There are changes taking effect to Ontario’s Business Corporations Act on July 5th, aimed at eliminating certain requirements in an attempt to make it easier for organizations in Ontario to do business. The changes come as part of Bill 213, the Better for People, Smarter for Business Act, which received royal assent near the end of 2020. The changes impacting the Business Corporates Act are twofold, each designed to simplify requirements and eliminate restrictions for businesses in the province. Specifically, the changes are as follows:

1. Eliminate the Canadian residency requirements for Directors
2. Simplify the shareholder resolution approval process

Both changes come into effect on Monday, July 5th. Below, we’ll explain each change in more detail so you can ensure your business is aware of how they may affect you.

Director Residency Requirement Changes

Under the current version of the Business Corporations Act, s. 118 (3) sets out the following requirement for Directors of Ontario corporations:

At least 25 per cent of the directors of a corporation other than a non-resident corporation shall be resident Canadians, but where a corporation has less than four directors, at least one director shall be a resident Canadian.

Beginning July 5th, the amendments will repeal this section, paving the way for more foreign-owned corporations to do business in Ontario. This brings Ontario into alignment with several other provinces that already have no residency requirements for directors. The move may prompt more businesses to incorporate in Ontario instead of elsewhere in Canada. This will also enable businesses incorporating in Ontario to appoint Directors based on skill, experience and knowledge without regard to where they live. Notably, the federal Business Corporations Act still maintains a 25% Canadian residency requirement for Directors of federally incorporated organizations.

Simplifying the Shareholder Resolution Process

The provincial Business Corporations Act currently permits shareholders to adopt a resolution in writing, instead of requiring a meeting in person. However, a unanimous decision by all shareholders is required in order to pass a written resolution, necessitating that the resolution must be signed by all shareholders with the right to vote on that particular resolution. As of July 5th, the rules will change, requiring only enough shareholders to represent a majority of shares, sign the resolution. In cases where a resolution passes by a majority rather than a unanimous agreement, the corporation will be required to provide notice in writing of its passing to those shareholders who opted not to sign. The new subsection will read as follows:

104 (1) Except where a written statement is submitted by a director under subsection 123 (2) or where representations in writing are submitted by an auditor under subsection 149 (6),

(a) a resolution in writing signed by all the shareholders or their attorney authorized in writing entitled to vote on that resolution at a meeting of shareholders is as valid as if it had been passed at a meeting of the shareholders;

(b) a resolution in writing dealing with all matters required by this Act to be dealt with at a meeting of shareholders, and signed by all the shareholders or their attorney authorized in writing entitled to vote at that meeting, satisfies all the requirements of this Act relating to that meeting of shareholders; and

(c) 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.

Emphasis added to highlight new subsections under s. 104

Note that this change applies only to ordinary resolutions. Special resolutions, which under the Act currently require approval by two-thirds of shareholders in the case of a meeting, or a unanimous decision by all shareholders if in writing.

The changes also do not prevent private corporations from setting more stringent requirements for signatures on ordinary resolutions. Businesses are free to set more robust signatory rules in the Articles of Incorporation or as part of a Shareholders Agreement.

Contact Milosevic & Associates in Toronto for Complex Corporate Commercial Matters and Litigation

Both of the above changes will make doing business in Ontario simpler, particularly in the current era where in-person meetings are being limited, and people are working remotely from all over the world.

The Toronto lawyers at Milosevic & Associates are skilled litigators who regularly guide clients through complex commercial matters, including shareholder disputes. Our team has extensive experience and expertise advocating for our clients’ rights. Call us at 416-916-1387 or contact us online to schedule a consultation.