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The First Dominion Companies Act

Published online by Cambridge University Press:  07 November 2014

A. W. Currie
A. W. Currie*
Affiliation:
University of Toronto
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Extract

The concept of a corporation was familiar to the first settlers in Canada, both French and English. The Company of New France and the Hudson's Bay Company are examples of the importance of trading companies in our early economic development. Moreover, colonial legislatures incorporated several dozen companies by special acts before deciding to allow companies to come into being without each one having to go directly to Parliament for its own charter. But a companies act which would permit companies to be expeditiously incorporated for manufacturing, trading, mining, and other ordinary kinds of business was not evolved without some experimentation, a good deal of borrowing from other jurisdictions, and the creation of two rather special methods of our own.

Until about 1850, the principle of limited liability was not generally accepted either in Canada, Britain, or most of the United States. Even as late as 1862 Nova Scotia's “Act for the incorporation and winding-up of Joint Stock Companies” (25 Vict. c. 2) forbade the incorporation of companies for “ordinary, mercantile and commercial business.” Legislators were afraid that a company might purchase excessive amounts of merchandise on credit and so take unfair advantage of its creditors, as individual traders often did during the nineteenth century.

Limited liability was permitted for banks, but only on certain conditions. In Canada, bank shareholders were usually liable for twice the par value of their stock and bank charters were valid for only ten years, so that periodically the government could review and perhaps amend the pertinent statutes.

Type
Articles
Information
Canadian Journal of Economics and Political Science/Revue canadienne de economiques et science politique , Volume 28 , Issue 3 , August 1962 , pp. 387 - 404
Copyright
Copyright © Canadian Political Science Association 1962

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References

1 Untitled article by Observator of Birmingham in Monthly Magazine, 10, 1807, 235–6.Google Scholar

2 Henry Day of Fenchurch St., London, in ibid., Jan., 1808, 554–5.

3 Lower Canada, House of Assembly, Journals, March 10, 1823, reprinted in Ontario, , Bureau of Archives, Report, 1915, 157.Google Scholar

4 Mackenzie, W. L., Sketches of Canada and the United States (London: Effingham, Wilson, 1833), 485.Google Scholar

5 Quoted by MacKay, R. A., “The Political Ideas of William Lyon Mackenzie,” this Journal, 02, 1937, 18.Google Scholar See also Gates, Lillian F., “The Decided Policy of William Lyon Mackenzie,” Canadian Historical Review, Sept., 1959, 190–5.Google Scholar

6 Shannon, H. A., “The Coming of Limited Liability,” Economic History, 01, 1931, 268.Google Scholar

7 Currie, A. W., “Corporation Law Before 1840,” Canadian Chartered Accountant, 05, 1940, 331–6.Google Scholar

8 Montreal, Pilot, 01 15, 1850.Google Scholar

9 Ibid.

10 Patterson v. Holland, 7 Grant's Chancery Reports I (1858).Google Scholar See also ibid., 6 Grant's Chancery 414 (1858).

11 Province of Canada, House of Assembly, Journals, 1849, passim.

12 Montreal Pilot, June 15, July 20, 24, 1850.

13 The free banking Act was not completely repealed until 1866. Five banks were incorporated under this Act but only one, Molson's, ever became important.

14 A study of corporation law in each of the United States would take decades to complete but two studies already made are valuable: Cadman, J. W., The Corporation in New Jersey (Cambridge, Mass., 1949)CrossRefGoogle Scholar, and Dodd, E. M., American Business Corporations to 1860 with special reference to Massachusetts (Cambridge, Mass., 1954).Google Scholar

15 Montreal Pilot, July 20, 1850.

16 North American Review, Oct. 30, 1850.

17 It is convenient to use the term par value, though it did not come into use until the twentieth century.

18 2 Wm. IV c. 14 ( 1832 ). The essence of this legislation now appears in the Interpretation Act, RSC, 1952, c. 158, s. 30.

19 As early as 1850, a shareholder tried to escape his liability because, so he alleged, the provisions regarding calls contained in 1 Wm. IV c. 12 (1831) had not been complied with. Marmora Foundry Co. v. Murney, 1 Upper Canada Common Pleas 1 (1850). After another company became bankrupt, shareholders who refused to pay a call for the unpaid balance on their shares unsuccessfully argued that their shares were forfeit and their liability had ceased. Harris v. Toronto Dry Dock Co., 7 Grant's Chancery 450 (1857).

20 Presumably this legislation was designed to correct a situation which arose in Feb., 1858, when suit was entered because a company refused to register stock in the name of a new shareholder until the last call had been paid on it. Crawford v. Prov. Insurance Co., 8 Upper Canada Common Pleas 50 (1858). In another case the courts decided they had jurisdiction to set aside an election of directors of a corporate body by persons who were subscribers only nominally but not bona fide. Davidson v. Grange, 4 Grant's Chancery 377 (1854). At least one judge found it difficult to adjust his language to the new terminology, for he regularly referred to shareholders as co-partners. Anderson v. Cameron, 1 ibid. 285 (1857).

21 Anderson, Dr., “Gold Fields of Nova Scotia,” Literary and Historical Society of Quebec, Transactions, 1863–1864, 49.Google Scholar

22 Province of Canada, House of Assembly, Select Committee on Canadian Fields Gold, Report, 1865, 10–11.Google Scholar The chairman of this Committee was Robert Bell, promoter of the Bytown & Prescott Railway and brother of John Bell, general counsel of the Grand Trunk. Other members were A. T. Gait, Hector Langevin, J. H. Pope, and Walter Shanly. Residents of Quebec were also concerned at this time about an alleged monopoly in the supply of cast iron by Les Forges Saint-Maurice. Tessier, Albert, “Une Compagnie Antitrustarde il y a un Siècle,” Les Cahiers des Dix, 1937, 199–206.Google Scholar

23 Under the Code de Commerce (1807), France allowed limited liability companies or sociétés anonymes to be formed with the assent of the Emperor as an act of administrative jurisdiction or, in other words, after examination by the Council of State. By a law of May 23, 1863, sociétés à responsabilité limitée could be created by filing certain documents with the Clerk of the Peace and the Court of Commerce. This legislation obviated the need for Imperial assent. It was introduced because after the Commercial Treaty of 1862, the French feared that their companies, finding it hard to incorporate in France, might become French branches of British companies which could be readily incorporated. Levy, A. B., Private Corporations and their Control (London, 1950), I, 56–7, 92–3.Google Scholar Although in a broad sense Canada's judicial decree method resembled French practice, there is no evidence of our borrowing the idea from France nor, even though the French Act of 1863 came after our legislation of 1860, of any borrowing in the reverse direction. The judicial decree method was certainly unknown in Britain and no record of its existence has been found in any of the United States.

24 Chaudière Gold Mining Co. v. Desharats, 13 Lower Canada Jurist 132 (1869): also 15 ibid. 44 (1871), and 17 ibid. 279 (1873). See also Foley v. Stuart, 20 ibid. 183 (1875).

25 Wegenast, F. W., The Law of Canadian Corporations (Toronto, 1931), 21–2.Google Scholar

26 ibid., 21.

27 Ibid.

28 Among the numerous books on the company law of Britain, see Formoy, R. R., Historical Foundations of Modern Company Law (London, 1923)Google Scholar; Gower, L. C. B., The Principles of Modern Company Law (London, 2nd ed., 1957)Google Scholar; Hunt, B. C., The Development of the Business Corporation in England, 1800–67 (Cambridge, Mass., 1936).CrossRefGoogle Scholar

29 Stephens, C. H., Law and Practice of Joint Stock Companies (Toronto, 1881), 119.Google Scholar

30 British and Canadian Mining Company (Limited), 28–9 Vict. c. 89 (1865), and The Bothwell (Canada West) Land and Petroleum Company (Limited), ibid., c. 90.

31 Montreal Pilot, July 20, 1850; Toronto Globe, May 22, 1869.