Important amendments to the Ontario Business Corporations Act (“OBCA”) were previously announced with the passing of Bill 213, the Better for People, Smarter for Business Act, which received Royal Assent in 2020. The changes did not come into force immediately, but it was announced that the changes described below would come into force on July 5, 2021.
Specifically, changes affect shareholder resolution approval requirements as well as eliminating the residency requirements for directors of a corporation.
As a result of these changes, corporations should consult with a knowledgeable business lawyer and review the corporation’s existing articles, by-laws and unanimous shareholder agreements.
Changes to Shareholder Resolution Approval Requirements
Among the changes is the introduction of a new clause, s. 104(1)(c) of the OBCA, which provides that, in the case of a corporation that is not an offering corporation, a resolution in writing signed by at least a majority of shareholders at a meeting of the shareholders is as valid as if it had been passed by ordinary resolution at the meeting. Under the previous legislation, written resolutions were required to be signed by all shareholders of a corporation.
In addition, if the resolution deals with all matters required by the OBCA to be dealt with at a meeting of shareholders where all business to be transacted at the meeting is to be passed by ordinary resolution, the resolution satisfies all the requirements of the OBCA relating to such a shareholder meeting, subject to the existing exceptions.
The section is further amended to require notice of the resolution referred to in s. 104(1)(c) to be given to all shareholders entitled to vote on the resolution who did not sign it.
Finally, provision is made for circumstances where the articles or a unanimous shareholder agreement require a greater number of votes of shareholders to effect a particular action by ordinary resolution.
Changes to Director Residency Requirements
Additionally, an important change is introduced to corporate directors’ residency requirements.
Previously, under s. 118(3) of the OBCA, 25% of an Ontario corporation’s directors were required to be Canadian residents. Forboards of directors with fewer than four members, the minimum was of one resident Canadian.
However, that provision is repealed pursuant to Bill 213 and there is no longer any residency requirement under the OBCA for corporate directors.
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The business law lawyers at Bader Lawhave been helping business owners and entrepreneurs in Mississauga and the surrounding areas mitigate their liability and potential risk for over a decade. We will review each client’s specific needs and work with them to design a shareholder agreement that contemplates and sets out strategies for managing a variety of potential issues. Our clients range from small family businesses to large operations with millions of dollars in annual revenue, giving us the experience to know how to effectively address the needs of any type of organization.
The business lawyers at Bader Law have been establishing trusted relationships with business owners and entrepreneurs in the Mississauga community for over a decade. We work with each client to develop an effective strategy focused on their specific needs and will create custom shareholder agreements designed to avoid conflict and mitigate risk. When conflicts do arise, we represent clients in a variety of issues and work to find effective and practical resolutions in every situation. To discuss your needs with a skilled lawyer, contact us online or at (289) 652-9092.