Discussion Activity 6.1:

Relevant Statutory Provisions:

BCBCA section 137 (1):

• “…the articles of a company may transfer, in whole or in part, the powers of the directors to manage or supervise the management of the business and affairs of the company to one or more other persons.” 

BCBCA section 137 (2):

• “(2) If the whole or any part of the powers of the directors is transferred in the manner contemplated by subsection (1),
  • (a) the persons to whom those powers are transferred have all the rights, powers, duties and liabilities of the directors of the company, whether arising under this Act or otherwise, in relation to and to the extent of the transfer, including any defences available to the directors, and
  • (b) the directors are relieved of their rights, powers, duties and liabilities to the same extent.”

Two Questions:

(1) Why do you think section 137(2)(b) of the BCBCA is necessary and worded the way it is? 

One reason for the necessity of this section is liability. Without this section, a Director who has had their rights, powers, and duties over a particular area of management ousted by the articles could then be potentially liable for mismanagement over that area despite not having any control. This would be a discouragement for potential Directors as there would be complete uncertainty around being held liable even if they are meeting all their fiduciary duties. Simply put, without the section, s. 137 would operate to oust control of the Director over the particular area of management over business affairs but would not oust the liability that could attach to Directors if anything were to go wrong within that area.

(2) What would be the effect of an agreement to transfer powers of the directors to manage or supervise the management of the business to one or more other persons if that agreement was not included in articles?

An effect of such agreement would be what was discussed in the earlier question, in that the Director who has transferred the power could still be held liable for the actions of the transferee of said power. This written agreement is different from s. 137 because it would be a written form of a Directors exercising of their right to appoint officers and specify their duties. And so, if in exercising that duty they did not carry out their fiduciary duties and obligations, such as not doing their due diligence in that appointment (e.g. appointing a fraudster) then it logically flows that liability should attach to them because it is liability attached to what is in their control whereas in the circumstance where there is no s.137(2)(b), it would be liability attaching to events outside their control.