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Bill 213, the Better for People, Smarter for Business Act, 2020 received Royal Assent in December of 2020.  As a result, some significant amendments to Ontario’s Business Corporations Act (“OBCA”) will come into force on July 5th, 2021:

1. Elimination of Director’s Canadian Residency Requirements

Currently, Subsection 118(3) of the OBCA mandates at least 25 percent of directors of an Ontario corporation to be resident Canadians, and if a corporation has less than 4 directors, at least 1 of them must be a resident Canadian.  On July 5th, 2021, this Section of the OBCA will be repealed and Ontario will join the majority of Canadian provinces and territories in no longer requiring directors of Ontario corporations to be resident Canadian.

This change should be well-received by most, but may be especially appealing to foreign investors who want to do business in Canada and non-Canadian businesses incorporating Canadian subsidiaries, as it no longer requires them to recruit or source a resident Canadian director to sit on the Corporation’s board for no other reason than to fulfill the OBCA’s Canadian residency requirements. In other words, directors can, as of July 5th, 2021, be chosen for their knowledge and proficiency, without the constraints of residency requirements.

Corporations incorporated under the Canada Business Corporations Act, however, will be required to continue to comply with the resident Canadian director obligations.

2. Decreased Approval Thresholds for Written Shareholder Resolutions

Section 104 of the OBCA currently necessitates written resolutions to be signed by all shareholders of a Corporation that would be entitled to vote on that resolution at a meeting of shareholders.  In other words, unanimous shareholder approval is presently required in order for a corporation to pass a written ordinary resolution in lieu of a meeting. This requirement can be challenging and extremely time-consuming for corporations that may have numerous, busy (and sometimes unresponsive) shareholders, as it could force the directors to call an unnecessary shareholders’ meeting in order to pass a simple resolution (eg: for matters such as the adoption of new by-laws, appointment of an auditor, or election of directors).

As of July 5th, 2021, the approval threshold for written ordinary resolutions will be reduced to a simple majority of shares entitled to vote on that resolution. This decreased approval threshold will only apply to privately-held corporations, and will include an additional proviso that within 10 business days after the resolution is signed by the majority shareholders, the corporation must give written notice of the resolution to the shareholders that were entitled to vote on the resolution but did not sign it.  

Note that the articles or unanimous shareholder agreement of a corporation can still require a number of votes that are greater than a simple majority to pass an ordinary resolution, and any such provisions in the articles or shareholder agreement will prevail over these amendments.

Further, the amendments to the OBCA will not apply to special resolutions dealing with matters such as amalgamations, dissolutions, the amendment of the articles, or sale of all or substantially all of the assets of a corporation, which will continue to require either a resolution passed by two thirds of the votes cast at a meeting, or a written resolution consented to by all shareholders entitled to vote on the matter.

Granting the ability for Ontario corporations to authorize certain shareholder resolutions in writing via majority approval will, expectantly, simplify the process for effecting routine maintenance matters for private corporations.

Overall, these upcoming practical changes to the OBCA are aimed at providing increased flexibility for Ontario businesses in order to attract investment and boost economic expansion.

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