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.
Part 6 -- Management
Division 1 -- Directors Generally
72 (1) An association must have at least 3 directors and
(a) a majority of the directors of the association must be individuals ordinarily resident in Canada, and
(b) one of the directors of the association must be an individual ordinarily resident in British Columbia.
(2) Subject to subsections (3) and (4) of this section, all of the directors of the association must be members of the association or individuals authorized under section 32.
(3) An association may provide in its rules for the election or appointment of directors who are neither members nor persons authorized under section 32.
(4) The number of the directors described in subsection (3) must not exceed 1/5 of the total number of directors provided for in the association's rules.
(5) If 2 or more persons are joint members of an association, only one of the joint members may be a director of the association at any time unless the association's rules otherwise provide.
73 (1) The first directors of an association must be appointed in writing by a majority of the subscribers to the memorandum.
(2) The first directors hold office until the first general meeting.
74 (1) An association must provide in its rules for the election or appointment of the directors of the association other than the first directors.
(2) Subject to the association's rules under subsection (1), if investment shareholders have a right to elect one or more directors, they meet separately from the members for the purpose of the election or appointment of the directors.
(3) No election or appointment of a person as a director is valid unless
(a) the person consented to act as a director in writing before the election or appointment, or
(b) if elected or appointed at a meeting, the person was present and did not refuse at the meeting to act as a director.
(4) A consent in writing given under subsection (3) (a) is only effective until the next following annual election or appointment of directors unless the consent states it is effective until
(a) revoked, or
(b) a date or time stated in it.
75 The association in general meeting must determine the remuneration of the directors, and what will be allowed to them for expenses.
76 (1) The directors must manage or supervise the management of the business of the association and may exercise all the powers of the association.
(2) The directors may delegate any of their powers to committees of the directors and set terms of reference for the committees that are binding on them in exercising the delegated powers.
(3) No limitation or restriction on the powers or functions of the directors is effective against a person who does not have knowledge of the limitation or restriction.
77 (1) A director of an association may participate in and vote at a meeting of directors
(a) in person, or
(b) unless the association's rules provide otherwise, by telephone or other communications medium if all directors participating in the meeting, whether by telephone, other communications medium or in person, are able to communicate with each other.
(2) A director who participates in a meeting in a manner contemplated by subsection (1) (b) is deemed for all purposes of this Act and the association's rules to be present at the meeting.
(3) Unless the association's rules provide otherwise, a resolution of the directors may be passed without a meeting if each of the directors entitled to vote on the resolution consents to the resolution in writing.
(4) The consents referred to in subsection (3) must be kept with the minutes of proceedings of directors.
78 (1) Every association, within 15 days after the appointment or election of a director, must file with the registrar a notice, in the prescribed form, of the appointment or election.
(2) A filing under subsection (1) is unnecessary if a director ceases to be a director and is re-elected or reappointed on the same day.
79 (1) A person must not become or act as a director of an association unless that person is an individual who is qualified to do so.
(2) An association may provide in its rules for qualifications or disqualifications of directors in addition to those in this section.
(3) An individual who is not a member of an association or a person authorized under section 32 is not qualified to become or act as a director of an association other than as a non-member director of the association, if the association's rules allow non-member directors in accordance with section 72.
(4) An individual is not qualified to become or act as a director of an association if that individual is
(a) under the age of 18 years,
(b) found by a court, in Canada or elsewhere, to be incapable of managing the individual's own affairs,
(c) an undischarged bankrupt, or
(d) convicted in or out of British Columbia of an offence in connection with the promotion, formation or management of a corporation or of an offence involving fraud, unless
(i) the court orders that the individual continues to be qualified to become or act as a director of an association,
(ii) 5 years have elapsed since the last to occur of
(A) the expiration of the period set for suspension of the passing of sentence without a sentence having been passed or without a fine having been imposed,
(B) the conclusion of the term of any imprisonment, and
(C) the conclusion of the term of any probation imposed, or
(iii) a pardon was granted or issued under the Criminal Records Act (Canada).
80 A director of an association ceases to hold office if
(a) the term of office of that director expires in accordance with the association's rules or this Act,
(b) the director dies or resigns,
(c) the director is removed in accordance with
(i) section 82, or
(ii) the association's rules, or
(d) the director ceases to be qualified under section 79 to be or act as a director.
81 A resignation of a director becomes effective as follows:
(a) subject to paragraphs (b) to (d), the time that a resignation record is received by the association by being received
(i) at the registered office of the association, or
(ii) by a director or officer of the association or a lawyer acting for the association;
(b) if a date but no time is specified in the resignation record, the beginning of the day on the date specified;
(c) if a time, whether by reference to an event or otherwise, but no date is specified, the time specified;
(d) if both a date and time are specified, the date and time specified.
82 (1) Subject to the association's rules, a director of an association may be removed before the expiration of the director's term of office by a special resolution, one or more separate resolutions or a combination of both, depending on whether the persons who would be entitled to vote if an election of that director were being held comprise, at the time of removal, only the members, only holders of one or more classes of investment shares, or a combination of both the members and those holders of investment shares.
(2) Subject to the association's rules, a vacancy on the board of directors because of the removal of a director under subsection (1) may be filled by a resolution or resolutions of the members or holders of investment shares described in subsection (1), requiring a simple majority for passage.
83 (1) Every association, within 15 days after the resignation or removal of a director or the association becoming aware of a director of the association not being qualified, must file with the registrar a notice, in the prescribed form, of a director ceasing to hold office.
(2) No filing is necessary for a director who ceases to be a director and is re-elected or reappointed the same day.
84 (1) Every director of an association, in exercising the director's powers and performing the director's functions, must
(a) act honestly and in good faith with a view to the best interests of the association,
(b) exercise the care, diligence and skill that a reasonably prudent person would exercise in comparable circumstances,
(c) act in accordance with this Act and the regulations, and
(d) subject to paragraphs (a) to (c), act in accordance with the association's memorandum and rules.
(2) This section is in addition to, and not in derogation of, any enactment or rule of law or equity relating to the duties or liabilities of directors of corporations.
(3) No provision in a contract or in an association's rules or memorandum relieves a director of the association from
(a) the duty to act in accordance with this Act and the regulations, or
(b) liability that by virtue of any enactment or rule of law or equity would otherwise attach to that director in respect of any negligence, default, breach of duty or breach of trust of which the director may be guilty in relation to the association.
(4) A director of an association who receives or has charge of money of the association must give security before entering on his or her duties, as may be considered necessary by the directors.
85 Every act of a director of an association is valid, despite any defect in the director's appointment, election or qualification.
Division 2 -- Disclosure and Conflict of Interest Rules -- Directors
and Officers
86 (1) For the purposes of this Division, a director or officer of an association holds a disclosable interest in a contract or transaction if
(a) the contract is a material contract, or the transaction is a material transaction, to the association,
(b) the association is or proposes to become a party to the contract or has entered into or proposes to enter into the transaction, and
(c) one of the following applies to the director or officer:
(i) the director or officer has a material interest in the contract or transaction;
(ii) the director or officer is a director or officer of, or has a material interest in, a person who has a material interest in the contract or transaction.
(2) For the purposes of subsection (1) and this Division, a director or officer of an association does not hold a disclosable interest in a contract or transaction if the interest referred to in subsection (1) (c) arose before the coming into force of this Act and was not one for which disclosure was required under a former Act, as defined in section 1 of this Act, or under the Company Act, or under a former Company Act or Companies Act, as they applied for the purposes of a former Act as defined in section 1 of this Act.
(3) For the purposes of subsection (1) and this Division, a director or officer of an association does not hold a disclosable interest in a contract or transaction merely because
(a) the contract or transaction is an arrangement by way of security for money loaned to, or obligations undertaken by, the director or officer, or a person in whom the director or officer has a material interest, for the benefit of the association or an affiliate of the association,
(b) the contract or transaction relates to an indemnity under section 98 or to insurance under section 103,
(c) the contract or transaction relates to the remuneration of the director or officer in that person's capacity as director, officer, employee or agent of the association or of an affiliate of the association,
(d) the contract or transaction relates to a loan to the association, and the director or officer, or a person in whom the director or officer has a material interest, has guaranteed or joined in guaranteeing the repayment of the loan or any part of the loan,
(e) the contract or transaction has been or will be made with or for the benefit of a corporation that is affiliated with the association and the director or officer is also a director or officer of that corporation,
(f) the contract or transaction is between the association and its wholly owned subsidiary,
(g) the contract or transaction benefits the director or officer on the same terms and conditions as any other member, or any other member in the membership class to which the director or officer belongs, or
(h) the contract or transaction is between the association and another association in which the association is a member and of which the director or officer is a director or officer.
87 (1) A director or officer of an association, in accordance with section 88, must disclose the nature and extent of any disclosable interest held by that person in a contract or transaction unless, before the coming into force of this Act, the disclosable interest was disclosed in the manner and within the time required under a former Act, as defined in section 1 of this Act, or under the Company Act, or under a former Company Act or Companies Act, as they applied for the purposes of a former Act as defined in section 1 of this Act.
(2) The disclosure required from a director or officer under subsection (1) must be made promptly after the last to occur of
(a) the date on which he or she becomes a director or officer,
(b) the date on which he or she becomes aware of having the disclosable interest, and
(c) the date on which he or she becomes aware of any of the following:
(i) the contract or transaction is to be considered at a meeting of the directors or is to be the subject of a consent directors' resolution;
(ii) the association is to become a party to the contract or is to enter into the transaction;
(iii) the contract or transaction has been considered at a meeting of the directors or has been the subject of a consent directors' resolution;
(iv) the association has become a party to the contract or has entered into the transaction.
88 (1) The disclosure required by section 87 is sufficiently given if
(a) it is entered in the minutes of a directors' meeting or of a general meeting,
(b) it appears in a resolution that under this Act is permitted to be passed without a meeting,
(c) it is contained in a record of disclosure provided to the association in relation to the particular contract or transaction, or
(d) it is made in a general notice given in accordance with subsection (2) of this section.
(2) A general written notice given by a director or officer of an association to the directors of the association is a sufficient disclosure of a disclosable interest for the purpose of this Division in relation to any contract or transaction that the association has entered into or proposes to enter into with a person if
(a) the notice
(i) declares that the director or officer giving the notice
(A) is a director or officer of, or has a material interest in, the person with whom the association has entered, or proposes to enter, into a contract or transaction, and
(B) is to be regarded as interested in any contract or transaction entered into or to be entered into by the association with that person, and
(ii) states the nature and extent of that interest, and
(b) at the time disclosure would otherwise be required under section 87, the extent of the director's or officer's interest in the person is not materially greater than that stated in the notice.
(3) Deviations in facts or circumstances from those set out in a general written notice given by a director or officer under subsection (2) that do not affect its substance or are not calculated to mislead do not invalidate the notice.
89 (1) Subject to this section and unless the court declares otherwise under section 93, a director or officer is liable to account to the association for any profit that accrues to the director or officer under or as a result of a contract or transaction in which the director or officer holds a disclosable interest.
(2) A director or officer is not obliged to account for and may retain the profit referred to in subsection (1) if
(a) the disclosable interest was disclosed before the coming into force of this Act in the manner and within the time required, at the time of the disclosure, under a former Act, as defined in section 1 of this Act, under the Company Act, or under a former Company Act or Companies Act, as they applied for the purposes of a former Act as defined in section 1 of this Act, and the contract or transaction was approved
(i) in the manner and within the time required under the applicable Act, or
(ii) in accordance with section 90 of this Act,
(b) the disclosable interest is disclosed in the manner and within the time required by this Act and the contract or transaction is approved in accordance with section 90,
(c) whether or not the contract or transaction is approved in accordance with section 90,
(i) the disclosable interest is disclosed in the manner and within the time required by this Act,
(ii) the association entered into the contract or transaction before the director or officer became a director or officer of the association, and
(iii) the director or officer does not participate in, and, in the case of a director, vote as a director on, any decision or resolution touching on the contract or transaction, or
(d) whether or not the disclosable interest is disclosed, or the contract or transaction is approved, in accordance with this Division, the contract or transaction is determined by the court or by the members, by special resolution, to be fair and reasonable to the association.
(3) Unless the court declares otherwise under section 93, if the contract or transaction referred to in subsection (1) of this section is not one to which subsection (2) applies, a director or officer who holds a disclosable interest in the contract or transaction may retain, if the contract or transaction, after the coming into force of this subsection, is approved in accordance with section 90, that part of the profit referred to in subsection (1) of this section that accrues after the date of approval.
(4) A director or officer is liable to account to the association for that part of the profit referred to in subsection (1) that the director or officer is not expressly permitted to retain by subsection (2) or (3) or by a declaration under section 93.
90 (1) For the purposes of section 89 (2) and (3), a contract or transaction may be approved by the directors of an association or by a special resolution of the members of the association.
(2) The directors may approve a contract or transaction by
(a) a resolution passed at a meeting of the directors in which the director who has a disclosable interest in the contract or transaction abstains from voting on the approval, or
(b) a consent resolution signed by all of the directors except the director who has disclosed a disclosable interest in the contract or transaction.
(3) Unless the rules provide otherwise, a director of the association who has a disclosable interest in a contract or transaction and who is present at the meeting of the directors referred to in subsection (2) may be counted in the quorum at the meeting even though the director does not vote on any or all of the resolutions considered at the meeting.
(4) Despite any other provision of this Act, or the rules of an association, the members, by a special resolution, may approve the contract or transaction or determine that the contract or transaction is fair and reasonable to the association, even though the directors have voted not to approve the contract or transaction.
(5) Despite this section, the directors have no authority to approve a contract or transaction if the members, in a properly constituted general meeting, have voted not to approve the contract or transaction.
91 (1) This section does not apply to associations that under the Securities Act are reporting issuers.
(2) Subject to subsection (4), if the contract or transaction in which a director or officer holds a disclosable interest is approved by the directors under section 90 (2), the directors, in accordance with subsection (3) of this section, must provide a brief description of the interest held by that person, including the nature and extent of the interest.
(3) The information required under subsection (2) must be provided,
(a) if an annual general meeting of the association is held after the date on which approval or affirmation was given, but in the financial year in which that date falls,
(i) at that annual general meeting, and
(ii) in the minutes of that meeting,
(b) if no such annual general meeting is held, as an attachment to the association's financial statements issued for that financial year, or
(c) if no such annual general meeting is held and the production of financial statements for that financial year is waived, in a record, deposited in the registered office of the association promptly after the directors become aware that disclosure cannot be made under paragraph (a) or (b) of this subsection.
(4) Despite subsections (2) and (3), the information referred to in subsection (2)
(a) need not be disclosed in accordance with this section
(i) if disclosure is waived or deferred by the court, or
(ii) if, in the opinion of the directors acting reasonably, the disclosure of that information would be harmful to the business of the association or its subsidiaries, and
(b) must be disclosed in accordance with any order of the court under paragraph (a) (i) deferring disclosure.
(5) The court may make an order under subsection (4) (a) (i) waiving or deferring disclosure
(a) on application by an association or by a director or officer of the association, and
(b) if the court is satisfied that
(i) the contract or transaction is fair and reasonable to the association, and
(ii) disclosure would be harmful to the association or to the director or officer.
92 (1) If a person who is a director or officer of an association holds a disclosable interest in a contract or transaction and fails to make the disclosure required by section 87 or if, after the disclosure is made, the contract or transaction is not approved under section 90, then, unless the members by special resolution determine or the court determines that the contract is fair and reasonable to the association, on the application of any member or investment shareholder of the association the court may
(a) enjoin the association from entering into the proposed contract or transaction,
(b) order the director or officer to account for any profit for which the director or officer is liable to account under section 89, or
(c) make any other or further order that the court considers appropriate.
(2) In an application brought under subsection (1), the court must take into account the interests and rights of any persons involved in or affected by the contract or transaction in question.
93 On the application of any director or officer of an association, the court may make one or more of the following declarations:
(a) whether a contract or transaction in which the director or officer has a disclosable interest is fair and reasonable to the association;
(b) whether the director or officer is obliged to account for any profit that accrues to the director or officer under or as a result of the contract or transaction in which the director or officer has a disclosable interest;
(c) whether the director or officer may retain any or all of the profit referred to in paragraph (b).
94 A contract or transaction with an association is not invalid merely because
(a) a director or officer of the association has an interest, direct or indirect, in the contract or transaction,
(b) a director or officer of the association has not disclosed an interest he or she has in the contract or transaction, or
(c) the directors or members of the association have not approved or affirmed a contract or transaction in which a director or officer of the association has an interest.
95 (1) If a director or officer of an association holds any office or possesses any property, right or interest that could result, directly or indirectly, in the creation of a duty or interest that materially conflicts with that individual's duty or interest as a director or officer, as the case may be, of the association, the director or officer must disclose, in accordance with this section, the nature and extent of the conflict.
(2) Section 88 applies to the disclosure required from a director or officer under subsection (1) of this section and, in addition, a director may make the disclosure required by this section by declaring at a meeting of the directors of the association the nature and extent of the conflict.
(3) The disclosure required from a director or officer under subsection (1) must be made promptly
(a) after that individual becomes a director or officer, or
(b) if that individual is already a director or officer, after that individual begins to hold the office or possess the property, right or interest for which disclosure is required.
96 Except as is provided in this Division, a director or officer of an association has no obligation to
(a) disclose any direct or indirect interest that the director or officer has in a contract or transaction, or
(b) account for any profit that accrues to the director or officer under or as a result of a contract or transaction in which the director or officer has a disclosable interest.
Division 3 -- Indemnification of Directors and Payment of Expenses
97 In this Division:
"associated corporation" means a corporation or entity referred to in paragraph (b) or (c) of the definition of "eligible party";
"eligible party", in relation to an association, means an individual who is or was a director or officer of, or who holds or held a position equivalent to that of a director or officer of,
(a) the association,
(b) another corporation if
(i) the corporation is or was an affiliate of the association, or
(ii) the individual acts or acted as a director or officer of the corporation at the request of the association, or
(c) a partnership, trust, joint venture or other unincorporated entity if the individual acts or acted as or holds or held a position equivalent to that of a director or officer of that entity at the request of the association,
and includes, except in the definition of "eligible proceeding" and except in sections 101 (1) (c) and (d) and 103, the heirs and personal or other legal representatives of that individual;
"eligible penalty" means a judgment, penalty or fine awarded or imposed in, or an amount paid in settlement of, an eligible proceeding;
"eligible proceeding" means a proceeding in which an eligible party or any of the heirs and personal or other legal representatives of the eligible party, because of the eligible party being or having been a director or officer of, or holding or having held a position equivalent to that of a director or officer of, the association or an associated corporation
(a) is or may be joined as a party, or
(b) is or may be liable for or in respect of a judgment, penalty or fine in, or expenses related to, the proceeding;
"expenses" includes costs, charges and expenses, including legal and other fees, but does not include judgments, penalties, fines or amounts paid in settlement of a proceeding;
"proceeding" includes any legal proceeding or investigative action, whether current, threatened, pending or completed.
98 Subject to section 101, an association may do one or both of the following:
(a) indemnify an eligible party against all eligible penalties to which the eligible party is or may be liable;
(b) after the final disposition of an eligible proceeding, pay the expenses actually and reasonably incurred by an eligible party in respect of that proceeding.
99 Subject to section 101, an association, after the final disposition of an eligible proceeding, must pay the expenses actually and reasonably incurred by the eligible party in respect of that proceeding if the eligible party
(a) has not been reimbursed for those expenses, and
(b) is wholly successful, on the merits or otherwise, in the outcome of the proceeding or is substantially successful on the merits in the outcome of the proceeding.
100 (1) Subject to subsection (2), an association may pay, as they are incurred in advance of the final disposition of an eligible proceeding, the expenses actually and reasonably incurred by an eligible party in respect of that proceeding.
(2) An association must not make the payments referred to in subsection (1) unless the association first receives from the eligible party a written undertaking that, if it is ultimately determined that the payment of expenses is not permitted by section 101, the eligible party will repay the amounts advanced.
101 (1) An association must not indemnify an eligible party under section 98 (a) or pay the expenses of an eligible party under section 98 (b), 99 or 100 if any of the following circumstances apply:
(a) if the indemnity is made or proposed in accordance with an earlier agreement to indemnify and, at the time that the agreement to indemnify was made, the association was prohibited by its memorandum or rules from giving the indemnity;
(b) if the indemnity is made or proposed otherwise than in accordance with an earlier agreement to indemnify and, at the time that the indemnity is made or proposed, the association is prohibited by its memorandum or rules from giving the indemnity;
(c) if, in relation to the subject matter of the eligible proceeding, the eligible party did not act honestly and in good faith with a view to the best interests of the association or the associated corporation, as the case may be;
(d) in the case of an eligible proceeding other than a civil proceeding, if the eligible party did not have reasonable grounds for believing that the eligible party's conduct in respect of which the proceeding was brought was lawful.
(2) If an eligible proceeding is brought against an eligible party by or on behalf of the association or by or on behalf of an associated corporation,
(a) the association must not indemnify the eligible party under section 98 (a) in respect of the proceeding, and
(b) the association must not, unless the court orders otherwise, pay the expenses of the eligible party under section 98 (b), 99 or 100 in respect of the proceeding.
102 Despite any other provision of this Division and whether or not payment of expenses or indemnification has been sought, authorized or declined under this Division, on an application by an association or an eligible party, the court may do one or more of the following:
(a) order an association to indemnify an eligible party against any liability incurred by the eligible party in respect of an eligible proceeding other than an eligible proceeding referred to in section 101 (2);
(b) order an association to pay some or all of the expenses incurred by an eligible party in respect of an eligible proceeding;
(c) order the enforcement of, or any payment under, an agreement of indemnification entered into by an association;
(d) order an association to pay some or all of the expenses actually and reasonably incurred by any person in obtaining an order under this section;
(e) make any other order the court considers appropriate.
103 An association may purchase and maintain insurance for the benefit of an eligible party or the heirs and personal or other legal representatives of the eligible party against any liability that may be incurred by reason of the eligible party being or having been a director or officer of, or holding a position equivalent to that of a director or officer of, the association or an associated corporation.
104 An officer of an association who receives or has charge of money of the association must give security before entering on his or her duties, as may be considered necessary by the directors.
105 (1) Every officer of an association, in exercising the officer's powers and performing the officer's functions, must
(a) act honestly and in good faith with a view to the best interests of the association,
(b) exercise the care, diligence and skill that a reasonably prudent person would exercise in comparable circumstances,
(c) act in accordance with this Act and the regulations, and
(d) subject to paragraphs (a) to (c), act in accordance with the association's memorandum and rules.
(2) This section is in addition to, and not in derogation of, any enactment or rule of law or equity relating to the duties or liabilities of officers of corporations.
(3) No provision in a contract or in the rules or the memorandum of an association relieves an officer of the association from
(a) the duty to act in accordance with this Act and the regulations, or
(b) liability that by virtue of any enactment or rule of law or equity would otherwise attach to that officer in respect of any negligence, default, breach of duty or breach of trust of which the officer may be guilty in relation to the association.
106 Every act of an officer of an association is valid, despite any defect in the officer's appointment or qualification.
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