PHASES OF COMPANY LAW IN CANADA.

6

The Canadian Bar Association performs a great service by investigation of the law relating to companies and the promotion of uniformity in that branch of legislation. The subject is one to which the general methods of codification are applicable, and there seems to be no inherent reason why such law throughout Canada should not be approximately standardised.' Mr. Wegenast's Memorandum, prepared for the Bar Association and published in your February issue, sets forth succinctly many of the questions which should be threshed out, when the piping days of peace return, and should stimulate thought on the whole matter. While the recent decisions in the Privy Council' serve to elucidate some problems, others almost as obscure and formidable emerge as a sequel. Why should we not profit by experience? Even friendly litigation is a poor method of defining the boundaries of federal and provincial legislation in affairs of such wide concern to the community, and is at the same time a dilatory and tedious method. A conference between representatives of the Governments interested would surely achieve far more than a sheaf of judgments. The terms of settlement could, if necessary, be embodied in an amendment to the British North America Act.

The situation to-day is a medley. Conflicting jurisdictions, dubious capacities, divergent systems of incorporation, heterogeneous measures relating to extraprovincial companies, distinct Acts relating to cer-tain classes of business, public utility commissions and 'blue-sky' laws combine to make this field of law a study for experts. Moreover, the tendency is to increase the complexity in answer to popular demands

1John Deere Plow Co. v. Wharton, [1915] A. C. 330; Bonanza Creek Gold Mining Co. v. The King, [1916] A. C. 566; Attorney-General for Canada v. Attorney-General for Alberta, [1916] A. C. 588: Attorney-General for Ontario v. Attorney-General for Canada, [1916] A. C. 598.

of all sorts for stricter control of company promotion, capitalisation, and so forth. Of these problems some are peculiar to us-others world-wide-others spring from evils which have long taxed the ingenuity of reformers and may prove insoluble. Perfection is doubtless not to be attained. But the business man and investor-to say nothing of the lawyer-may reasonably demand at least more certainty in the law and clearer landmarks than now exist. Conditions must be boldly faced, even if the knife be needed and some sacrifices have to be made.

Questions which should, I suggest, receive an early and precise answer are (1) whether the system of incorporation by letters patent or by memorandum of association is to prevail in Canada, and (2) what are to be the limits of federal and provincial jurisdiction in respect to companies.

(1) Letters Patent v. Memorandum of Association. The system of incorporation by letters patent is employed by the Dominion, and the Provinces of Quebec, Ontario, New Brunswick and Manitoba-the rival system is maintained in the Provinces of Nova Scotia, Saskatchewan, Alberta and British Columbia, Prince Edward Island, the Yukon Territory and Newfoundland. In the discussion of this subject our relation to the Empire should, I venture to submit, be given a prominent place; the question in that light ceases to be merely Canadian and becomes Imperial.

At the Imperial Conference held in 1907, the following resolution was unanimously adopted :

"That it is desirable, so far as circumstances permit, to secure greater uniformity of the company laws of the Empire, and that the Memorandum and Analysis prepared on this subject by the Imperial Government be noted for the consideration of the various governments represented at the Conference."

In 1908 the Imperial Companies Acts were consolidated in a new Act entitled the Companies (Consolidation) Act, 1908. It has been adopted (with modifica

tions) in various parts of the Empire, although not so widely as might have been anticipated.

One great benefit from such uniformity may be noticed at this point. It is well expressed in a report of the Chamber of Commerce of Victoria (Aus.), from which this is an extract :

"We strongly approve of the desire which has been manifested to assimilate our law to the English Companies Act, 1908, and consider that the more nearly our law is made to resemble the English Act, the greater will be the advantage, as the legal profession and the Courts will then have the advantage of the English text books and decisions explaining and interpreting the law. This in our opinion will make for certainty, and we deprecate anything in the nature of trifling deviations from the English Act that will tend to have an opposite effect."

The last sentence contains a pious wish, which can hardly be realised. Even its authors would not advance a claim of ne plus ultra for the parent Act. The gain will be big, if its main principles and framework are assimilated and preserved.

The strong desire of the Dominions to play a larger part in Imperial affairs and to that end to bring about some organic reform will tend to aid the movement towards uniformity in laws. The subject of companies is of a commercial nature, and a type of Act in common use will facilitate that growth of trade relations throughout the Empire, which is so prominently advocated as a lesson of the war.

So far as I can ascertain, the Imperial Act of 1908 (with modifications) is now in force in Prince Edward Island, British Columbia, Alberta, Saskatchewan, the Yukon, Victoria, New Zealand, the Fiji Islands, the Transvaal, Mauritius, Southern Nigeria, India, the Straits Settlements, Hong Kong, British Honduras, British Guiana, Trinidad and Tobago. The Imperial Act of 1862 has been adopted or adapted in Nova Scotia, New South Wales, Queensland, South Australia, Western Australia, Tasmania, Cape Colony, Natal, Orange Free State and a host of Crown Colonies. Thus, so far as

the Empire is concerned, the prerogative charter is evidently in a desperate minority. Its case is not improved when we turn to foreign countries. Across the line our neighbours in the United States almost universally, I believe, employ a method of incorporation which is close brother to the British system. Different terms are used and the provisions for organisation and procedure vary. But such differences consist rather in form than substance. In Europe the voluntary method of association, subject to statutory regulation, everywhere prevails. In France, Belgium, Holland, Germany, Sweden and Norway, for example, are found laws on that model. The Japanese law follows similar lines.

One would not expect to find any other system under a republican form of government. In the presence of its doctrines there could exist no fountain head from which a charter could derive. But it is noteworthy that even in monarchical countries the original method of creating a corporation has been practically abandoned. In the United Kingdom only corporations of a highly public character are now established by royal charter. The truth may be that the exercise of such prerogative power is deemed archaic and unsuited to modern conditions. In the light of these facts the system of letters patent, as the common means of incorporation, should perhaps bow gracefully to the opinion of the majority and retire.

The merits of the two systems should also be reviewed from the standpoint of practical government. Is the incorporation of the multifarious companies of to-day appropriate business for the executive branch of the State? Is it not merely a matter of formal administration, akin to the registration of title? No question of policy is involved-no special privilege or franchise is claimed. Certain persons agree to do something together according to law and in return for certain rights are saddled with a corresponding lia

VOL. XXXVII. C.L.T.-47

bility. Again, after incorporation, the Court and not the Council-chamber appears to be the natural forum, and, if not the regular Court, some department of a quasi-judicial character. If the executive officer acts merely in a ministerial capacity and cannot refuse an application a position which is inconsistent with the notion inherent in a charter-there can be no point in retaining a system whose virtue is obsolete. The solemn title of letters patent is a misnomer, for the grace has departed from it.

A serious feature, so far as concerns the provinces, arises out of the distinction drawn in the Bonanza Creek Case between the capacities of companies incorporated under the two systems. If a company incorporated by letters patent has a capacity superior to a company incorporated under the registration system and can thus travel outside its geographical and (apparent) statutory boundaries, it will be a hard task to persuade those provinces to exchange their system for one of inferior efficacy. The fact that the doctrine of ultra vires is not applicable will have to be reckoned with. Objection based on these grounds is not perhaps so weighty as it may sound.

Alberta has already passed an Act endowing its companies with the capacity which, according to the judgment in the Bonanza Creek Case, they lacked. There is little doubt that a province may bestow such authority. Speaking of companies incorporated under a memorandum of association-the observation applies equally to a company created by special ActLord Haldane says:*

"The capacity of such a company may be limited to capacity within the province, either because the memorandum of association has not allowed the company to exist for the purpose of carrying on any business outside the provincial boundaries, or because the statute under which the incorporation took place did not authorize, and therefore excluded, incorporation for such a purpose."

Bonanza Creek Mining Company Case, ubi supra, at p. 584.