The Bank Act is the complete source for the legal status of all banks in Canada and for their powers to operate within and outside of the country. Every bank has an identical legal status and corporate powers derived from their shared constitution, the Bank Act.
Following the pattern of the CBCA, the Bank Act bestows on each bank the capacity of a natural person and all the rights, powers, and privileges of a natural person in law, subject to the Act,41in relation to its operations in Canada.42
Outside Canada, its capacity to operate is determined by the Act and by the laws of the jurisdiction within which it is operating.43
The purpose of conferring natural capacity on corporate persons in the CBCA was to abolish the ultra vires doctrine in the common law, which operated in an unpredictable manner.44
The common law once assumed that corporations were created with lim-
ited powers, so that any activity expressly or implicitly ultra vires was invalid and unenforceable. The doctrine of ultra vires was intended to reassure shareholders and creditors that the activities in which they were investing or financing, respectively, would be the activities to which the company was restricted and that corporate assets would not be dissipated in unauthorized activities. Ultra vires became a defence that frustrated third party contractors with the company, but over the course of the late nineteenth and early twentieth centuries, the courts adopted various compromises by which third party contracts were sometimes enforced and sometimes not. Statutory elimination of the doctrine of ultra vires by bestowing the powers of a natural person on corporate bodies theoretically meant that like a natural person, corporations could engage in any activity, provided it was not illegal, such as criminal or tortious activities, and shareholders and creditors were forewarned, while third parties could enjoy greater security under contracts with the company.
While there is an ongoing debate in business corporations law generally as to whether the CBCA really abolished the doctrine of ultra vires completely,45in banking law it can be said that it did not. The Bank Act contains numerous provisions restricting the powers and activities of banks, so that it can be said that while in theory banks are endowed with the legal capacity of a natural person by the Act, the practical effect of that same Act is to restrict those powers considerably.
Nevertheless, third party contractors with a bank can be largely assured that their transactions are enforceable. The Act provides that no act, including property transfers, is invalid by reason only that the act or transfer is contrary to the Act or the bank’s incorporating instrument.46
Nor is it necessary for a bank to pass a by-law conferring any particular power on the bank or the directors47for an act of the bank to...