In brief
On 8 October 2020, the Government of Ontario tabled the Better for People, Smarter for Business Act, 2020 (Bill 213) for its second reading. Bill 213 introduces red tape reduction and regulatory modernization efforts to make Ontario more competitive. Among the changes proposed are amendments to the Business Corporations Act (Ontario) (OBCA) which would eliminate director residency requirements for Ontario corporations, and permit written shareholder resolutions to be effective if signed by a majority of votes rather than a unanimity of shareholders. Bill 213 has not yet received royal assent, and no date has been set for the coming into force of the proposed changes to the OBCA.
Director Residency Requirements
Bill 213 proposes to repeal residency requirements under ss. 118(3) of the OBCA, such that Ontario corporations which are not offering securities to the public will no longer be required to ensure that resident Canadians hold at least 25 percent of the seats on their board of directors. This legislative change would align with corporate law requirements in many of Canada’s largest provinces and several international financial hubs, and would likely reduce the use of Ontario branch offices by foreign companies seeking to avoid director residency requirements.
Written Shareholder Resolutions
The OBCA generally imposes that ordinary resolutions considered at a meeting of shareholders be passed by a majority of the votes cast. However, in order to pass an ordinary resolution in writing in lieu of holding a meeting, s. 104 of the OBCA stipulates that unanimous written shareholder approval is necessary. Bill 213 proposes to reduce the threshold for written shareholder approval by Ontario corporations which are not offering securities to the public. Following the proposed changes, it will be possible for such corporations to pass ordinary shareholder resolutions in writing relying on the vote of a majority of the shares. Bill 213 introduces an obligation to notify all shareholders who did not sign a written resolution within 10 business days of the resolution being passed. Changes to shareholder approval requirements should be considered in light of constating documents, which may impose obligations more stringent than those under the OBCA.
• The authors of this piece gratefully acknowledge the contributions of articling student Tina Yuan.
