A bill introduced by the Government of Ontario in October 2020 aims to amend the Ontario Business Corporations Act (OBCA) to increase the jurisdiction’s attractiveness to foreign businesses and make Ontario the location of choice to incorporate their subsidiaries.
The proposed bill called Bill 213, Better for People, Smarter for Business Act, includes provisions that eliminate Canadian residency requirements for directors and reduces the voting threshold allowed for shareholders to pass certain resolutions. The bill is expected to pass later this year.
Below is a brief explanation of the proposed changes.
Updated residency requirements for corporate directors
Under the current OBCA law, at least 25% of the directors appointed to an Ontario corporation must be Canadian citizens or permanent residents. In cases where corporations have less than four directors appointed, at least one must be a Canadian citizen or permanent resident.
The new bill would eliminate residency requirements for Ontario corporations, thus simplifying governance requirements in the province. The change will allow foreign businesses to establish and operate entities with an entirely non-resident board of directors. The provision aims to make Ontario a more competitive location for international corporations to incorporate their Canadian subsidiaries and align with other Canadian provinces that do not have director residency requirements.
Updated shareholder voting threshold for private companies
Current OBCA rules indicate that shareholders may adopt resolutions in writing rather than via an in-person shareholder meeting so long as 100% of the shareholders entitled to vote sign off on the written resolution.
The proposed bill will eliminate the need for all shareholders to vote or sign off on resolutions for their approval. The bill would deem sufficient for ordinary resolutions to be approved in writing by just a majority of the shareholders entitled to vote. Additionally, the new law will require that a written notice of the resolution be provided to each shareholder entitled to vote who did not sign it.
It is important to note that a few rules under the OBCA will not be affected by the approval of Bill 213. These are:
- "Special resolutions" must still be approved by two-thirds of the shareholders during a formal in-person meeting or by all shareholders in a written resolution.
- Ontario corporations will maintain the ability to set shareholder approval thresholds that are different from those proposed in the new bill, so long as the minimum requirement proposed is met.
The Better for People, Smarter for Business Act is currently on its second review by Ontario lawmakers and is expected to be approved sometime in 2021. If enacted, companies may be required to update their articles and by-laws to account for the proposed changes. CT will remain vigilant on any updates regarding this bill and provide more information as it becomes available.
For more information on these changes and how they may affect your business in Canada, contact a CT representative at (844) 322-6993 (toll-free U.S.).