Tierney Stauffer LLP Lawyers

In force starting July 5th, 2021, the Better for People, Smarter for Business Act, 2020 (Bill 213) will amend Ontario’s Business Corporations Act (OBCA) in a few important ways. The OBCA, the chief legislation governing Ontario’s for-profit corporations, sets the legal framework for various business-related matters, such as incorporation and dissolution, for-profit corporations’ powers, corporate transactions, etc. The new Bill, the fruit of government efforts to make Ontario a more business-friendly province, invites more flexibility into the OBCA. 

In the words of the Hon. Prabmeet Singh Sarkaria, “our government has a plan to make Ontario work better for people, and smarter for business. And it starts with empowering people and getting out of the way of business to let them do what they do best — create jobs and opportunity for hardworking families.”

Bill 213, which amends several provincial statutes, affects Ontario business law in a few key ways. On the whole, the Bill loosens some long-instituted regulatory burdens, and is considered a “red tape reduction measure”.

Written Shareholder Resolution Minimal Requirements Eased

Bill 213 introduces a new clause 104 (1) (c) to the OBCA:

In the case of a corporation that is not an offering corporation,

(i) a resolution in writing signed by the holders of at least a majority of the shares or their attorney authorized in writing entitled to vote on that resolution at a meeting of the shareholders is as valid as if it had been passed by ordinary resolution at a meeting of the shareholders, and

(ii) a resolution in writing dealing with all matters required by this Act to be dealt with at a meeting of shareholders where all business to be transacted at the meeting is to be passed by an ordinary resolution, and signed by the holders of at least a majority of the shares or their attorney authorized in writing entitled to vote on that resolution at a meeting of the shareholders, satisfies all the requirements of this Act relating to that meeting of shareholders.

As such, Bill 213 reduces the approval threshold for a written shareholder resolution. Prior to the amendment, section 104 of the OBCA required unanimous shareholder approval and signature in the case of a written resolution. The pre-Bill 213 unanimity requirement placed a heavy burden on corporations, as gathering unanimous shareholder approval is cumbersome, time-consuming and a challenge for many.  

The majority approval amendment applies to private corporations for decisions that necessitate an ordinary resolution. These include, among others, the adoption of new by-laws, the election of directors, and the appointment of an auditor. The benefits of this amendment flow from the new flexibility given to corporations. For example, written resolutions will now be able to come into effect more quickly, as they only need to be signed by a simple majority. Importantly, the OBCA requires that within 10 business days of the signing and passing of a resolution by a simple majority, a corporation must post a written notice of the resolution to all shareholders who were entitled to sign but did not.

The new majority approval threshold is not indefinitely set in stone: this threshold can be increased if so stipulated in a corporation’s articles or a unanimous shareholders’ agreement. Furthermore, Bill 213 does not change the current OCBA rules that apply to written resolutions for matters that require a special resolution. These include, for example, amalgamations, dissolutions, amendments to articles, etc. For such fundamental matters, written resolutions need to be signed by all shareholders.

Canadian Residency Rules Removed From Business Corporations Act

Another key amendment targets the OBCA’s residency requirements for directors. Subsection 118 (3), which governs director residency requirements is henceforth repealed. Under the OBCA, prior to the amendments, 25% of the directors of an Ontario corporation had to be Canadian residents. This requirement, already a figment of the past in other Canadian jurisdictions, such as British Columbia, has enticed non-Canadian resident incorporators to set up shop outside Ontario.  

Importantly, corporations in Ontario incorporated under the Canada Business Corporations Act will still be required to continue to comply with the resident Canadian director obligations stipulated in the federal statute.

Contact the Corporate Lawyers at Tierney Stauffer LLP in Ottawa & Arnprior for Experienced Counsel on a Broad Range of Business Law Issues

Our business law team practicing in Ottawa, Arnprior, Kingston, and Cornwall provides experienced advice and legal representation in all areas of business law to individuals, sole proprietors, partners, corporations and financial institutions. We have extensive experience representing clients in a host of business-related matters and will provide practical and strategic advice to help you identify the best solution for your company’s needs.

At Tierney Stauffer LLP, our lawyers are committed to providing comprehensive, forward-thinking and practical advice to our corporate clients, no matter the size of the operation. We have extensive experience in all business law matters from real estate to licensing and business succession. Call us at 1-888-799-8057 or contact us online to arrange a consultation with an experienced business lawyer.

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