Canada Cooperatives Act (S.C. 1998, c. 1)

Liability

Marginal note:Directors’ liability

• 101 (1) Directors who vote for or consent to a resolution authorizing the issue of a membership share or an investment share in exchange for a thing or service other than money are jointly and severally, or solidarily, liable to the cooperative to make good any amount by which the thing or service received is less than the fair equivalent of the money that the cooperative would have received if the membership share or investment share had been issued for money on the date of the resolution.

• Marginal note:Exemption

  (2) A director is not liable under subsection (1) if the director proves that he or she did not know and could not reasonably have known that the membership share or investment share was issued for a thing or service less than the fair equivalent of the money that the cooperative would have received if the membership share or investment share had been issued for money on the date of the resolution.

• Marginal note:Further liability

  (3) Directors who vote for or consent to resolutions authorizing any of the following matters are jointly and severally, or solidarily, liable to restore to the cooperative any amounts so distributed or paid and not otherwise recovered by the cooperative:

  • (a) a redemption or other acquisition of shares or the repayment of member loans contrary to this Act;

  • (b) a commission contrary to this Act;

  • (c) a payment of a dividend, a patronage return or interest contrary to this Act;

  • (d) [Repealed, 2001, c. 14, s. 166]

  • (e) a payment of an indemnity contrary to this Act; or

  • (f) any other payment contrary to this Act.

• Marginal note:Contribution

  (4) A director who satisfies a judgment for a debt owed under this section is entitled to contribution from the other directors who were liable for the debt.

• Marginal note:Recovery

  (5) A director who is liable under subsection (3) may apply to a court for an order to recover any money or property referred to in paragraphs (3)(a) to (f).

• Marginal note:Order of court

  (6) A court may, on application under subsection (5), if it is satisfied that it is equitable to do so,

  • (a) order any person to pay or deliver to the director any money or property referred to in paragraphs (3)(a) to (f) that was paid or distributed to that person;

  • (b) order a cooperative to return or issue membership shares or investment shares to a person from whom the cooperative redeemed or otherwise acquired membership shares or investment shares;

  • (c) order any person to repay to the cooperative the amount of a member loan that was repaid; or

  • (d) make any further order that it sees fit.

• Marginal note:Limitation period

  (7) An action to enforce a liability imposed by this section may not be commenced more than two years after the date of the resolution authorizing the action complained of.

Marginal note:Liability for wages

• 102 (1) Subject to this section and any other applicable law, each director is jointly and severally, or solidarily, liable to the employees of the cooperative for all debts payable to them for services performed while the director held office.

• (2) [Repealed, 2001, c. 14, s. 167]

• Marginal note:Amount of liability

  (3) The amount of the liability under this section may not exceed six months wages in the case of each employee.

• Marginal note:Conditions precedent

  (4) A director is not liable under this section unless

  • (a) the cooperative was sued for the debt within six months after it became due and execution was returned unsatisfied in whole or in part;

  • (b) the cooperative has commenced liquidation or dissolution proceedings or was dissolved and a claim for the debt was proved no later than six months after the earlier of the date of commencement of the proceedings and the date of the dissolution; or

  • (c) the cooperative made an assignment or was made subject to a bankruptcy order under the Bankruptcy and Insolvency Act and a claim for the debt was proved no later than six months after the date of the assignment or bankruptcy order.

• Marginal note:Limitation period

  (5) A director is not liable under this section unless he or she is sued while holding office or no later than two years after ceasing to be a director.

• Marginal note:Amount due after execution

  (6) If execution referred to in paragraph (4)(a) has issued, the amount recoverable from the director is the amount remaining unsatisfied after execution.

• Marginal note:Subrogation of director

  (7) A director who pays a debt owed under this section that is proven in liquidation and dissolution or bankruptcy proceedings is subrogated to any priority that the employee would have been entitled to and, if a judgment has been obtained, the director is

  • (a) in Quebec, subrogated to the employee’s rights as declared in the judgment; and

  • (b) elsewhere in Canada, entitled to an assignment of the judgment.

• Marginal note:Contribution

  (8) A director who pays a debt owed under this section is entitled to contribution from the other directors who were liable for the debt.

Conflict of Interests

Marginal note:Disclosure of interest

• 103 (1) A director or officer must, in accordance with this section, disclose to the cooperative the nature and extent of any interest that the director or officer has in a material contract or transaction, or a proposed material contract or transaction, with the cooperative, and any material change to any such interest, if the director or officer

  • (a) is a party to the contract or transaction;

  • (b) is a director or officer — or an individual acting in a similar capacity — of a party to the contract or transaction; or

  • (c) has a material interest in a party to the contract or transaction.

• Marginal note:Exemption

  (2) This section does not require the disclosure of an interest in a contract or transaction that is available to and customarily entered into between the cooperative and its members, if the contract or transaction is on the same terms as are generally available to members.

• Marginal note:Manner of disclosure

  (3) The director or officer must make the disclosure in writing to the cooperative or request to have it entered in the minutes of the meetings of directors.

• Marginal note:Time of disclosure for a director

  (4) A director must make the disclosure

  • (a) at the meeting of directors at which the proposed contract or transaction is first considered;

  • (b) if the director was not interested in the proposed contract or transaction at the time of the meeting referred to in paragraph (a), at the first meeting after the director acquires an interest in it;

  • (c) if there is a material change in the director’s interest in the contract, transaction, proposed contract or proposed transaction, at the first meeting after the change;

  • (d) if the director becomes interested in a contract or transaction after it is made, at the first meeting after the director acquires an interest in it;

  • (e) if the director had an interest in the contract or transaction before becoming a director, at the first meeting after becoming a director; or

  • (f) if the contract or transaction is one that would, in the ordinary course of business, not require the approval of the directors, as soon as the director becomes aware of the contract or transaction.

• Marginal note:Time of disclosure for an officer

  (5) An officer who is not a director must make the disclosure

  • (a) immediately after becoming aware that the contract, transaction, proposed contract or proposed transaction is to be considered or has been considered at a meeting of directors;

  • (b) if the officer acquires an interest in a contract or transaction after it is made, immediately after the officer acquires an interest in it;

  • (c) if there is a material change in the officer’s interest in the contract, transaction, proposed contract or proposed transaction, immediately after the change;

  • (d) if the officer had an interest in the contract or transaction before becoming an officer, immediately after becoming an officer; or

  • (e) if the contract or transaction is one that would, in the ordinary course of business, not require the approval of the directors, as soon as the officer becomes aware of the contract or transaction.

• Marginal note:Access

  (6) The members and shareholders may examine the portions of minutes of meetings of directors, of other documents that contain disclosures under this section and of the general notice referred to in section 105 during the usual business hours of the cooperative.

• (7) [Repealed, 2001, c. 14, s. 168]

Marginal note:Voting

• 104 (1) A director who is interested in a contract or transaction referred to in subsection 103(1) may not vote on any resolution to approve the contract or transaction.

• Marginal note:Exception

  (2) Subsection (1) does not apply to

  • (a) a contract or transaction that relates primarily to the director’s remuneration as a director, officer, employee or agent or mandatary of the cooperative or of one of its subsidiaries; or

  • (b) a contract for indemnity or insurance under section 113.

Marginal note:Continuing disclosure

105 For the purposes of section 103, a general notice to the directors declaring that the director or officer is a director or officer of an entity or acting in a similar capacity, or has a material interest in an entity, or that there has been a change in the nature of their interest in the entity, and that the director or officer is therefore to be regarded as interested in a contract or transaction made with that entity, as declared in the notice, is a sufficient declaration of interest in a contract or transaction so made.

Marginal note:Effect of disclosure

106 A contract or transaction for which disclosure is required under section 103 is not invalid, and the director or officer is not accountable to the cooperative, its members or its shareholders for any profit realized from the contract or transaction, because of the director’s or officer’s interest in the contract or transaction or because the director was present or was counted to determine whether a quorum existed at the meeting of directors or committee of directors that considered the contract or transaction, if

• (a) disclosure of the interest was made in accordance with sections 103 to 105;

• (b) the directors approved the contract or transaction; and

• (c) the contract or transaction was reasonable and fair to the cooperative when it was approved.

Marginal note:Confirmation

106.1 Even if the conditions of section 106 are not met, a director or officer, acting honestly and in good faith, is not accountable to the cooperative, its members or its shareholders for any profit realized from a contract or transaction for which disclosure is required under section 103 and the contract or transaction is not invalid by reason only of the interest of the director or officer in the contract or transaction if

• (a) the contract or transaction is approved or confirmed by special resolution at a meeting of the members;

• (b) disclosure of the interest was made to the members in a manner sufficient to indicate its nature before the contract or transaction was approved or confirmed; and

• (c) the contract or transaction was reasonable and fair to the cooperative when it was approved or confirmed.

Marginal note:Court order

107 If a director or officer of a cooperative fails to disclose an interest in a material contract or transaction in accordance with section 103, or otherwise fails to comply with sections 103 to 106.1, a court may, on the application of the cooperative or a member or shareholder, set aside the contract or transaction on any terms that it thinks fit or order that the director or officer account to the cooperative, its members or its shareholders for any profit realized from the contract or transaction.