Fix your corporate year-end headaches with rectification orders

Corporate law practice presents many opportunities to commit minor slips and errors. Shareholders go missing. Paralegals forget to file annual reports. Resolutions transpose vertical amalgamation approvals for horizontal amalgamations. Often, these corporate errors go unnoticed, and everyone proceeds with business as usual - until an event like a closing or a CRA audit comes up. In those circumstances, solicitors scramble to fix those irregularities. Sometimes, it is not possible or practical to fix them with director or shareholder resolutions. The practice of “slip sheeting” is not a practical solution. The BC Business Corporations Act can help.

The Business Corporations Act gives the BC Supreme Court extensive powers to effect practical solutions to many irregularities in corporate practice. Specifically, sections 229 and 230 of the Business Corporations Act codifies the court’s equitable jurisdiction to fashion these remedies. Here are some examples of rectification orders that Ascendion Law has obtained on behalf of solicitors:

• making a misfiled Notice of Alteration purporting to create a new share class effectively retroactively, almost a decade after the new share class was supposed to have been created;
• validating an amalgamation that had been defectively approved by the shareholders and directors of the predecessor companies;
• declaring that a company will not suffer consequences when it failed to hold annual general meetings for over a decade, where one of the shareholders required to sign a unanimous shareholder resolution to rectify that deficiency retroactively went missing;
• issuing or allotting shares;
• ratifying the election of officers.

In most cases, these applications can proceed quickly since no one contests them. Theoretically, a firm can prepare and file the application and supporting affidavits, and then obtain the court order within a working week – or faster in cases of actual and material urgency. If company management is unsure whether the application can proceed without dissent, the company can obtain the order and allow for a “call back” procedure. In such a process, the court grants the order but makes it subject to a delay during which the company advises the stakeholders who have an interest in the order and allows them to file dissents with the court. Practically, no one dissents and the rectification orders are finalized within a few weeks.

If the instructing solicitor can involve themselves actively to brief the litigator, the litigator can prepare these applications efficiently and at a lower cost since the solicitor is more familiar with the corporate records. Once that supporting affidavit is drafted, the legal principles can be expressed quickly in a Notice of Application. For corporate procedures that may require a significant number of duplicative resolutions, a court application may not only be less expensive for the client but may entail lower execution risk.

Solicitors should consider these applications when obtaining shareholder or director approval is not practical or strategically unwise. They can be obtained quickly and with relatively little cost. They are a useful and practical tool for any corporate practice.