In CDEF v Canadian Pickles Iacobucci J stated that “the general abolition of the doctrine of ultra vires is in accordance with sound policy and common sense”, because the original purpose of the doctrine (to protect creditors) had been largely frustrated. Section 33(2) abolishes the doctrine of ultra vires for corporations incorporated under the BCBCA.
However, just because a restricted act is not invalid does not mean there is no repercussion for doing the restricted act. Section 33(1) could possibly be used by shareholders to sue directors on behalf of the corporation. If the directors cause the company to commit a restricted act this is arguably not in the best interest of the company and therefore could potentially be a breach of fiduciary duty. It is also possible, although I am just speculating, that if one company acts in a manner inconsistent with the restrictions in its articles and this harms a second company, the second company could sue the other company for breaching s. 33(1).
While I see the purpose of s. 33(2) (e.g.: a debtor should not be able to get out of repaying a debt simply because the loan was invalid; this would result in a loss to the lending corporation and a windfall to the debtor), it does seem potentially dangerous to provide corporations with even more protection. Section 33(2) seems to remove incentive for corporations to act in a manner consistent with their articles. The fear of not being able to sue on a loan because the loan was ultra vires may encourage corporations to act within the restrictions set out in their articles. Section 33(2) seems to take away a major punishment to a corporation for disobeying its articles of incorporation. This seems to move in the opposite direction of corporate accountability.
I agree! I read it in line with the Pickles case and also took it to mean that, just because a company officially has the “capacity” to do a restricted act (s 33.2) doesn’t mean it can’t be sued for those actions.