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Banking and Finance Law Review. Volume 23 (2007), p. 1-49.


CBCA; federal corporate legislation; share transfers; transfer of securities


Canadian federal corporate legislation contemplates that shares will be transferred by endorsement of paper share certificates. These provisions, now found in the Canada Business Corporations Act Part VII, were enacted in the mid-1970s to reflect the then current market practices. However, for the last two decades, the overwhelmingly prevalent commercial practice is to transfer shares by book entries without using paper certificates - such transfers taking place in what is called the indirect holding system. Despite the domination of the indirect holding system, until recently, there have been no legislative provisions addressing this method of transferring securities. Recent specific provincial legislation has addressed this practice by removing responsibility for securities transfers from provincial corporate legislation and placing it within legislation that deals exclusively with securities transfers. However, Canadian federal legislation has yet to respond to the ubiquitous indirect holding system for federal corporations. This paper examines the case law history regarding the current CBCA part VII provisions and outlines the current prevailing methods of transferring securities. It then compares the operation of the CBCA Part VII provisions to general corporate law rationales. The impact of provincial securities legislation on the CBCA is evaluated and future of the CBCA Part VII provisions is analyzed focusing on efficiency concerns. Finally, responses by the Canadian federal government are evaluated and two possible solutions are offered as rational and efficient responses under the current circumstances.

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