

"overissue" means the issue of securities in excess of any maximum number of securities that the issuer is authorized, by its notice of articles or memorandum or by a trust indenture, to issue;

"purchaser" means a person who takes an interest in a security by sale, mortgage, hypothec, pledge, issue, reissue, gift or any other voluntary transaction;

"security" means

(a) a share, participation or other interest in property, rights or interests of a company,

(b) a right to acquire such a share, participation or interest, or

(c) a debt obligation of a company,

that

(d) is of a type commonly dealt in on securities exchanges or markets, or is commonly recognized as a medium for investment in any area in which it is issued or dealt in, and

(b) is one of a class or series, or is by its terms divisible into a class or series,

and includes a security certificate if the context requires;

"security certificate" means an instrument representing a security in bearer form, order form or registered form;

"special endorsement" means an endorsement of a security that specifies

(a) the person to whom the security is to be transferred, or

(b) the person who has the power to transfer it;

"transfer" includes transmission by operation of law;

"unauthorized", in relation to a signature or an endorsement, means one made without actual, implied or apparent authority, and includes a forgery;

"valid" means

(a) issued in accordance with applicable law and with the articles and notice of articles or memorandum of the issuer, or

(b) validated under section 138 (3).

(2) This Part does not apply to a promissory note or bill of exchange to which the Bills of Exchange Act (Canada) applies.

(3) Unless its transfer is restricted and that restriction is noted on the security in accordance with section 109 (1), a security certificate is a negotiable instrument.

 
Division 2 -- Securities and Securities Registers

Right to security certificate

107 (1) Subject to subsections (2) and (3), a holder is entitled, on request, to receive from a company a certificate in a form that complies with this Act in respect of the securities of the company of which the person is the holder.

(2) A company may charge a fee of not more than the prescribed amount for a security certificate issued in respect of a transfer.

(3) A company is not required to issue more than one certificate in respect of securities held jointly by several persons and delivery of a certificate to one of several joint holders is sufficient delivery to all.

Signature on security

108 (1) A security issued by a company must be signed manually

(a) by a director or officer of the company,

(b) by or on behalf of a transfer agent, branch transfer agent or other agent of the company, or

(c) by a trustee under a trust indenture who certifies it in accordance with the trust indenture.

(2) Any signatures required on a security that are additional to the signatures required under subsection (1) may be printed or otherwise mechanically reproduced on the security.

(3) If a security contains a printed or mechanically reproduced signature of an individual, the company may issue the security even though the individual has ceased to be a director or an officer of the company, and the security is as valid as if the individual were a director or an officer on the date of the issue of the security.

(4) Despite subsection (1), a manual signature is not required on a security representing

(a) a fractional share, or

(b) a promissory note that is not issued under a trust indenture.

Restriction or lien on security

109 (1) If a security issued by a company or by a corporation before the corporation was continued under this Act is or becomes subject to a restriction on its transfer, or to a lien in favour of the company, the restriction or lien is ineffective against a transferee of the security who does not have actual knowledge of the restriction or lien, unless that restriction or lien or a reference to it is noted conspicuously on the security.

(2) A company must not have a restriction on the issue, transfer or ownership of its shares of any class or series of shares if any of its issued shares

(a) are or were part of a distribution to the public,

(b) remain outstanding, and

(c) are held by more than one person.

Completion or alteration of a security

110 (1) If a security contains the signatures necessary for its issue or transfer but is incomplete in any other respect,

(a) any person may complete it by filling in the blanks in accordance with that person's authority, and

(b) even if the blanks are incorrectly filled in, the security as completed is enforceable by a purchaser who takes it for value and without notice of that incorrectness.

(2) A completed security that has been improperly altered, even if fraudulently altered, remains enforceable but only according to its original terms.

Securities registers

111 (1) A company must maintain a central securities register in which it records

(a) the securities issued by it in registered form, and

(b) with respect to each class or series of those securities,

(i) the names, alphabetically arranged, and the last known addresses of

(A) the persons to whom securities of that class or series have been issued by the company, and

(B) the persons currently holding the securities of that class or series,

(ii) the number of those securities held by each of the persons referred to in subparagraph (i) (B), and

(iii) the date and particulars of the issue and transfer, if any, of each of those securities.

(2) In addition to its central securities register, the company may maintain branch securities registers.

(3) A company may appoint agents to maintain the central securities register and any branch securities registers.

(4) A company must maintain its central securities register at its records office or at any other place in British Columbia designated by the directors, and may maintain branch securities registers at any places in or out of British Columbia designated by the directors.

(5) Recording the issue or transfer of a security in the central securities register or in a branch securities register is complete and valid registration for all purposes.

(6) A branch securities register must only contain particulars of securities issued or transferred at that branch.

(7) Particulars of each issue or transfer of a security recorded in a branch securities register must also be promptly recorded in the central securities register.

 
Division 3 -- Transfers to Purchasers

Transfers require endorsement and delivery

112 (1) A transfer of a security occurs,

(a) in the case of a security in bearer form, when the security has been delivered in accordance with this Part, or

(b) in any other case, when the security has been endorsed and delivered in accordance with this Part.

(2) An endorsement of a security, whether special, to bearer or in blank, does not constitute a transfer until delivery of the security on which the endorsement appears or, if the endorsement is on a separate record, until delivery of both the record and the security.

Endorsement of securities

113 (1) An endorsement of a security in registered form is made when

(a) an appropriate person signs, on the security or on a separate record, an assignment or transfer of the security or a power to assign or transfer it, or

(b) the signature of an appropriate person is written without more on the back of the security.

(2) Whether the person signing is an appropriate person is determined as of the time of signing and an endorsement by an appropriate person does not become unauthorized for the purposes of this Part by reason of any subsequent change of circumstances.

(3) An endorsement of a security may be

(a) in blank,

(b) to bearer, or

(c) a special endorsement.

(4) A holder may convert an endorsement to bearer or in blank into a special endorsement.

(5) Unless otherwise agreed, the endorser by making an endorsement assumes no obligation that the security will be honoured by the issuer.

(6) An endorsement purporting to relate to only part of the securities represented by a security certificate is effective to the extent of the endorsement.

(7) Failure of a fiduciary to comply with a controlling instrument or with the law applicable to the fiduciary relationship, including any law requiring the fiduciary to obtain court approval of the transfer, does not render the fiduciary's endorsement unauthorized for the purposes of this Part.

Guarantee of signature of endorser

114 (1) A person who guarantees the signature of an endorser of a security, by that guarantee,

(a) warrants that, at the time of the signing of the security,

(i) the signature was the signature of the endorser,

(ii) the endorser was an appropriate person to endorse, and

(iii) the endorser had the legal capacity to endorse, and

(b) does not otherwise warrant the rightfulness of the particular transfer.

(2) A person who guarantees an endorsement of a security gives the warranties set out in subsection (1) (a) and warrants the rightfulness of the transfer in all respects.

(3) The warranties referred to in this section are made to any person taking or dealing with the security in reliance on the guarantee, and the guarantor is liable to such person for any loss resulting from breach of warranty.

Absence of endorsement

115 If a security in registered form has been delivered to a purchaser without a necessary endorsement, the purchaser may become a good faith purchaser only as of the time 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.

Delivery of a security

116 (1) Subject to section 117 and unless otherwise agreed, a transferor's duty to deliver a security under a contract of purchase is not fulfilled until the transferor

(a) delivers the security to the purchaser or to a person designated by the purchaser, or

(b) causes an acknowledgment to be made to the purchaser that the security is held for the purchaser.

(2) Delivery of a security to a purchaser occurs when

(a) the purchaser or a person designated by the purchaser acquires possession of a security,

(b) the purchaser's broker acquires possession of a security specially endorsed or issued in the name of the purchaser,

(c) the purchaser's broker sends the purchaser confirmation of the purchase and the broker, in the broker's records, identifies a security in the broker's possession as belonging to the purchaser,

(d) with respect to an identified security to be delivered while still in the possession of a third person, that person acknowledges that it is being held for the purchaser, or

(e) appropriate entries in the records of a clearing agency are made under section 120.

(3) A purchaser is the owner of a security held for the purchaser by a broker or by a clearing agency, but a purchaser is not a good faith purchaser of a security so held except in the cases referred to in subsection (2) (b), (c) and (e).

(4) If a security is part of a fungible bulk, the purchaser is the owner of a proportionate interest in the fungible bulk.

(5) Notice of an adverse claim received by a broker or by a purchaser after the broker takes delivery as a holder for value is not effective against the broker or the purchaser except that, as between the broker and the purchaser, the purchaser may demand delivery of an equivalent security as to which no notice of an adverse claim has been received.

Delivery of a security if sold on exchange or through brokers

117 (1) Unless otherwise agreed, if a sale of a security is made on a securities exchange or otherwise through brokers,

(a) the selling customer fulfills the customer's duty to deliver the security when the customer

(i) delivers the security to the selling broker or to a person designated by the selling broker, or

(ii) causes an acknowledgment to be made to the selling broker that the security is held for that broker, and

(b) the selling broker, including a correspondent broker, acting for a selling customer fulfills the broker's duty to deliver the security by

(i) delivering the security or a like security to the buying broker or to a person designated by the buying broker, or

(ii) effecting clearance of the sale in accordance with the rules of the securities exchange on which the transaction took place.

(2) A sale to a broker purchasing for the broker's own account is subject to section 116 and not to subsection (1) of this section unless the sale is made on a securities exchange.

Delivery of fungible securities

118 Unless otherwise agreed and subject to any applicable law, regulation or securities exchange rule, a person required to deliver securities may deliver any security of the specified issue

(a) in bearer form,

(b) recorded in the name of the transferee,

(c) endorsed to the transferee, or

(d) endorsed in blank.

Rights acquired by purchaser on transfer

119 (1) On the transfer of a security to a purchaser, the purchaser acquires the rights in the security that the transferor had, or had actual authority to convey, except that a purchaser who has been a party to any fraud or illegality affecting the security or who, as a prior holder, had notice of an adverse claim cannot improve the purchaser's position by taking from a later good faith purchaser.

(2) A good faith purchaser, in addition to acquiring the rights of a purchaser, also acquires the security free of any adverse claim.

(3) A purchaser of a limited interest in a security acquires rights in the security only to the extent of the interest purchased.

Transfer may be effected through clearing agency

120 (1) A transfer or pledge of a security, or the taking of a security interest in the security or in an interest in the security, may be effected by the making of an appropriate entry in the records of a clearing agency if

(a) the security is in the custody of the clearing agency or a custodian, or of a nominee of either of them, subject to the instructions of the clearing agency,

(b) the security is shown in the records of the clearing agency, and

(c) the security

(i) is in bearer form,

(ii) is endorsed in blank by an appropriate person, or

(iii) is recorded in the name of the clearing agency or a custodian, or of a nominee of either of them.

(2) An entry referred to in subsection (1) may be made in respect of like securities or in respect of interests in like securities as part of a fungible bulk, and may show merely

(a) the quantity of securities transferred or pledged or in which a security interest is taken without reference to the name of the registered owner, the certificate or bond number or the like, or

(b) the balance of the securities after clearing.

(3) The making of an entry referred to in subsection (1) is deemed to be

(a) a delivery of a security in bearer form, or duly endorsed in blank, representing the quantity of securities transferred or pledged, or in which a security interest is taken, and

(b) a transfer of possession of the security to the transferee, pledgee or secured party.

(4) A transfer, a pledge or the taking of a security interest under this section does not constitute a registration of transfer under this Part.

Transferor must provide requisites for registration of transfer

121 (1) A transferor must, on demand, supply a purchaser of a security with proof of the transferor's authority to transfer the security, and with any other requisite that is necessary to obtain registration of the transfer of the security, unless

(a) the transferor and the purchaser otherwise agree, or

(b) in the case of a transfer that is not for value, the purchaser fails to pay the reasonable and necessary costs of the proof and transfer.

(2) If the transferor fails to comply with a demand under subsection (1) within a reasonable time, the purchaser may reject or rescind the transfer.

Warranties in favour of purchaser

122 (1) A person, by transferring a security to a purchaser for value, warrants to the purchaser only that

(a) the transfer is effective and rightful,

(b) the security is genuine and has not been materially altered, and

(c) the person knows of nothing that might impair the validity of the security.

(2) A person signing a security as a transfer agent or other agent for an issuer warrants to a purchaser for value without notice that

(a) the security is genuine,

(b) the agent's own acts in connection with the issue of the security are within the agent's capacity and within the scope of the authorization received by the agent from the issuer, and

(c) the agent has reasonable grounds for believing that the security is in the form, and represents a quantity of securities that is within the number of securities, that the issuer is authorized to issue.

(3) Unless otherwise agreed, a person referred to in subsection (2) who signs a security does not assume any further liability for the validity of a security.

(4) If a security is delivered by a intermediary known by the purchaser to be entrusted with delivery of the security on behalf of another or with collection of a draft or other claim to be collected against that delivery, the intermediary, by that delivery, warrants to the purchaser only the intermediary's own good faith and authority even if the intermediary has purchased or made advances against the draft or other claim to be collected against the delivery.

Other warranties

123 (1) A pledgee or holder who is a secured party in possession, who redelivers a security received, or after payment and on order of the debtor delivers that security to a third person, gives only the warranties of a intermediary under section 122 (4).

(2) A broker gives to a customer, to the issuer or to a purchaser, as the case may be, the warranties provided in, and has the rights and privileges of a purchaser under, this section and sections 122 and 125, and those warranties of and in favour of the broker acting as an agent are in addition to warranties given by and in favour of the customer.

 
Division 4 -- Registration

Issuer must register transfer

124 (1) If a security in registered form is presented for registration of transfer, the issuer must register the transfer if

(a) the security is endorsed by an appropriate person,

(b) reasonable assurance is given that the endorsement is genuine and effective,

(c) the issuer has no duty to inquire into adverse claims or has discharged any such duty, and

(d) the transfer is rightful or is to a good faith purchaser.

(2) If an issuer has a duty to register a transfer of a security, the issuer is liable to the person presenting the security for registration of transfer for loss resulting from any unreasonable delay in registration of transfer or from failure or refusal to register the transfer.

(3) An issuer must not require a guarantee of endorsement as a condition to registration of transfer.

Warranties on presentation

125 (1) A person who presents a security for registration of transfer, for payment or for conversion or exchange warrants to the issuer that the person is entitled to the registration, payment, conversion or exchange.

(2) Despite subsection (1), a purchaser for value without notice of an adverse claim who receives a new, reissued or reregistered security on registration of transfer, warrants to the issuer only that the purchaser has no knowledge of any unauthorized signature in a necessary endorsement.

Assurances required by issuer

126 (1) Before registering a transfer, an issuer may require assurance that each necessary endorsement on a security is genuine and effective by requiring a guarantee of the signature of the person endorsing and by requiring,

(a) if the endorsement is by an agent, reasonable assurance of authority to sign,

(b) if the endorsement is by a fiduciary, appropriate evidence of appointment or incumbency,

(c) if there is more than one fiduciary, reasonable assurance that all of the fiduciaries who are required to sign have done so, and

(d) if the endorsement is by a person not mentioned in this section, reasonable assurance respecting that person that corresponds as closely as practicable to the foregoing.

(2) In subsection (1), a "guarantee of the signature" means a guarantee signed by or on behalf of a person reasonably believed by the issuer to be responsible.

(3) In subsection (1) (b), "appropriate evidence of appointment or incumbency" means,

(a) in the case of a fiduciary appointed by a court order, a copy of the entered order, or

(b) in any other case, a copy of a record showing the appointment or other evidence reasonably believed by the issuer to be appropriate.

(4) An issuer who obtains a record referred to in subsection (3) is deemed not to have notice of the contents of that record except to the extent that the contents relate directly to appointment or incumbency.

(5) If an issuer demands assurance additional to that specified by this section for a purpose other than that specified by subsection (1) and obtains a copy of a will, a trust or partnership agreement, articles or another similar record, the issuer is deemed to have notice of all matters contained in the record that affect the transfer.

Effect of registration

127 (1) A company or a trustee under a trust indenture may, subject to sections 188 and 190, before presentation for registration of a transfer of a security in registered form, treat the registered owner of the security as the person exclusively entitled to

(a) vote in respect of the security,

(b) receive notices in respect of the security,

(c) receive any interest, dividend or other payments in respect of the security, and

(d) otherwise exercise all the rights and powers of an owner of the security.

(2) Despite subsection (1), a company must, if its memorandum or articles restrict the right to transfer its securities, and any other company may, treat a person referred to in paragraph (a), (b) or (c) of this subsection as a registered owner entitled to exercise all the rights of the registered owner that the person represents, if the person furnishes appropriate evidence of appointment or incumbency, as that term is defined in section 126 (3), to the company that the person is

(a) the executor, administrator or legal representative of the estate of a deceased holder,

(b) a guardian, committee, trustee, curator or tutor representing a registered owner who is a minor, an incompetent person or a missing person, or

(c) a trustee in bankruptcy for a registered owner.

(3) If a fiduciary or person on whom the ownership of a security devolves by operation of law, other than a person referred to in subsection (2), furnishes proof satisfactory to the company of the person's authority to exercise rights or privileges in respect of a security of the company that is not recorded in the person's name, the company may treat the person as entitled to exercise those rights or privileges.

(4) A company is not required to inquire into the existence of, or to see to the performance or observance of, any duty owed to a third person by a registered owner of any of the company's securities or by anyone whom it treats, as permitted or required by this section, as the owner of any of its securities.

(5) If a minor exercises any rights of ownership in the securities of a company, no subsequent repudiation or avoidance is effective against the company.

(6) If a security is issued to several persons as joint holders, on receiving proof satisfactory to the company of the death of any of those joint holders, the company may treat the surviving joint holders as owner of the security.

(7) A person referred to in subsection (2) (a) is entitled to become or to designate the registered owner of the security in respect of which the deceased holder was the holder if the person deposits with the company or its transfer agent,

(a) in the case of a grant of probate or of letters of administration,

(i) the original of that grant, or

(ii) a copy of that grant certified to be a true copy by

(A) the court that granted the probate or letters of administration,

(B) a trust company, or

(C) a lawyer or notary acting on behalf of the person, or

(b) in the case of transmission by notarial will in the province of Quebec, a copy of that will authenticated under the laws of that province,

together with

(c) an affidavit or declaration of transmission made by the person, stating the particulars of the transmission,

(d) the security that was owned by the deceased holder,

(i) in the case of a transfer to the person depositing the security, with or without the endorsement of that person, and

(ii) in the case of a transfer to any other person, endorsed in accordance with section 113, and

(e) any assurance the company may require under section 126.

(8) Despite subsection (7), if the laws of the jurisdiction, including British Columbia, that govern the transmission of a security of a deceased holder do not require a grant of probate or of letters of administration in respect of the transmission, a legal representative of the deceased holder is entitled to become a registered owner or to designate a registered owner, if the legal representative deposits with the company or its transfer agent

(a) the security that was owned by the deceased holder, and

(b) reasonable proof of

(i) the governing laws,

(ii) the deceased holder's interest in the security, and

(iii) the right of the legal representative or the person the legal representative designates to become the registered owner.

(9) Deposit of the records required by subsection (7) or (8) empowers a company or its transfer agent to record in a securities register the transmission of a security from the deceased holder to the legal representative of the deceased holder or to any other person that the legal representative may designate and, after that, to treat the person who thus becomes a registered owner as the owner of that security.

 
Division 5 -- Defects and Liabilities

Notice of terms of security

128 (1) Even against a purchaser for value without notice of a defect going to the validity of a security, the terms of a security include

(a) the terms stated on the security certificate, and

(b) the terms incorporated in the security certificate by reference to another record, enactment, rule or order

(i) if that reference is stated on the security certificate, and

(ii) to the extent that the terms so incorporated do not conflict with the stated terms.

(2) A security is valid in the hands of a purchaser for value without notice of any defect going to its validity.

(3) A reference referred to in subsection (1) (b) is not of itself notice to a purchaser for value of a defect going to the validity of the security, even if the security expressly states that a person accepting it admits such notice.

(4) Except as provided in section 129, the fact that a security is not genuine is a complete defence even against a purchaser for value without notice.

(5) All other defences of the issuer, including non-delivery and conditional delivery of a security, are ineffective against a purchaser for value without notice of the particular defence.

Unauthorized signatures on issue

129 (1) Subject to subsection (2), an unauthorized signature placed on a security before or in the course of issue is ineffective.

(2) An unauthorized signature is effective in favour of a purchaser for value if

(a) the purchaser is without notice of the lack of authority, and

(b) the signing has been done by

(i) a transfer agent,

(ii) another person entrusted by the issuer with the signing of the security or of similar securities, or with their immediate preparation for signing, or

(iii) an individual who is an employee of the issuer or of a person referred to in subparagraph (i) and who, in the ordinary course of the employee's duties, handles the security.

Staleness as notice of defect

130 After an act or event has occurred that creates a right to immediate performance of the principal obligation represented by a security or that sets a date on or after which a security is to be presented or surrendered for redemption, conversion or exchange, a purchaser of the security is deemed to have notice of any defect in the issue of the security or of any defence of the issuer

(a) if

(i) the act or event requires that, on the presentation or surrender of the security, one or both of the following must occur:

(A) money must be paid;

(B) securities must be delivered in exchange,

(ii) the money to be paid or the securities to be delivered are available on the date set for the payment or delivery, as the case may be, and

(iii) the purchaser takes delivery of the security more than one year after that date, or

(b) if the act or event is not one to which paragraph (a) applies and the purchaser takes delivery of the security more than 2 years after

(i) the date on which the right to immediate performance of the principal obligation became exercisable, or

(ii) the date set for presentation or surrender.

Constructive notice of adverse claim

131 (1) A purchaser, including any broker for a seller or purchaser, of a security is deemed to have notice of an adverse claim if

(a) the security, whether in bearer or registered form, has been endorsed "for collection" or "for surrender" or for some other purpose not involving transfer, or

(b) the security is in bearer form and has on it an unambiguous statement that it is the property of a person other than the transferor, but the mere writing of a name on a security is not such a statement.

(2) Even if a purchaser, or any broker for a seller or purchaser, has notice that a security is held for a third person or that it is recorded in the name of or is endorsed by a fiduciary, the purchaser has no duty to inquire into the rightfulness of the transfer and has no notice of an adverse claim, except that if a purchaser knows that the consideration is to be used for, or that the transaction is for, the personal benefit of the fiduciary or is otherwise in breach of the fiduciary's duty, the purchaser is deemed to have notice of an adverse claim.

(3) An event that creates a right to immediate performance of the principal obligation represented by a security or that sets a date on or after which the security is to be presented or surrendered for redemption, conversion or exchange is not of itself notice of an adverse claim, except in the case of a purchase that is made more than

(a) one year after any date set for that presentation or surrender for redemption, conversion or exchange, or

(b) 6 months after any date set for payment of money against presentation or surrender of the security if funds were available for payment on that date.

Endorsement of security in bearer form

132 An endorsement of a security in bearer form may give notice of an adverse claim under section 131 but does not otherwise affect any right to registration of transfer that the holder may have.

Effect of unauthorized endorsement

133 (1) The owner of a security may assert the ineffectiveness of an endorsement against the issuer or any purchaser, other than a purchaser for value without notice of an adverse claim who has in good faith received a new, reissued or reregistered security on registration of transfer, unless the owner

(a) has ratified an unauthorized endorsement of the security, or

(b) is otherwise precluded from impugning the effectiveness of an unauthorized endorsement.

(2) An issuer who registers the transfer of a security on an unauthorized endorsement is subject to liability for improper registration.

Action for wrongful transfer

134 (1) A person against whom the transfer of a security is wrongful for any reason, including the person's incapacity, may, against anyone except a good faith purchaser,

(a) reclaim possession of the security,

(b) obtain possession of a new security representing all or part of the same rights, or

(c) claim damages.

(2) If the transfer of a security is wrongful by reason of an unauthorized endorsement, the owner may reclaim possession of the security or a new security from any purchaser against whom the ineffectiveness of the purported endorsement may be asserted under section 133.

(3) On application by any interested party respecting the transfer of a security,

(a) the court may order that the security be impounded until the court is able to determine the rightfulness of the proposed transfer, or

(b) if the transfer of the security is wrongful, the court may order that

(i) the right, under subsection (1) (a), to reclaim possession of the security may be specifically enforced, or

(ii) the transfer of the security be restrained.

Notice to issuer of adverse claim

135 (1) An issuer to whom a security is presented for registration of transfer has a duty to inquire into adverse claims if

(a) written notice of an adverse claim is received at a time and in a manner that affords the issuer a reasonable opportunity to act on it before the issue of a new, reissued or reregistered security and the notice discloses

(i) the name and address of the adverse claimant,

(ii) the registered owner of the security, and

(iii) the issue of which the security is a part, or

(b) the issuer is deemed to have notice of an adverse claim from a record that is obtained under section 126 (5).

(2) An issuer may discharge a duty of inquiry by any reasonable means, including by notifying an adverse claimant by registered mail sent to the address furnished by the adverse claimant or, if no such address has been furnished, to the adverse claimant's residence or regular place of business, that

(a) a security has been presented for registration of transfer by a named person, and

(b) the transfer will be registered unless, within 30 days after the date of mailing the notice,

(i) the issuer is served with a restraining order or other order of a court by which the issuer is prevented from registering the transfer, or

(ii) the issuer is provided with an indemnity bond sufficient in the issuer's judgment to protect the issuer and any transfer agent or other agent of the issuer from any loss that may be incurred by any of them as a result of complying with the adverse claim.

(3) Unless an issuer is deemed to have notice of an adverse claim from a record that is obtained under section 126 (5) or has received notice of an adverse claim under subsection (1) (a) of this section, if a security presented for registration of transfer is endorsed by an appropriate person, the issuer has no duty to inquire into adverse claims and, in particular,

(a) an issuer registering a security in the name of a person who is a fiduciary or who is described as a fiduciary is not bound to inquire into the existence, extent or correct description of the fiduciary relationship and, after registering the security, the issuer may assume without inquiry that the newly registered owner continues to be the fiduciary until the issuer receives written notice that the newly registered owner is not acting as fiduciary with respect to the particular security,

(b) an issuer registering a transfer on an endorsement by a fiduciary has no duty to inquire whether the transfer is made in compliance with the record or with the law applicable to the fiduciary relationship, and

(c) an issuer is deemed not to have notice of the contents of any court record or any record filed or registered in any other public registry even if the record is in the issuer's possession and even if the transfer is made on the endorsement of a fiduciary to that fiduciary or to that fiduciary's nominee.

(4) A written notice of adverse claim received by an issuer ceases to be effective

(a) 12 months after the date on which it was received by the issuer, or

(b) if the notice of adverse claim is renewed by a renewal record, 12 months after the date on which the most recent renewal record was received by the issuer.

Liability of issuer

136 (1) The issuer is not liable to the owner or to any other person who incurs a loss as a result of the registration of a transfer of a security if

(a) the necessary endorsements were, at the time of the registration of transfer, on or with the security, and

(b) the issuer had no duty to inquire into adverse claims or had discharged any such duty.

(2) If an issuer has registered a transfer of a security to a person not entitled to it, the issuer must deliver on demand a like security to the owner unless

(a) subsection (1) applies,

(b) the owner is precluded by section 137 (1) from asserting any claim, or

(c) the delivery would result in overissue, in which event section 138 applies.

If securities are lost, destroyed or wrongfully taken

137 (1) If a security has been lost, apparently destroyed or wrongfully taken, the owner is precluded from asserting against the issuer any claim to a new security if

(a) the owner failed to notify the issuer of the loss, destruction or taking by giving the issuer written notice of the owner's adverse claim within a reasonable time after the owner became aware of the loss, destruction or taking, and

(b) the issuer registered a transfer of the security before receiving notice under paragraph (a).

(2) If the owner of a security claims that the security has been lost, apparently destroyed or wrongfully taken, the issuer must issue a new security in place of the original security if the owner

(a) so requests before the issuer has notice that the security has been acquired by a good faith purchaser,

(b) files with the issuer an indemnity bond sufficient in the issuer's judgment to protect the issuer and any transfer agent or other agent of the issuer from any loss that may be incurred by any of them by complying with the request to issue a new security, and

(c) satisfies any other reasonable requirements imposed by the issuer.

(3) If, after the issue of a new security under subsection (2), a good faith purchaser of the original security presents the original security for registration of transfer, the issuer

(a) must register the transfer unless registration would result in overissue, in which event section 138 applies, and

(b) may, in addition to any rights the issuer may have under an indemnity bond, recover the new security issued under subsection (2) of this section from the person to whom it was issued or from any person taking under that person other than a good faith purchaser.

Overissue

138 (1) The provisions of this Part that validate a security or compel its issue or reissue do not apply to the extent that validation, issue or reissue would result in an overissue.

(2) If a person is entitled to the issue, validation or reissue of a security but that issue, validation or reissue would result in an overissue, the person so entitled may,

(a) if a valid security, similar in all respects to the security involved in the overissue, is reasonably available for purchase, compel the issuer to purchase the security for and deliver the security to the person so entitled against surrender of the security that the person holds, or

(b) if a valid security, similar in all respects to the security involved in the overissue, is not reasonably available for purchase, recover from the issuer an amount equal to the fair market value, as at the date of demand, of the security involved in the overissue, plus interest on that amount, from the date of demand, at the prescribed rate.

(3) Section 67 applies to the issue of securities by an issuer that results in an overissue.

(4) A purchase or payment by an issuer under subsection (2) is not a purchase or payment to which sections 76, 78 and 80 apply.

Duty of agents for issuer

139 (1) A transfer agent or other agent for an issuer has, in respect of the issue, registration of transfer and cancellation of a security of the issuer,

(a) a duty to the issuer to exercise good faith and due diligence, and

(b) the same obligations to the holder or owner of a security as does the issuer, and the same rights, privileges and immunities as does the issuer.

(2) Notice to a transfer agent or any other agent for the issuer is notice to the issuer with respect to the functions performed by the agent.

Transfer by agent in good faith is not conversion

140 (1) An agent or bailee who has, in good faith, received securities and sold, pledged, delivered or otherwise dealt with them according to the instructions of the agent's or bailee's principal is not liable for conversion or for participation in a breach of fiduciary duty although the principal has no right to deal with them.

(2) For the purposes of subsection (1), "good faith" includes, if the agent or bailee is in the business of buying, selling or otherwise dealing with securities, observance of reasonable commercial standards.

Obligations and defences of guarantor of security

141 The obligations and defences of an issuer apply to a guarantor of a security to the extent of the guarantee whether or not the obligations are noted on the security.

Burden of proof

142 In a legal proceeding in respect of a security,

(a) unless specifically denied in the pleadings, each signature on the security or in a necessary endorsement is admitted,

(b) a signature on the security is presumed to be genuine and authorized, but, if the effectiveness of the signature is put in issue, the burden of establishing that the signature is genuine and authorized is on the party claiming under the signature,

(c) if a signature is admitted or established, production of the security entitles a holder to recover on it unless the defendant establishes a defence or a defect going to the validity of the security, and

(d) if the defendant establishes that a defence or defect exists, the plaintiff has the burden of establishing that the defence or defect is ineffective against the plaintiff or some person under whom the plaintiff claims.

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