New Ontario Corporate Law Requirements
Recently, on December 8, 2020, Ontario enacted the Better for People, Smarter for Business Act, 2020 which will include few very important amendments to the Ontario Business Corporations Act ("OBCA").
What are these changes?
There are two specific changes that will come forth through Ontario's legislature that are important to consider when incorporating or operating a provincially governed corporation:
The Canadian residency requirement will be removed;
The shareholder resolution approval process for private corporations will be simplified.
As of right now, the OBCA's amendments are not effective. The proclamation of the Lieutenant Governor will force these amendments. Stay tuned!
What are the current rules regarding Residency Requirements?
Currently, there is a requirement under the Act, for both federal and provincial corporations, that at least 25% of corporation’s directors be resident Canadians. This new legislation would squash that requirement for provincially governed OBCA corporations only. The federal requirement to have at least 25% of the corporation's directors resident Canadians still stands and has no plans to change at this time. The removal of the director residency requirement will allow Ontario's corporate law platform to become more aligned with other Canadian provinces.
What are the current rules regarding Resolutions in Writing?
Currently, the OBCA requires that a written shareholder resolution have unanimous approval from any and all shareholders who are entitled to vote on the resolution at a meeting. With the new amendments, a written shareholder resolution can now be approved by a simple majority of shareholders. This means that resolutions will no longer require unanimous approval. However, it is important to note that these changes apply only to private OBCA corporations and any corporation offering securities will not be affected by these amendments. Another important factor to consider is that a simple majority approval only applies to ordinary resolutions. Special resolutions remain subject to a unanimous approval if it is in writing.
These changes are coming soon. Froese Law is your ally for success. If you require assistance reviewing articles of incorporation, unanimous shareholders agreements and/or by-laws, contact us today. We can help determine whether or not it is required or beneficial for your current corporate structure be changed in compliance with these new rules.