|Written by Me Sébastien Fiset , LL.B., B.A.A.
|Monday, 06 April 2020 18:00
CONSTITUTION AND KINDS OF LEGAL PERSONS
298. Legal persons are endowed with juridical personality.
Legal persons are established in the public interest or for a private interest.
299. Legal persons are constituted in accordance with the juridical forms provided by law, and sometimes directly by law.
Legal persons exist from the coming into force of the Act or from the time provided thereby if they are established in the public interest or are constituted directly by law or by operation of law; otherwise, they exist from the time provided by the Acts that are applicable to them.
300. Legal persons established in the public interest are primarily governed by the special Acts by which they are constituted and by those which are applicable to them; legal persons established for a private interest are primarily governed by the Acts applicable to their particular type.
Both kinds of legal persons are also governed by this Code where the provisions of such Acts require to be complemented, particularly with regard to their status as legal persons, their property or their relations with other persons.
EFFECTS OF JURIDICAL PERSONALITY
301. Legal persons have full enjoyment of civil rights.
302. Every legal person has a patrimony which may, to the extent provided by law, be divided or appropriated to a purpose. It also has the extra-patrimonial rights and obligations flowing from its nature.
303. Legal persons have capacity to exercise all their rights, and the provisions of this Code concerning the exercise of civil rights by natural persons are applicable to them, adapted as required.
They have no incapacities other than those which may result from their nature or from an express provision of law.
304. Legal persons may not exercise tutorship or curatorship to the person.
They may, however, to the extent that they are authorized by law to act as such, hold office as tutor or curator to property, liquidator of a succession, sequestrator, trustee or administrator of another legal person.
305. Every legal person has a name which is assigned to it when it is constituted, and under which it exercises its rights and performs its obligations.
It shall be assigned a name which conforms to law and which includes, where required by law, an expression that clearly indicates the juridical form assumed by the legal person.
306. A legal person may engage in an activity or identify itself under a name other than its own name. It shall give notice to the enterprise registrar by filing a declaration to that effect in accordance with the Act respecting the legal publicity of enterprises (chapter P-44.1) and, if the legal person is a syndicate of co-owners, apply for the registration of such a notice in the land register.
307. The domicile of a legal person is at the place and address of its head office.
308. A legal person may change its name or its domicile by following the procedure established by law.
309. Legal persons are distinct from their members. Their acts bind none but themselves, except as provided by law.
310. The functioning, the administration of the patrimony and the activities of a legal person are regulated by law, the constituting act and the by-laws; to the extent permitted by law, they may also be regulated by a unanimous agreement of the members.
In case of inconsistency between the constituting act and the by-laws, the constituting act prevails.
311. Legal persons act through their organs, such as the board of directors and the general meeting of the members.
312. A legal person is represented by its senior officers, who bind it to the extent of the powers vested in them by law, the constituting act or the by-laws.
313. The by-laws of a legal person establish contractual relations between the legal person and its members.
314. A legal person exists in perpetuity unless otherwise provided by law or its constituting act.
315. The members of a legal person are bound towards the legal person for anything they have promised to contribute to it, unless otherwise provided by law.
316. In case of fraud with regard to the legal person, the court may, on the application of an interested person, hold the founders, directors, other senior officers or members of the legal person who have participated in the alleged act or derived personal profit therefrom liable, to the extent it indicates, for any injury suffered by the legal person.
317. The juridical personality of a legal person may not be invoked against a person in good faith so as to dissemble fraud, abuse of right or contravention of a rule of public order.
318. The court, in deciding an action brought by a third person in good faith, may rule that a person or group not having the status of a legal person is bound in the same way as a legal person, if the person or group acted as such towards the third person.
319. A legal person may ratify an act performed for it before it was constituted; it is then substituted for the person who acted for it.
The ratification does not effect novation; the person who acted has thenceforth the same rights and is subject to the same obligations as a mandatary with respect to the legal person.
320. A person who acts for a legal person before it is constituted is bound by the obligations so contracted, unless the contract stipulates otherwise and includes a statement to the effect that the legal person might not be constituted or might not assume the obligations subscribed in the contract.
OBLIGATIONS AND DISQUALIFICATION OF DIRECTORS
321. A director is considered to be the mandatary of the legal person. He shall, in the performance of his duties, conform to the obligations imposed on him by law, the constituting act or the by-laws and he shall act within the limits of the powers conferred on him.
322. A director shall act with prudence and diligence.
He shall also act with honesty and loyalty in the interest of the legal person.
323. No director may mingle the property of the legal person with his own property nor may he use for his own profit or that of a third person any property of the legal person or any information he obtains by reason of his duties, unless he is authorized to do so by the members of the legal person.
324. A director shall avoid placing himself in any situation where his personal interest would be in conflict with his obligations as a director.
A director shall declare to the legal person any interest he has in an enterprise or association that may place him in a situation of conflict of interest and of any right he may set up against it, indicating their nature and value, where applicable. The declaration of interest is recorded in the minutes of the proceedings of the board of directors or the equivalent.
325. A director may, even in carrying on his duties, acquire, directly or indirectly, rights in the property under his administration or enter into contracts with the legal person.
The director shall immediately inform the legal person of any acquisition or contract described in the first paragraph, indicating the nature and value of the rights he is acquiring, and request that the fact be recorded in the minutes of proceedings of the board of directors or the equivalent. He shall abstain, except in case of necessity, from the discussion and voting on the question. This rule does not, however, apply to matters concerning the remuneration or conditions of employment of the director.
326. Where the director of a legal person fails to give information correctly and immediately of an acquisition or a contract, the court, on the application of the legal person or a member, may, among other measures, annul the act or order the director to render account and to remit the profit or benefit realized to the legal person.
The action may be brought only within one year after knowledge is gained of the acquisition or contract.
327. Minors, persons of full age under tutorship or curatorship, bankrupts and persons prohibited by the court from holding such office are disqualified for office as directors.
However, minors and persons of full age under tutorship may be directors of associations constituted as legal persons that do not aim to make pecuniary profits and whose objects concern them.
328. The acts of a director or senior officer may not be annulled on the sole ground that he was disqualified or that his designation was irregular.
329. The court, on the application of an interested person, may prohibit a person from holding office as a director of a legal person if the person has been found guilty of an indictable offence involving fraud or dishonesty in a matter related to legal persons, or who has repeatedly violated the laws relating to legal persons or failed to fulfil his obligations as a director.
330. No prohibition may extend beyond five years from the latest act charged.
The court may lift the prohibition under the conditions it sees fit, on the application of the person concerned by the prohibition.
JUDICIAL ATTRIBUTION OF PERSONALITY
331. Juridical personality may be conferred retroactively by the court on a legal person which, before being constituted, had publicly, continuously and unequivocally all the appearances of a legal person and acted as such towards both its members and third persons.
The authority that should originally have overseen the constitution of the legal person must first consent to the application.
332. Any interested person may intervene in the proceedings or contest a judgment which, in fraud of his rights, has attributed juridical personality.
333. The judgment confers juridical personality from the date it indicates. It in no way alters the rights and obligations existing on that date.
A copy of the judgment is transmitted without delay by the clerk of the court to the authority which accepted or issued the constituting act of the legal person. Notice of the judgment shall be published by the authority in the Gazette officielle du Québec.
PROVISIONS APPLICABLE TO CERTAIN LEGAL PERSONS
334. Legal persons assuming a juridical form governed by another title of this Code are subject to the rules of this chapter; the same applies to any other legal person if the Act by which it is constituted or which applies to it so provides or indicates no other rules of functioning, dissolution or liquidation.
They may, however, make derogations in their by-laws from the rules concerning their functioning, provided the rights of the members are safeguarded.
FUNCTIONAL STRUCTURE OF LEGAL PERSONS
§ 1. — Administration
335. The board of directors manages the affairs of the legal person and exercises all the powers necessary for that purpose; it may create management positions and other organs, and delegate the exercise of certain powers to the holders of those positions and to those organs.
The board of directors adopts and implements management by-laws, subject to approval by the members at the next general meeting.
336. The decisions of the board of directors are taken by the vote of a majority of the directors.
337. Every director is, with the other directors, liable for the decisions taken by the board of directors unless he requested that his dissent be recorded in the minutes of proceedings or the equivalent.
However, a director who was absent from a meeting of the board is presumed not to have approved the decisions taken at that meeting.
338. The directors of a legal person are designated by the members.
No one may be designated as a director without his express consent.
339. The term of office of directors is one year; at the expiry of that period, their term continues unless it is revoked.
340. The directors fill the vacancies on the board. Vacancies on the board do not prevent the directors from acting; if their number has become less than a quorum, the remaining directors may validly convene the members.
341. Where the board is prevented from acting according to majority rule or another specified proportion owing to an impediment or the systematic opposition of some directors, the others may act alone for conservatory acts; they may also, with the authorization of the court, act alone for acts requiring immediate action.
Where the situation persists and the administration is seriously impeded as a result, the court, on the application of an interested person, may exempt the directors from acting in the specified proportion, divide their duties, grant a casting vote to one of them or make any order it sees fit in the circumstances.
342. The board of directors keeps the list of members and the books and registers necessary for the proper functioning of the legal person.
The documents referred to in the first paragraph are the property of the legal person and the members have access to them.
343. The board of directors may designate a person to keep the books and registers of the legal person.
The designated person may issue copies of the documents deposited with him; until proof to the contrary, the copies are proof of their contents without any requirement to prove the signature affixed to them or the authority of the author.
344. If all the directors are in agreement, they may participate in a meeting of the board of directors by the use of a means which allows all those participating to communicate directly with each other.
§ 2. — General meeting
345. The general meeting is convened each year by the board of directors, or following its directives, within six months after the close of the financial period.
The first general meeting is held within six months from the constitution of the legal person.
346. The notice convening the annual general meeting indicates the date, time and place of the meeting and the agenda; it is sent to each member qualified to attend, not less than 10 but not more than 45 days before the meeting.
Ordinary business need not be mentioned in the agenda of the annual meeting.
347. The notice convening the annual general meeting is accompanied by the balance sheet, the statement of income for the preceding financial period and a statement of debts and claims.
348. No business may be discussed at a general meeting except that appearing on the agenda, unless all the members entitled to be convened are present and consent. However, at an annual meeting, each member may raise any question of interest to the legal person or its members.
349. The proceedings of the general meeting are invalid unless a majority of the members qualified to vote are present or represented.
350. A member may be represented at a general meeting if he has given a written mandate to that effect.
351. Decisions of the meeting are taken by a majority of the votes cast.
The vote of the members is taken by a show of hands or, upon request, by secret ballot.
352. If they represent 10% of the votes, members may require the directors or the secretary to convene an annual or special general meeting, stating in a written notice the business to be transacted at the meeting.
If the directors or the secretary fail to act within 21 days after receiving the notice, any of the members who signed it may convene the meeting.
The legal person is bound to reimburse to the members the useful expenses incurred by them to hold the meeting, unless the meeting decides otherwise.
§ 3. — Provisions common to meetings of directors and general meetings
353. The directors or the members may waive the notice convening a meeting of the board of directors, a general meeting or a meeting of any other organ.
The mere presence of the directors or the members is equivalent to a waiver of the convening notice unless they are attending to object that the meeting was not regularly convened.
354. Resolutions in writing signed by all the persons qualified to vote at a meeting are as valid as if passed at a meeting of the board of directors, at a general meeting or at a meeting of any other organ.
A copy of the resolutions is kept with the minutes of proceedings or the equivalent.
DISSOLUTION AND LIQUIDATION OF LEGAL PERSONS
355. A legal person is dissolved by the annulment of its constituting act or for any other cause provided for by the constituting act or by law.
It is also dissolved where the court confirms the fulfilment of the condition attached to the constituting act, the achievement of the object for which the legal person was constituted or the impossibility of achieving it, or the existence of some other legitimate cause.
356. A legal person may also be dissolved by consent of not less than two-thirds of the votes cast at a general meeting convened expressly for that purpose.
The notice convening the meeting shall be sent not less than 30 days but not more than 45 days before the meeting and not at an inopportune moment.
357. The juridical personality of the legal person continues to exist for the purposes of the liquidation.
358. The directors shall give notice of the dissolution to the enterprise registrar by filing a declaration to that effect in accordance with the Act respecting the legal publicity of enterprises (chapter P-44.1) and, if the legal person is a syndicate of co-owners, apply for the registration of the notice in the land register. They shall also appoint a liquidator, according to the by-laws, who shall proceed immediately with the liquidation.
If the directors fail to fulfil these obligations, they may be held liable for the acts of the legal person, and any interested person may apply to the court for the appointment of a liquidator.
359. Notice of the appointment of a liquidator, as also of any revocation, is filed in the same place and in the same manner as the notice of dissolution. The appointment and revocation may be set up against third persons from the filing of the notice in the enterprise register kept under Chapter II of the Act respecting the legal publicity of enterprises (chapter P-44.1).
360. The liquidator is seized of the property of the legal person and acts as an administrator of the property of others charged with full administration.
The liquidator is entitled to require from the directors and the members of the legal person any document and any explanation concerning the rights and obligations of the legal person.
361. The liquidator first repays the debts, then effects the reimbursement of the capital contributions.
The liquidator, subject to the provisions of the following paragraph, then partitions the assets among the members in proportion to their rights or, otherwise, in equal portions, following if need be the rules relating to the partition of property in undivided co-ownership. Any residue devolves to the State.
If the assets include property coming from contributions of third persons, the liquidator shall remit such property to another legal person or a trust sharing objectives similar to those of the legal person being liquidated; if that is not possible, it devolves to the State or, if of little value, is shared equally among the members.
362. The liquidator retains the books and records of the legal person for five years from the closing of the liquidation; he holds them for a longer period if the books and records are required as evidence in proceedings.
He disposes of them thereafter as he sees fit.
363. Unless the liquidator obtains an extension from the court, the Minister of Revenue undertakes or continues a liquidation that is not terminated within five years from the filing of the notice of dissolution.
The Minister of Revenue has, in that case, the same rights and obligations as a liquidator.
364. The liquidation of a legal person is closed by the filing of a notice of closure in the same place and in the same manner as the notice of dissolution. The filing of the notice in the register cancels any other registrations concerning the legal person.
Last Updated on Monday, 06 April 2020 18:00