mercredi 3 octobre 2012

The judge possesses broad powers when dealing with an order of winding-up of a corporation under the CBCA

by Adam Eidelmann
Cabinet Gamliel, avocats

It is no secret that the winding-up of a corporation and its liquidation is often a complicated process, frequently involving multiple parties and diverging interests. For these reasons, we draw your attention to a recent decision Hollinger v. Hollinger (2012 QCCA 1682) a recent decision of the Quebec Court of Appeal where the Appellant requested that a provision be made under section 217 of the Canada Business Corporations Act (CBCA).
 

In the case at hand, the Appellant Sarah Kopyto Hollinger had asked pursuant to section 217 (h) of the CBCA that a provision be made on the occasion of the liquidation of 157198 Canada Inc. The purpose of her request was in order to protect her monetary interests subsequent to the signing of a unanimous shareholders agreement with the said company’s shareholders.
 
The Honourable Madam Justice Chantal Corriveau of the Superior Court declined to grant the order sought by the Appellant, whom was one of the shareholders. In a unanimous decision rendered by the Court of Appeal, they upheld the decision of the motions judge.
 
The Court states the following to substantiate its decision: 
[11] We cannot accept the Appellant's submission that the agreement would give her an unconditional right to claim funds, at her own and sole discretion, and with no obligation to establish, or even allege, a need.   
[...]
[13] In such a framework, it is obvious that the words «require» and «still require» mean need, not just want.  
[...] 
[15] S. 217 of the CBCA grants Courts broad discretionary powers in the liquidation process, including the power to make provisions for the payment of liquidated, unliquidated, future or contingent obligation of the corporation. 
[16] The judge did not fail to recognize that s. 217 (h) of the CBCA allowed her to make a provision. In paragraphs 104 to 112 of her judgment, she expressly acknowledges that she has a discretion in that regard, despite the fact that the liquidation of the Company is not a scenario contemplated in the agreement. 
[17] The judge did not conclude that there was a legal impediment to the making of an order. While she accepted that an order could be made in theory, she concluded that it should not be made in the particular circumstances of the case and in light of the reasonable expectations of the Appellant. 
[...] 
[19] The facts establishing that in the future, and in all likelihood, the Appellant would not need funds to attend to her needs, as noted by the judge in paragraphs 98 to 100 of her judgment, provided the backdrop against which she had to exercise her discretion and she acted accordingly.
The full text of the decision is available here: http://bit.ly/P91428
 
Neutral reference: [2012] ABD 353

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