- Amendments to the Nova Scotia Companies Act
- June 27, 2008 | Author: Maurice P. Chiasson
- Law Firm: Stewart McKelvey - Halifax Office
Conducting Business in Nova Scotia Made More Efficient
On May 28, 2008 several significant amendments to the Nova Scotia Companies Act were proclaimed. The Government of Nova Scotia, in consultation with the Nova Scotia Barristers’ Society, has enacted a number of positive changes to make doing business in the Province more efficient and less costly. These revisions will come into effect on June 1 of this year.
Nova Scotia has long been a popular jurisdiction for companies due to its flexible rules. Over the years, however, certain issues arose with the legislation which created problems for many common transactions involving Nova Scotia companies. These amendments are largely aimed at resolving these issues and allowing Nova Scotia companies the same advantages found in other Canadian corporate statutes while retaining much of the flexibility for which the Companies Act is known.
The Province of Nova Scotia accepted all of the recommendations of the Nova Scotia Barristers’ Society Steering Committee on changes to the Companies Act.
The following is a brief description of the principal changes:
Amalgamating without court approval: Nova Scotia has been the only jurisdiction in Canada requiring that the court approve amalgamations. While court approved amalgamations will still be possible, there will now be a procedure similar to that used nearly everywhere else where the Registrar can implement an amalgamation over-the-counter so long as solvency declarations are provided. In certain cases, "short form" amalgamations of closely related companies will be possible without amalgamation agreements or shareholder approval.
Modernizing financial assistance restrictions: Currently, leveraged buyouts and some corporate reorganizations are not easily achieved in Nova Scotia due to rules that prohibit Nova Scotia companies giving financial assistance toward the purchase of their shares. The new rules will effectively permit assistance to be given except where it would be oppressive to the interests of shareholders or creditors.
Converting corporations into unlimited companies (ULCs): The new rules allow continuance from another jurisdiction directly as a ULC without the need to amalgamate. Similarly, limited companies already in Nova Scotia can convert to ULCs by unanimous shareholder resolution.
Paid up capital: It will become possible for shareholders of companies to add capital without issuing more shares. In particular, it will now be possible to capitalize "contributed surplus" by resolution.
Capital reductions: It will no longer be necessary for a limited company to go to court in order to reduce its capital if it can meet a solvency test. Unlimited companies will continue to be able to reduce capital by resolution.
Requirements for shareholder special resolutions become similar to other jurisdictions: Until now, so-called "special resolutions" (needed for fundamental changes) have required three-quarters of the votes represented at a meeting followed by a bare majority at a second, confirmatory meeting. Amendments reduce this to two-thirds going forward and eliminate the confirmation requirement. Existing companies will be bound by the old majority requirement (but not the need for a confirmatory meeting) unless they adopt the new threshold.
Location of corporate records: Companies will no longer need to keep their main share transfer register and other corporate records at their registered office (i.e., in Nova Scotia). It will still be necessary for records to be accessible electronically from the registered office.
Restoration of wound-up companies: Currently, companies that dissolve voluntarily cannot be restored. New rules will allow the Registrar to restore any dissolved company if it meets certain traditional requirements.
While these recent changes in Nova Scotia do not represent a complete overhaul of the Companies Act, they do represent a significant series of amendments addressing many of the concerns that have created problems with the existing legislation. These changes make the conducting of business in Nova Scotia more efficient and less costly.