Canada: Amended Ontario Emergency Order Clarifies Financial Statement Requirements For Delayed AGMs

The Government of Ontario has amended its emergency order for virtual shareholder meetings to provide, among other things, additional relief in respect of requirements to re-issue notices of meetings and to present financial statements at annual meetings within a specified period.

Pursuant to an order under the Emergency Management and Civil Protection Act (Ontario) (the Amended Order), the Government of Ontario has amended its March 30, 2020 order (the Original Order) which had temporarily suspended and replaced certain provisions of the Business Corporations Act (Ontario) (OBCA) which had extended the deadline for annual shareholder meetings and allowed issuers to hold virtual-only board and shareholder meetings, regardless of their articles and bylaws, as we had previously discussed. The Amended Order provides greater certainty for OBCA-corporations with regard to the timing, format and procedures of annual shareholders meetings in 2020, in response to the COVID-19 pandemic, as well as extending its coverage to corporations under Corporations Act (Ontario), the Co-Operative Corporations Act (Ontario) and the Condominium Act (Ontario).

Annual Financial Statements

The OBCA requires that financial statements, any related auditor's reports, and, where applicable, further financial information be laid before shareholders at each annual meeting. Such financial statements and other information must pertain to the period commencing either on the day the corporation came into existence or immediately following the end of its last completed financial year and ending not more than six months before the annual meeting. As a result, the directors of an OBCA-corporation are generally required to hold an annual meeting for a date not later than six months after the end of the immediately preceding financial year, as well as satisfy the general requirement to call a meeting no later than 15 months after the corporation's last annual meeting. The Ontario Government's extension of the meeting deadline under the Original Order failed to address the financial statement requirement and left some ambiguity as to how corporations could both comply with the financial statement requirements and delay their meeting in 2020. The Amended Order addresses this issue by temporarily suspending the requirement that the financial information placed before an annual meeting pertain to a period ending not more than six months before such meeting.

Notice of Meeting

The Amended Order clarifies that an OBCA-corporation is not required to send a new or amended notice of meeting if it is changing the date, time or place of its meeting of shareholders to permit a virtual meeting, provided that the persons entitled to receive the notice are informed of the change in a manner and within a time that is reasonable in the circumstances. This requirement is consistent with the Canadian Securities Administrators' recent guidance with regard to virtual shareholder meetings, which requires issuers changing the date, time, location or format of their shareholder meetings in the 2020 proxy season to issue a news release announcing the change and taking all reasonable steps to inform the parties involved in the proxy voting infrastructure.

Virtual Meetings

Like the Original Order, the Amended Order temporarily amends the provisions of the OBCA in respect of shareholder meetings to provide additional flexibility for corporations looking to hold virtual meetings by permitting shareholder meetings to be held by telephonic or electronic means, regardless of any provision in the corporation's articles or bylaws. However, the Amended Order further clarifies how voting should be conducted at a virtual meeting, by providing that the chair of a virtual meeting must conduct the vote by a show of hands or by a ballot, if feasible, and otherwise the chair may direct voting by alternate means, for example, in the case of an audio only meeting.  This is generally consistent with the process we have seen followed in virtual meetings, where voting is handled via ballots.

Meeting Deadline

As previously discussed, in light of the state of emergency declared in Ontario, the deadline to hold an annual meeting of shareholders has temporarily been extended for OBCA-corporations as follows (the extended meeting deadlines):

• If the last day on which the annual meeting is required to be held falls during the time that the current declaration of emergency applies, the corporation may hold the meeting any time before the 90^th day after the day the declaration of emergency is terminated.
• If the last day on which the annual meeting is required to be held falls within the 30-day period that begins on the day after the day the current declaration of emergency is terminated, the corporation may hold the meeting any time before the 120^th day after the declaration of emergency is terminated.

The Amended Order clarifies that the directors of an OBCA-corporation may call a meeting of shareholders to be held on a date contemplated by the extended meeting deadlines at a time that enables the corporation to comply with the extended meeting deadlines and that is reasonable in the circumstances. The Amended Order also clarifies that the date on which an OBCA-corporation was required to hold its annual meeting of shareholders for the purpose of determining whether the extended meeting deadlines will apply to the corporation should be based upon both the meeting deadline described in section 94 of the OBCA (i.e., within 15 months from the corporation's last annual meeting) and the financial statements required to be placed before the meeting (i.e., within 6 months of the issuer's year end).

General

The Amended Order can be found in Order Under Subsection 7.1(2) of the Act – Corporations, Co-Operative Corporations and Condominium Corporations, Amending Ontario Regulation 107/20 made under the Emergency Management and Civil Protection Act, published on April 24, 2020. The temporary suspension and replacement of certain provisions of the OBCA under the Amended Order, as discussed above, is retroactive to March 17, 2020. Similar amendments to the Corporations Act (Ontario), the Co-Operative Corporations Act (Ontario) and the Condominium Act (Ontario) are provided for in the Amended Order.

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