D'importantes modifications à la Loi sur les sociétés par actions de l'Ontario (la « LSAO ») entreront en vigueur le 5 juillet 2021. Les modifications suppriment l'obligation qui incombe actuellement au conseil d'administration d'être composé d'au moins 25 % de résidents canadiens, tandis que le seuil d'approbation d'une résolution ordinaire écrite est abaissé à la majorité simple pour les sociétés ne faisant pas appel au public seulement.
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Significant amendments to Ontario's Business Corporations Act (OBCA) are in effect as of July 5, 2021. The amendments eliminate the current requirement that 25% of directors be resident Canadians while, in the case of non-offering corporations only, they reduce the approval threshold for a written ordinary resolution to a simple majority.
This post updates our post of November 30, 2020 with respect to the proclamation date only. Because there are no substantive changes to report, the following information about the key elements of the legislation is the same as in the earlier post.
Canadian Director Requirement Eliminated
Section 118(3) of the OBCA previously required that 25% of the directors of an Ontario corporation be “resident Canadians” (with a minimum of one such person on a board with fewer than four members). As of July 5, 2021, Ontario will become the sixth Canadian jurisdiction without a resident director requirement. Notably, the Canada Business Corporations Act (CBCA) still has a 25% resident director requirement.
Eliminating the resident director requirement makes Ontario more attractive as an incorporation jurisdiction. As of July 5, 2021, it is no longer necessary for foreign investors who wish to incorporate in Ontario to find Canadians to serve on their boards (or, alternatively, to choose to incorporate in a province without a director residency requirement). Each of these options can add cost, complication and delay to business transactions.
Simple Majority for Certain Written Resolutions
Section 104 of the OBCA, which allows written resolutions, previously required all such resolutions to be signed by all shareholders. In the case of private companies, this was a burdensome requirement that sometimes left boards with little choice but to convene a shareholder meeting in order to pass resolutions dealing with minor matters.
The changes have brought Ontario more closely into line with many other jurisdictions by reducing the approval threshold for written ordinary resolutions in non-offering OBCA corporations (essentially private companies) to a simple majority, provided that written notice is then provided, within 10 business days, to non-signing shareholders who were entitled to vote on the resolution. This allows OBCA corporations to avoid the time and expense involved in obtaining the consent of small shareholders, or (alternatively) the delay in providing notice and holding a meeting, for minor housekeeping matters.
It is important to note, however, that the OBCA will continue to require either a two-thirds vote at a shareholder meeting or a unanimous written resolution for any proposal that, under the Act, must be approved by a special resolution. Such proposals include – among others – adoption of an amalgamation agreement (s. 176(4)), continuances to other jurisdictions (s. 181(3)), additions or reductions to stated capital (ss. 24(6); 34(1)), alteration of the number of directors (s. 125(3)) and other situations that often arise in transactional contexts.
Going Forward
The articles, bylaws and shareholder agreements of some non-distributing OBCA corporations may contain provisions on the topics discussed above that are more restrictive than is required as a result of the amendments. In such cases, these corporations may wish to review those documents and consider amendments that would allow the new OBCA standards to apply to them, while also ensuring that their processes and record-keeping practices align with the new written-resolution thresholds and timeframes.
Finally, a non-distributing OBCA corporation may wish to reconsider the composition of its slate of directors going forward. As of July 5, 2021, such corporations will be better able to ensure that their boards have the best possible range of business oversight and corporate governance expertise.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
