This report contains draft legislation and recommends that a company incorporated under the Alberta Companies Act be permitted to purchase shares which it has issued. Under the recommendations, the portion of the price representing the consideration received by the company for issuing the shares in the first place must be allocated to reducing paid-up capital. Furthermore, the remainder of the price may be deducted from any surplus account that the directors designate. This power may be exercised by a resolution of the directors rather than by a special resolution of the shareholders. The report recommends that the repurchased shares be classed as authorized, but unissued shares and that the power cannot be exercised unless the company will still be solvent and be able to meet its obligations as they become due. Finally, the report recommends that there be various disclosure requirements: for private companies this would constitute a notification to the Registrar of Companies, while public companies would be required to file insider reports.

Since the present Act does not contain an “oppression” section granting the shareholder easy access to the courts, the offer can only be made in one of two ways, one of which is to make it in accordance with the unanimous agreement of all of the shareholders holding shares of the class being purchased, accompanied by an information circular under which the company must state the number of shares it proposes to buy. If there is an over-subscription, the company must buy pro rated shares from the offering shareholders, with certain exceptions.

Additional safeguards and remedies are recommended: 1) The company that purchases shares which it has issued must be subject to the same liability as that which is now imposed on insiders who trade in a company’s shares; 2) The directors of the company who authorize the purchase must be liable in damages if the company purchases its shares in breach of the solvency and liquidity tests, with recourse against the selling shareholder.