From the desk of:

Carrie Ritchie

Carrie Ritchie

Imminent Changes to Ontario’s Business Corporations Act

Introduction

Last year, the provincial government enacted the Better for People, Smarter for Business Act, 2020 (the “BPSBA”). This new legislation brings expansive amendments to a wide range of laws in Ontario.

Notably, the BPSBA implements changes to Ontario’s Business Corporations Act (the “OBCA”), which governs businesses incorporated provincially. Changes to the resident director requirements will come into force on July 5, 2021, as proclaimed by the Lieutenant Governor.

Canadian Residency Requirements

Currently, subsection 118(3) of the OBCA requires that at least 25% of the directors of an Ontario corporation are resident Canadians.

This requirement will be repealed on July 5, 2021, bringing Ontario in line with director residency requirements of other provinces, notably those of British Columbia, Alberta, Yukon, New Brunswick, and Nova Scotia.

Moving forward, neither existing nor newly incorporated businesses under the OBCA will be subject to a Canadian residency requirement. Ontario corporations may still be required to provide the residency status of their directors, but this information will used specifically for the purposes of maintaining the public registry and collecting demographic information.

Overhauls to Shareholders’ Resolutions

Also as of July 5th, 2021, the requirement outlined in section 104 of the OBCA that written resolutions of shareholders must be signed by all shareholders entitled to vote will be amended. In practice, this requirement was particularly cumbersome for larger corporations with numerous shareholders.

Once proclaimed into force, shareholders of private corporations will be able to enact resolutions through written resolutions of the majority of shareholders as though such resolutions were passed by ordinary resolution at a shareholders’ meeting.

Other requirements have been amended to provide further clarity that a majority vote through ordinary resolutions is sufficient for certain corporate changes. Examples include:

  • shareholders’ approval of the creation, amendment, or repeal of corporate by-laws;
  • shareholders’ election and removal of directors to a corporation;
  • shareholders’ appointment or removal of an auditor; and
  • determination of the auditors’ remuneration.

If a corporation’s articles or a unanimous shareholder agreement require a greater number of shareholder votes, those requirements would prevail over the BPSBA amendments to the OBCA.

The cumulative effect of these legislative amendments should provide further flexibility for Ontario corporations.

For more information, please contact Carrie Ritchie.

This article was co-written with the assistance of our Articling Students, William Annab and David Yun. 

This article is not intended to serve as a comprehensive treatment of the topic and is not legal advice. All legal matters are dealt with pursuant to their specific facts and circumstance. Nothing replaces retaining a qualified, competent lawyer.