August 20, 2021 | Christianah

Previously, in our Business Structure series, we considered how incorporation is possible at the provincial or federal level. The Ontario Business Corporations Act (“OBCA”), R.S.O. 1990, c. B.16 governs the incorporation and operation of corporations established in the province of Ontario. Effective from July 5, 2021, certain positive amendments were made to the OBCA by the Better for People, Smarter for Business Act, 2020. These changes will simplify the incorporation and management process of corporations within Ontario. In today’s post, we will examine these changes and the benefits they provide to existing and prospective business owners in Ontario.

1) Elimination of Directors’ Canadian Residency Requirement.

Previously, s.118(3) of the OBCA required at least 25% of directors of an Ontario corporation to be resident Canadians. Similarly, if a corporation had less than four directors, no less than one had to be a resident Canadian. This requirement was challenging for some business owners and investors as they were constrained to source for Canadian directors to meet this requirement. With the repeal of this section, business owners are encouraged to incorporate in Ontario instead of picking provinces with less stringent requirements. Also, with this change, directors can now be chosen based solely on their benefit to the company and not their residency status.

It is important to note that under the Canada Business Corporations Act (“CBCA”), the Canadian residency status requirement persists for federal corporations.

2) Reduced Approval Threshold for Written Resolutions.

Another amendment made to the OBCA is to reduce the approval threshold for written resolutions provided under s.104(1)(c). To pass a written resolution under this section, all eligible shareholders voted at a shareholders’ meeting. It was very time-consuming to get all shareholders to sign this resolution. Most times, the corporation would schedule a shareholders’ meeting to pass even a simple resolution. However, with the new change in the OBCA, a simple majority of shareholder votes would suffice to pass a written resolution. Private companies can now easily get shareholder approval for simple matters quickly and efficiently.

It is important to note that Article provisions and unanimous shareholder agreements supersede this new change. Therefore, if a corporation’s Articles require higher votes than a simple majority, the Articles would prioritize.

Another necessary provision is that the corporation must give written notice to shareholders that did not sign the resolution. The corporation must provide this notice within ten days of passing the resolution. Also, the information should include the resolution and reasons for the business dealt with by the resolution.

These changes are commendable and will help promote the formation and efficiency of corporate business structures in Ontario.

For any questions on how these changes would benefit your corporation as an existing or prospective business owner, please do not hesitate to contact Northview Law at 416-639-7639 or follow this link to book a free consultation.