When an Owner Dies or Can’t Act: Keeping the Corporation Running

The director’s seat ends

• Death: a director ceases to hold office on death under the federal statute (CBCA s. 108(1)), Ontario (s. 121(1)), British Columbia (s. 128(1)) and Alberta (s. 108(1)). In Quebec the same result follows from the Civil Code: a director is the corporation’s mandatary, and a mandate ends on death (arts. 321 and 2175).
• Incapacity: a person found incapable under provincial law is disqualified as a director, and their office ends (CBCA ss. 105(1) and 108(1); Ontario ss. 118(1) and 121(1); Alberta ss. 105(1) and 108(1)). In British Columbia, a director found incapable by a court, or certified incapable, must promptly resign (s. 124). In Quebec, a person of full age under tutorship or under a protection mandate is disqualified (Civil Code art. 327).
• A power of attorney alone isn’t a finding of incapacity. Disqualification generally needs a court finding, a guardianship or trusteeship order, or a certificate under provincial law, so a director whose attorney has started acting may technically still hold office.
• Delaware and the Model Act don’t list death or incapacity as a ground, but Delaware expressly deals with a corporation left without directors “by reason of death” (§ 223(a)), and both let the vacancy be filled.

Filling the board when no directors are left

If other directors remain, they can usually fill the vacancy themselves (CBCA s. 111(1); Ontario s. 124(1); British Columbia s. 131; Quebec s. 145; Delaware § 223(a)). When the only director dies, the shareholders have to act:

• Canada, federal; Ontario; Alberta; Quebec: if there are no directors in office, any shareholder may call a shareholders’ meeting to elect directors (CBCA s. 111(2); Ontario s. 124(3); Alberta s. 111(2); Quebec s. 146), or the shareholders can elect them in a written resolution signed by all of them (CBCA s. 142(1); Ontario s. 104(1); Alberta s. 141(1); Quebec s. 178).
• British Columbia: shareholders holding more than half the votes can empower someone to call a meeting or appoint directors, or all the voting shareholders can appoint directors by unanimous resolution (s. 135).
• Delaware: any officer, any stockholder, or a stockholder’s executor, administrator, trustee or guardian may call a special meeting to elect directors, or apply to the Court of Chancery to order an election (§ 223(a)).
• Model Act states: the shareholders may fill a vacancy (s. 8.10), including by a written consent signed by all of them (s. 7.04).
• If the deceased owner held all the shares, the person who signs as shareholder is the estate’s representative, so sort out the shares first.

The deceased owner’s shares

The shares don’t end with the owner: they pass to the estate, and the estate’s representative, whether called an executor, estate trustee, administrator or liquidator, exercises the shareholder’s rights.

• Before registration: a corporation whose articles restrict share transfers, as most private corporations’ articles do, must treat the deceased shareholder’s representative as entitled to exercise the shareholder’s rights once given the evidence it may require (CBCA s. 51(2); Ontario s. 67(2); Alberta s. 50(2)). In British Columbia, the representative has the shareholder’s rights once they provide the required evidence, even before being registered (s. 115).
• To register the transmission: the corporation can ask for the grant of probate or letters of administration (or a certified copy), a declaration of transmission and the deceased owner’s share certificate (CBCA s. 51(7); Ontario s. 67(7); British Columbia s. 118; Alberta s. 50(7)). The federal statute also provides a route for when there is no grant of probate (s. 51(8)).
• Quebec: the liquidator of the succession acts as an administrator of the property of others and exercises the rights attached to the shares, including voting (Civil Code arts. 802 and 1302; QBCA s. 181).
• Delaware and the Model Act: fiduciaries may vote shares they hold (§ 217(a)), and a corporation may accept a vote signed by an executor or administrator, with evidence of their status if it asks for it (MBCA s. 7.24).
• The corporation isn’t required to see that the estate is administered properly; it acts on the evidence it is given (CBCA s. 51(4); Ontario s. 67(4); Alberta s. 50(4)).

If the owner is alive but can’t act

An attorney under a continuing or enduring power of attorney for property can generally exercise the owner’s rights as a shareholder. Ontario lets an attorney sign shareholders’ written resolutions and proxies (ss. 104(1)(a) and 110(2)), and the federal statute treats an attorney as a personal representative who can sign proxies (ss. 2(1) and 148(2)). None of the statutes we checked lets the attorney sit on the board in the owner’s place. If the owner was the only director, the attorney, voting the shares, elects a new director to keep the corporation running.

In Quebec, a protection mandate covering the administration of the person’s property takes effect when a court homologates it (Civil Code arts. 2131 and 2166), and the person is then disqualified as a director (art. 327).

Officers, the bank and signing authority

• The new board confirms or appoints the officers. In Delaware, a vacancy in an office caused by death is filled as the bylaws provide or, if they are silent, by the board (§ 142(e)); in Quebec, an officer is a mandatary, and the mandate ends on death (QBCA s. 116; Civil Code art. 2175).
• Give the bank a new resolution changing signing authority from the new board, with a certificate of incumbency showing who the directors and officers now are.
• Update the registers of directors, officers and shareholders, and file the resolutions in the minute book.

Tell the registry

• Canada, federal: a notice of change of directors to Corporations Canada within 15 days (CBCA s. 113(1)).
• Ontario: a notice of change within 15 days, including the date the director ceased to be one (Corporations Information Act s. 4(1)).
• British Columbia: a notice of change of directors within 15 days (s. 127(1)).
• Alberta: a notice of change of directors within 15 days (s. 113(1)).
• Quebec: an updating declaration within 30 days, which may also need to update the ultimate beneficiaries (Act respecting the legal publicity of enterprises ss. 33 and 41).
• Delaware: the directors are reported on the next annual franchise tax report (8 Del. C. § 502).

Prepare before it happens

• Keep the registers, resolutions and share certificates current, so the estate isn’t rebuilding the minute book.
• Consider a second director, or an officer other than you who can sign, so the corporation isn’t frozen while the board is rebuilt.
• Make sure your will and powers of attorney deal with the shares, and that the people named know where the minute book is.
• Check whether a shareholder agreement says what happens to a deceased or incapable owner’s shares, such as a buyout.

Common questions