Anonymised, illustrative composite. A structural step taken before the deal starts, gated twice: once by the shareholders and once by the Director, with a dissent right of its own attached.
At a glance
The group in a plan of arrangement because nothing else fit needed to reach a corporate statute whose arrangement provision had no solvency gate. The route was a continuance out of the CBCA under s.188. See continuance under the CBCA and setting up a Canadian acquisition vehicle.
The capital structure was 4,000 voting common shares, held by the two founders and a management holder, and 1,800 non-voting preferreds issued to three family members in the 2014 freeze — 900, 600 and 300. The preferreds had never voted on anything. Nobody expected them to vote on this.
The deal team's vote count was 2,900 in favour and 900 against out of 3,800 common votes cast, with 200 not voted: 76.3%, comfortably over the two-thirds a special resolution needs. Under s.2(1) of the Act a special resolution means one “passed by a majority of not less than two-thirds of the votes cast by the shareholders who voted in respect of that resolution”, or signed by all shareholders entitled to vote on it.
Two of the three preferred holders opposed the move — not on the merits of Alberta corporate law, but because they had understood their preferreds to be a fixed, quiet entitlement and the continuance made them nervous about a jurisdiction they had never heard of. Under the team's model their views were irrelevant. They were not.
Counting the preferreds, votes cast go from 3,800 to 5,600. The 900 and 600 blocks vote against; the 300 block votes in favour. Votes in favour become 2,900 + 300 = 3,200.
3,200 of 5,600 is 57.1%. The threshold is 66.7%. The resolution fails by 537 votes, on a class the notice of meeting had not been drafted to reach and the proxy solicitation had not contacted.
Section 188(4) is a single sentence and it is the whole file: “Each share of the corporation carries the right to vote in respect of a continuance whether or not it otherwise carries the right to vote.” The unit is the share, not the voting class. A continuance changes the statute under which every holder's rights exist, so the Act gives every holder a say — and it does so by enlarging the denominator, which is exactly where a vote model built from the share register goes wrong.
Section 188(1) then imposes two conditions, and only one of them is a vote. The corporation may apply to be continued elsewhere if it “(a) is authorized by the shareholders in accordance with this section to make the application; and (b) establishes to the satisfaction of the Director that its proposed continuance in the other jurisdiction will not adversely affect creditors or shareholders of the corporation”. Limb (b) is a regulator gate, it names creditors first, and it is available to a creditor who objects even where every shareholder has voted in favour. A continuance is not a purely internal decision.
Section 188(5) sets the standard — authorisation “becomes authorized when the shareholders voting thereon have approved of the continuance by a special resolution” — and s.188(10) adds a jurisdictional condition that limits where a company can go: it “shall not be continued as a body corporate under the laws of another jurisdiction unless those laws provide in effect that (a) the property of the corporation continues to be the property of the body corporate”, that the body corporate remains liable for the obligations, that existing causes of action are unaffected, that pending proceedings may be continued, and that convictions, rulings, orders and judgments remain enforceable. Not every jurisdiction qualifies.
And the continuance carries its own dissent right, before the sale it was meant to enable. Section 190(1) lists, among the triggers, a resolution to be continued under section 188. There is a trap in how that interacts with notice. Section 188(3) requires the notice of meeting to state that a dissenting shareholder is entitled to be paid fair value, “but failure to make that statement does not invalidate a discontinuance under this Act”. That looks like a let-off and is the opposite of one: omitting the statement does not save the transaction, and under s.190(5) a dissenting shareholder need not send a written objection before the meeting at all where “the corporation did not give notice to the shareholder of the purpose of the meeting and of their right to dissent”. A defective notice removes the shareholder's procedural obligation while leaving the corporation's exposure exactly where it was.
The resolution was pulled two days before the meeting once the share count was redone. The continuance was abandoned and the reorganisation was rebuilt as a sequence of ordinary steps under the CBCA, taking four months and costing the group the single effective time its buyer had asked for. The price was re-cut, and the nine weeks and $140,000 already spent on the continuance bought nothing.
What would have worked was ordinary and cheap: count the votes under s.188(4) before choosing the route, and talk to the preferred holders in week one rather than assuming a class that has never voted never will. Two of the three opposed the move because nobody had explained it to them; a class that had been ignored for eleven years was handed a veto by a subsection and used it.
The inbound direction runs on a different gate, which matters to a buyer thinking of moving a target into the CBCA. Section 187(1) provides that “A body corporate incorporated otherwise than by or under an Act of Parliament may, if so authorized by the laws of the jurisdiction where it is incorporated, apply to the Director for a certificate of continuance.” The permission comes from the home jurisdiction. Section 187(2) also allows the body corporate, on the way in, to effect by its articles of continuance any amendment a CBCA corporation could make to its own articles, without having to say so in them.
So the two directions are not mirror images. Going out, the CBCA gates the exit on the Director's satisfaction about creditors and shareholders, gives every share a vote and generates a dissent right. Coming in, the CBCA asks whether the other jurisdiction permits it and lets amendments ride along. Which statute a target lives under decides its dissent triggers, its oppression standing, its director-residency rules and which reorganisation routes are open — and moving it is a transaction in its own right, not a piece of housekeeping done before the real one starts.
A vote model built from the voting register on a resolution that is not an ordinary resolution. Continuance is one of a small number of CBCA matters where the franchise is wider than the articles suggest, and the register is organised by class rather than by resolution type, so the error is structural rather than careless. The second tell is a class of shares nobody has spoken to since it was issued — a freeze class held by family members is exactly that, and s.188(4) is the day it matters.
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