The TeleMark

The official publication dealing with Canadian corporate and commercial law

June 1999

Volume 6 -- Number 6

Summary

Jurisprudence in company law
Jurico

Actuality in company law

  1. A company, belonging to an individual, who is an undivided owner is considered a third person to an undivided co-ownership.

  2. A search warrant addressed to a business is annulled.

  3. A company with one shareholder can not claim the privilege of unseizability created in favour of work instruments.

  4. A business, having ceased it activities, has the right to the protection of its confidential information.
  1. Corporate names, trade-marks and registered names - the terminology for concrete utilisation

  2. Government delays

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JURISPRUDENCE IN COMPANY LAW
Jurico

  1. Articles 1002 C.C.Q. provides that when one of the owners in an undivided ownership "learns that a third person has acquired, by onerous title, the share of another undivided co-owner", he may exclude the third person from the joint ownership by reimbursing him for the transfer price.
 

An action by which the plaintiff François Saucier, one of the undivided owners of a property, requests that the defendant, Progiciels P.C.-Impôt Inc. ("Progiciels") transfer its share in the property pursuant to articles 1022 of the Civil Code of Quebec (CCQ). This article provides that when one of the joint owners of a undivided ownership "learns that a third person has acquired, by onerous title, the share of another undivided co-owner, he may exclude the third person from the joint ownership by reimbursing him for the transfer price. Progiciels is a company belonging to the brother of the plaintiff, Marcel Saucier. It acquired its share of the property from the latter for the amount of $1.

Progiciels pleaded that the recourse provided by article 1022 (CCQ) does not apply because it is not a third person to the undivided ownership. It is, ain fact the alter ego of Marcel Saucier, who owns 100% of its shares and is its guiding spirit. The court noted that Marcel Saucier and the defendant have distinct legal personalities. It is of the opinion that " while is true that certain jurisprudential authorities have held that the civil liability or the criminal guilt of a legal person may be engaged by the acts of its alter ego, these precedents do not apply in this case, and so one must analyse the acts of a legal nature as being between two persons having distinct legal personalities." And, if Progiciels were to become insolvable, the plaintiff would have no recourse against Marcel Saucier. He could only take action against Progiciels. Progiciels is thus a third party to the indivision.

Consequently, the court accepted in part the action of the plaintiff, transferring the property to François Saucier.

 
Saucier v. Progiciels P.C.-Impôts Inc., C.S. 700-05-006573-988, 1999-02-01, R.E.J.B.: 99-11872 (Judge Hilton).

 

  1. The protection of the private life of citizens also exists in favour of businesses and these are thus protected against searches which are not necessary and which are made in an indiscrete manner.
 

A petition to annul search warrants by which the plaintiff, Société Radio-Canada (SRC), a news reporting company, pleaded that they had been irregularly issued by the defendant, Judge Parent.

These search warrants had been issued at the request of the Service de police de la communauté urbaine de Montréal (SPCUM). The SPCUM wanted to search the offices of the SRC in order to seize the videotape recordings of a violent demonstration which took place in Montreal, in which sundry criminal acts took place and which had been attended by journalist-employees of the plaintiff. The SPCUM wanted to have access to these video tapes which would help it to analyse the events.

The court noted that article 487(1) of the Criminal Code (CC) is the legislative source of the power of search by a peace officer. It reminded that one "must demonstrate more than a simple possibility or even worse the hope of finding the conclusive elements of a identified crime in the location foreseen, to be authorized to present and to effect a search and perhaps a seizure."

This concern for the protection of the private lives of citizens "also exists in favour of legal persons, news reporting businesses or not..." The court recognized that a search warrant for a news reporting business should not be granted unless it satisfied the prerequisites of article 487(CC), if it is necessary and may be exercised with much discression; "a fishing expedition has no more justification in the premises of a news reporting business that in the residence of an individual." In this case, the court was of the opinion that there was no particular privilege attaching to the objects searched for in the warrants and neither was there any confidentiality to protect. However, this "does not diminish at all the reasonable expectation of privacy in the premises of a news reporting business, nor that there would be a probable disruption to its activities during a search, and it has the incontestable right not to be the object of an abusive search or seizure." This was not a situation where the survival of the state was in peril where the legislative rules which regulate the activities must momentarily suspended .

The court was of the opinion that the fact that the SPCUM wanted to find proof on film permitting it to bring accusations against the demonstrators is an admission on its part that it wishes to indulge in a "fishing expedition". Thus, it estimated "that Judge Parent exceeded the jurisdiction which article 487 (CC) conferred upon him, in authorizing three searches whose objective was to search for proof that they wished to find on the premises of the plaintiff."

Consequently the court accepted the petition of the plaintiff and cancelled the search warrants.
Société Radio-Canada v L'honorable Claude Parent, J.C.Q., C.S.500-36-001830-994, 1999-03-04, R.E.J.B.: 99-11333 (Judge Boilard).



  1. A company with one shareholder can not seek the lifting of the corporate veil to withdraw a part of its company property from seizure, because its assets constitute a common pledge to its creditors.
 

An action by which the opposant, in the grip of a seizure obtained by the plaintiff, opposes the seizure of its property because, pursuant to article 552(3) of the Code of Civil Procedure, they are work instruments needed for the personal exercise of a professional activity, which may be withdrawn from the seizure by the debtor.

The opposant is a company with one shareholder. The court noted that the question in dispute is if "the work instruments needed for the personal exercise of the professional activity of the sole proprietor of the legal person seized" may be withdrawn from the seizure. The court firstly, recognized that this exception seems to be available for individuals. However, it established five facts: 1) the property of debtors constitute a common pledge to its creditors even if it is a legal person; 2) the privilege of unseizability is an exceptional circumstance which must be interpreted restrictively; 3) the position of the new Civil Code of Quebec compared to the Civil Code of Lower Canada on this point is not yet clear; 4) under the Civil Code of Lower Canada, the courts did not allow legal persons owned by a sole shareholder to lift their corporate veil and did not extend the privilege of unseizability to their property; 5) a person who decides to use the corporate vehicle must be subject to its advantages and its drawbacks.

In this case "the opposant seeks the lifting of the corporate veil to withdraw a part of the company property, which constitutes a common pledge to its creditors. In this sense, its request is made in its own interest to the detriment to that of third parties, that the general rule serves well and who will suffer a prejudice in the recognition of the exception".

According to the court, "a legal person, even if it is belongs to one shareholder, can not claim the privilege of unseizability created in favour of work instruments by paragraph 3 of article 552 (CCP), which had been created only for the benefit of individuals".

Consequently the court rejected the petition in opposition.
Le Sous-Ministre de Revenu du Québec v. Couvre-Plancher Aylmer Inc., C.Q. 550-02-006763-973, 1998-07-10, R.E.J.B.: 98-08659 (Judge Gosselin).

 

  1. The suspension of activities of a private business does not remove the objectively confidential nature of its financial statements, because the information that they contain continues to be a part of the extra-patrimonial rights attached to the person of this business and to benefit from the protection accorded in private life to all persons.
 

An appeal, of a decision by the Commission d'accès à l'information (Commission), to have a ruling as to whether financial information of a confidential nature, in the sense of articles 23 of the Loi sur l'accès aux documents des organismes publics et sur la protection des renseignements (LADOPPR), loses its confidential quality the moment that the activities of the business, which is at the origin of this information, are suspended.

The respondent, Libman, then a member of the National Assembly of Quebec, requested from the Minister of Agriculture, Fisheries and Food a copy of the financial statements of the appellant, Socomer, a private business, not listed on a stock exchange. The appellants Société québecoise des pêches and Société québecoise d'initiatives agro-alimentaires (SOQUIA) are minority shareholders of Socomer and are both public bodies. Libman requested that the financial statements of Socomer be transmitted to him, because he wanted to judge the pertinence of government participation in the company.

The Commission had recognized that Socomer was a business in the private sector and the nature of its activities was not compromised by the fact that a government body owned a part of its share capital. However, it refused to recognize the the confidential character of the financial statements of

Socomer because it did not receive proof to this effect and it also took into account the suspension of the activities of the business. The appellants held that the confidentiality of the financial statements of a business come from a general rule which is objective. In addition, they pleaded that this confidentiality should be maintained notwithstanding the suspension of the activities of the business.

The court recognized that financial statements are of a confidential nature according to an objective test and that the appellants had thus proved the application of articles 23 (LADOPPR). It was up to Libman to prove that the suspension of the activities of the business removed the confidential character from its financial statements.

The court noted that "financial statements are by their nature information attached to the extra-patrimonial rights of a legal person pursuant to articles 300, 301 and 302 of the Civil Code of Quebec (CCQ), and are protected with regard to their diffusion by article 5 of the Charter of Human Rights and Freedoms of Quebec", and so "the suspension of activities does not in any way remove the objectively confidential character of the financial statements of a private business because the information that they contain continues to be a part of the extra-patrimonial rights attached to the person of this business and continues to benefit from the protection accorded to the private life of all persons".

Consequently, the court accepted the appeal and reversed the decision of the Commission.
Société Québécoise d'Initiatives Agro-Alimentaires v. Libman, C.Q. 200-02-005590-932, 1998-07-15, R.E.J.B.: 98-08141 (Judge Lavoie).

 

      Actuality in company law         

 

Corporate names, trade-marks and registered names - the terminology for concrete utilisation

 

At birth, each natural person is given a surname and a given name which will allow him to identify himself, to be known and potentially to distinguish him for his fellow man. In the case of a legal person, of a sole proprietorship or a partnership, this right of identification is provided by the different constitutive acts1, the legal publicity act2, the Civil Code of Quebec3 and the Trade-Marks Act4. Thus three ways of identification are available.

The corporate name is the legal designation of the legal person5, its official name. This name must be used in all contracts, invoices, orders for goods and services and negotiable instruments implicating the company6. It is important to remember that the structure of the corporate name of a company in Quebec and a federal corporation must obligatorily include a legal element7 (for example: inc., ltd., ltée., corporation, company). Please also note that in the case of a numbered company or corporation, the corporate name is replaced by a designating number attributed by the government8.

A name other than one's own (hereinafter referred to as a "trade name") represents any other name used in the exercise of the activities and exploitation of a business9. This trade name is sometimes also designated as a commercial name, a business name, a registered name or "a name that a company or corporation is doing business under". Contrary to the corporate name, a trade name need not include a legal element. Remember that a legal person, a sole proprietorship or a partnership may use several trade names.

Two important elements distinguish a trade name from a corporate name. Firstly a trade name may coexist with another identical trade name, corporate name or a trade-mark, because the Inspector General of Financial Institutions does not have the jurisdiction to exercise control at this level10. Secondly no name reservation is required in the case of a trade name, while common practice has made a name reservation obligatory in the granting of a corporate name11. However, notwithstanding these last two remarks, it is important to remember that a name search prior to the use of a trade name or the reservation of a corporate name is essential as a prudent action, so as to assure oneself that no other business uses an identical or similar name or trade-mark. Moreover this evaluation of the potential risks will allow the business to avoid the painful obligation of either amending its articles to change the corporate name or to withdraw, by amending declaration, its trade name, in the case when a business having a previous right to use demands the suspension of the use of a name identical to its own trade name or corporate name.

A trade-mark consists of a word, a symbol, a design or a slogan identifying a good or a service offered by a business. Even though a trade-mark may be identical to a trade name or a corporate name, it is not necessary that it be so, because it may serve to identify a product or a service which only represents a part of the activities of the business. Of interest is the fact that trade-marks are not subject to the provisions of the Charter of the French language12. Consequently a trade-mark registered only in English, may be used in English only as a trade name in Quebec13.

In conclusion, a legal person has three methods of identification which may be used jointly or separately. Each of these methods of identification offers a different usage and allows the business to distinguish itself from its competitors. Consequently, if we speak about a corporate name, a trade name or a trade-mark, a search prior to its utilisation is strongly recommended because it allows the business to understand the risks of confusion engendered by such utilisation. A complete preliminary search will allow you to correctly evaluate the risks and to get, immediately, all the information necessary to be able to make an informed decision, in the best future interests of the business. An ounce of prevention is worth a pound of cure!
 

1  In particular The Canada Business Corporations Act, R.S.C. 1970, c. C-32 (hereinafter the CBCA); The Companies   Act, R.S.Q., c. C-38 (hereinafter the CA)

2  An Act respecting the legal publicity of sole proprietorships, partnerships and legal persons., R.S.Q., c. P-45 (hereinafter   the LPA)

3  1991, chapter 64 (P.L. 125

4  R.L.C. 1985, charpet T-13, articles 2

5  Articles 7(1), 123.12 paragraph 1 (CA), 6(1) (a) (CBCA) and article 305 Civil Code of Quebec

6  Article 33 (CA) and articles 305 Civil Code of Quebec

7  Articles 123.22 (CA) and 10(1) (CBCA)

8  Articles 123.23 (CA) and 11(2) (CBCA)

9  Article 306 Civil Code of Quebec and article 10 paragraph 2 LPA

10  Article 13 LPA a contrario to article 9.1 (CA), which provides in paragraph 8 that a corporate name may not be            identical to another name used and articles 20 to 22 of the regulations of the (CBCA)/DORS/79-316, (1979) 113 Can.Gaz., Part II, 1389

11 Articles 9.2 (CA) and 11(1) (CBCA)

12 R.S.Q., c C-11 (hereinafter the C.F.L.)

13 Article 25(4) (C.F.L.)

 

 

DELAYS (22-06-1999)

Government services Quebec

Canada
Search and reservation of names 5 days 1 day
Incorporation 4 days 2 days
Amendment 4 days 2 days
Continuance/Amalgamation 2.5 wks. 2 wks.
Dissolution 3 mths 1 wks.
Deposit of declarations IGIF 2.5 mths --
Obtention of GST and QST numbers on demand
Attestation/certificate 24 hours 2 days
Incorporation Part III, Part II 2.5 wks. 4 wks.
Amendment Part III, Part II 2.5 wks. 3-4 wks.
Revival 2.5-4 mths. 4 wks.
Repeal of radiation 2.5-4 mths. --