{"id":4864,"date":"2019-05-06T10:54:13","date_gmt":"2019-05-06T14:54:13","guid":{"rendered":"http:\/\/www.spiegelsohmer.com\/?p=4864"},"modified":"2019-05-06T15:03:35","modified_gmt":"2019-05-06T19:03:35","slug":"the-end-of-a-shareholders-corporate-duties-and-the-end-of-suretyship-an-illustration","status":"publish","type":"post","link":"https:\/\/spiegelryan.com\/en\/2019\/05\/06\/the-end-of-a-shareholders-corporate-duties-and-the-end-of-suretyship-an-illustration\/","title":{"rendered":"The End of a Shareholder\u2019s Corporate Duties and the End of Suretyship: an Illustration"},"content":{"rendered":"

The end of a shareholder\u2019s corporate duties and his continued suretyship: an illustration.<\/strong><\/p>\n

 <\/p>\n

In June 2015, Location<\/em>, a tool rental company, opened an account for the benefit of a company with which it was doing business, Bor\u00e9alia<\/em>. Bor\u00e9alia<\/em> obtained a thirty-day term to pay its bills and other benefits. Bussi\u00e8re was a shareholder of Bor\u00e9alia<\/em>, via his management company, and a director of Bor\u00e9alia<\/em>. Bussi\u00e8re is a party (with the other shareholders) to the standard contract of Location <\/em>as a surety of Bor\u00e9alia<\/em>\u2019s obligations.<\/p>\n

In June 2016, Bussi\u00e8re sold his shares to other shareholders and resigned as director. He sent a written note to Location<\/em> to inform it of the change in the shareholding and Board. A few months later, Bo\u00e9ralia<\/em> and several shareholders became insolvent and defaulted under the Location<\/em> Contract. Location<\/em> claimed from Bussi\u00e8re as a surety the payment of bills issued subsequent to the date on which Bussi\u00e8re sold his shares and resigned. Bussi\u00e8re contested on the ground that his guarantee is valid as long as he remains involved in the company, and that the sale of his shares and his resignation as director had the effect of terminating his suretyship.<\/p>\n

Article 2363 Civil Code of Quebec (C.C.Q.) provides that a person\u2019s suretyship attached to the exercise by that person of particular duties within the company ends with the cessation of these duties. Location<\/em> argued that the status of shareholder is not a duty and that the sale of shares cannot nullify the surety.<\/p>\n

The leading case remains that of the Supreme Court of Canada in the case \u00c9piciers unis M\u00e9tro-Richelieu c. Collin, (2004) 3 R. C. S. 257 which held that article 2363 CCQ should be interpreted broadly and liberally, its purpose being to protect the surety. The Supreme Court noted that this article is not one of public order so that the parties can depart from it, which was not the case here.<\/p>\n

In order to determine whether the end of a person\u2019s corporate duties enables him to remove his liability as a surety arising therefrom, it is necessary to consider the common intention of the parties as to the creation of the suretyship in relation with the person\u2019s duties and status within the corporation. Here, the court noted that the opening of the account was based on a verification of the solvency and the commitment of the shareholders, and thus that it is the attribute which took precedence for Location<\/em>. The end of the shareholder\u2019s status  signified the end of the validity of the surety from that date onward.<\/p>\n

Conclusion. If a supplier of goods or services provides credit to a corporation whose shareholders or officers act as sureties, and does not want, as a result of article 2363 CCQ, to lose the benefit of their suretyship in the event of the withdrawal of one or more of such persons as shareholders, directors or officers, it must be clearly provided that the termination of the related status or duties does not put an end to the surety.<\/p>\n

B\u00e9dard c. Bussi\u00e8re, 2018 QCCQ 10911<\/a><\/p>\n

 <\/p>\n

This publication is of a general nature, is as of the date indicated and is not intended to constitute an opinion or legal advice. The facts and circumstances of your particular situation should be specifically identified and addressed before appropriate legal advice may be given.<\/em><\/p>\n","protected":false},"excerpt":{"rendered":"

The end of a shareholder\u2019s corporate duties and his continued suretyship: an illustration.   In June 2015, Location, a tool rental company, opened an account for the benefit of a company with which it was doing business, Bor\u00e9alia. Bor\u00e9alia obtained a thirty-day term to pay its bills and other benefits. Bussi\u00e8re was a shareholder of […]<\/p>\n","protected":false},"author":6,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[5],"tags":[],"class_list":["post-4864","post","type-post","status-publish","format-standard","hentry","category-litigation"],"acf":[],"yoast_head":"\nThe End of a Shareholder\u2019s Corporate Duties and the End of Suretyship: an Illustration - Spiegel Ryan<\/title>\n<meta name=\"description\" content=\"If a supplier of goods or services provides credit to a corporation whose shareholders or officers act as sureties, and does not want, as a result of article 2363 CCQ to lose the benefit of the surety in the event of the withdrawal of one or more of such persons as shareholders, directors or officers, it must be clearly provided that the termination of the related status or duties does not nullify the surety.\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.spiegelsohmer.com\/en\/2019\/05\/06\/the-end-of-a-shareholders-corporate-duties-and-the-end-of-suretyship-an-illustration\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"The End of a Shareholder\u2019s Corporate Duties and the End of Suretyship: an Illustration - 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