Disclosure of interest by a director or officer (CBCA s. 120)

A seller meets this when one of its directors or officers has a stake in the buyer or in another contract with the company, such as a side arrangement tied to the sale. This entry covers corporations under the federal Act, with a note on Ontario; check the statute that governs the corporation.

What the section requires

• Disclosure is to the corporation, in writing or by requesting that it be entered in the minutes of directors’ or committee meetings.
• It covers a material contract or material transaction, whether made or proposed, if the director or officer is a party, has a material interest in a party, or falls within another case in s. 120(1).
• A director required to disclose shall not vote on a resolution to approve the contract unless it relates primarily to remuneration, is for indemnity or insurance under s. 124, or is with an affiliate (s. 120(5)).

What to ask

Ask whether any director or officer has an interest in the buyer or the deal, whether it was disclosed and recorded, and how the approving vote was taken. Ontario’s Business Corporations Act, s. 132, has its own disclosure rule for directors and officers. See whether a purchase agreement can require the buyer’s own board approval first and related-party transactions.