On Monday, July 5, 2021, changes to Ontario’s Business Corporations Act (OBCA), will take effect. The latest updates to the law reflect an effort to modernize aspects of the OBCA and enable the Canadian province to compete more effectively, nationally and internationally, as a home for corporate headquarters.
Among other changes, two will have a significant impact on businesses that call Ontario home: the elimination of Canadian residency requirements for corporate directors, and allowing written ordinary shareholder resolutions to be signed by a majority of shareholders of non-public corporations entitled to vote on the resolutions (rather than requiring signatures of 100% of such shareholders, as required previously).
Under the prior version of the OCBA, at least 25% of the directors of a corporation must have been resident Canadians (except where the corporation had fewer than four directors, at which point at least one director was required to be a resident Canadian). This requirement made it difficult for some foreign businesses to incorporate in Ontario and led some among this group to incorporate in another province. Beginning July 5th, however, corporations can populate their boards according to criteria more aligned to their businesses than simply the jurisdiction of residence of a potential director.
The change to a simple “majority of shareholders” requirement for signatures to written resolutions of shareholders is equally significant. Under the pre-July 5th version of the law, if a non-public corporation could not obtain signatures from 100% of eligible shareholders, a shareholder meeting needed to be called, at which the resolution could be passed. However, organizing a shareholder meeting can be a relatively slow and expensive process. The updated law makes it easier for eligible corporations to obtain approval for relatively simple shareholder resolutions. There are exceptions to this less-strict requirement, however, and Ontario corporations should review their articles and bylaws — and speak with qualified legal counsel for guidance — to better understand how this and other updates to the OBCA may affect them.