Changes Coming to the OBCA Will Give Ontario Businesses More Flexibility
Ontario’s Bill 213 – the Better for People, Smarter for Business Act, 2020 (the “Act”) – recently received Royal Assent, and its provisions, as they pertain to Ontario’s Business Corporations Act (the “OBCA”), will come into force on July 5, 2021. The amendments under the Act are designed to provide more flexibility for Ontario businesses, and re-position Ontario as an attractive jurisdiction in which to conduct business.
The OBCA Amendments
The amendments impact the OBCA in a number of ways, but two significant amendments will:
- eliminate director residency requirements; and
- for private corporations, lower approval thresholds for written shareholder resolutions.
Elimination of Director Residency Requirements
Currently, Section 118(3) of the OBCA requires that at least 25% of the directors of an Ontario corporation be “resident Canadians” (or, for a board with fewer than four members, a minimum of one “resident Canadian”).
Once the OBCA amendments come into force, Section 118(3) will be repealed; a change generally welcomed by local and foreign business communities. This means there will no longer be a requirement for a “resident Canadian” to sit on the board of an OBCA corporation. Historically, foreign investors who desired a Canadian corporation would need to incorporate in a Canadian jurisdiction without director residency requirements, or, if an Ontario corporation was preferred, to identify an appropriate “resident Canadian(s)” to sit on the board. The amendment will remove the burden for foreign investors, who wish to incorporate under the OBCA, to identify a Canadian resident board member. Investors will be able to focus on expertise and experience, rather than on mere residency, in appointing board members.
Removal of this requirement aligns the OBCA with the corporate statutes in British Columbia, Alberta, Quebec, the Maritime provinces, and the Territories, each of which previously removed the Canadian residency requirement. Note that corporations incorporated under the Canada Business Corporations Act will still need to comply with “resident Canadian” director requirements.
Lowering of Approval Threshold for Written Shareholder Resolutions
Section 104 of the OBCA currently requires written resolutions to be signed by all shareholders of a corporation. For non-offering (i.e., private) corporations (particularly widely-held private corporations), obtaining a signature from 100% of shareholders can be burdensome, and often leaves a board with no choice but to convene a shareholders’ meeting to pass even an immaterial resolution; a step that often causes unnecessary delays and adds unnecessary costs.
The amendments lower the approval threshold for written ordinary (not special) resolutions to a simple majority (i.e., 50%) of shares entitled to vote on that resolution. This lower threshold only applies to privately-held corporations, and stipulates that within 10 business days after the resolution is signed, written notice be provided to all non-signing shareholders who were entitled to vote on the resolution. A corporation can opt out of the new default regime by including a provision in its articles or unanimous shareholder agreement (“USA”) that requires a greater number of votes to pass an ordinary resolution.
Preparing for the Changes
The articles, by-laws and USAs of many private OBCA corporations may currently contain provisions that are more restrictive than the amendments in the Act provide for. Notably, the amendments would not apply in these cases, as the articles and USA of a corporation prevail over these amendments. Corporations incorporated under the OBCA should review their articles, by-laws, and USAs, and consider amending these documents (in particular, their articles and/or USAs) if they would like the new OBCA director residency requirements and/or threshold for written shareholder resolutions to apply.
For further information on these amendments or to discuss potential changes to your articles or USA, please contact any member of our Mergers and Acquisitions Group.
Authors
Insights
-
Capital Markets
Public Safety Canada Releases Updated Guidance on Modern Slavery Reporting Obligations
The Fighting Against Forced Labour and Child Labour in Supply Chains Act (the “Act”) came into force on January 1, 2024, implementing enhanced reporting requirements for certain entities to… -
Capital Markets
Ontario Court of Appeal Enforces Contractual Waiver of Statutory Dissent Rights
Ontario’s Court of Appeal concluded in a recent decision that, subject to limited exceptions, shareholders can contractually waive statutory “dissent rights”, which allow shareholders to dissent in… -
Shareholder Activism
Jon Feldman featured on "State of Shareholder Activism in Canada", Mission Matters Business Podcast
Goodmans partner Jon Feldman was recently featured on the Mission Matters Business Podcast with Adam Torres for the episode "State of Shareholder Activism in Canada", and shared his insights on Canada… -
Capital Markets
CSA Provides Further Updated Guidance on Virtual Shareholder Meetings
On February 22, 2024, the Canadian Securities Administrators (CSA) recently published updated guidance on virtual shareholder meetings following initial guidance provided in February 2022. See… -
Mergers and Acquisitions
Neill May featured in "Deal Diary: Five Law Firms Work Chord Energy-Enerplus", The Deal
Goodmans partner Neill May has been featured by The Deal for his work as Canadian Counsel to Chord Energy Corp. (CHRD) in their acquisition of Enerplus Corp. (ERF). Read the full deal description… -
Capital Markets
Access Model for prospectuses: Final amendments announced, Law360 Canada
Bill Gorman and Randy McAuley co-authored Access Model for prospectuses: Final amendments announced in Law360 Canada. Excerpt from Access Model for prospectuses: Final amendments…
Featured Work
-
Mergers and Acquisitions
Bazaarvoice Inc. acquires Granify Inc.
Goodmans acted for Bazaarvoice Inc., a leading platform for full-funnel authentic user-generated content and social commerce, in relation with it’s acquisition of Granify Inc., an e-commerce company… -
Mergers and Acquisitions
Majority interest in Kensington Capital Partners Limited acquired by AGF Private Capital Inc.
Goodmans acted for Kensington Capital Partners in connection with AGF Private Capital Inc.'s acquisition of a majority interest in Kensington. Kensington is one of Canada’s leading alternative… -
Mergers and Acquisitions
Y. Dov Meyer and Seth Greenspan acquire remaining 92.5% stake in Terra Firma Capital Corporation
Goodmans acted for Y. Dov Meyer and Seth Greenspan in connection with their acquisition of the remaining 92.5% stake in Terra Firma Capital Corporation. The process commenced with a non-binding letter… -
Mergers and Acquisitions
Chord Energy and Enerplus to Combine in $11 Billion Transaction
Goodmans LLP is acting as Canadian counsel for Chord Energy Corporation in connection with its agreement to buy Enerplus Corporation for US$3.7 billion in stock and cash, creating a leading producer… -
Mergers and Acquisitions
Bulloch Technologies, Inc. acquired by Dover
Goodmans acted for Bulloch Technologies, Inc. in connection with its acquisition by Dover. Specializing in point-of-sale forecourt controller and electronic payment server solutions for the… -
Mergers and Acquisitions
Minute Media acquires STN Video
Goodmans acted for Minute Media, a leading global technology and sports content company, in relation to its acquisition of STN Video, a North American industry leader in sports content distribution…
News & Events
-
Banking and Financial Services
The Canadian Legal Lexpert Directory 2024 Continues to Recognize Goodmans
We are proud to announce Goodmans LLP has once again been recognized in the 2024 edition of The Canadian Legal Lexpert Directory.91 Goodmans lawyers have been recognized as top-tier in their… -
Banking and Financial Services
Chambers and Partners Continues to Honour Goodmans with Global Recognition
We are proud to announce Goodmans LLP has once again received top-tier recognition from Chambers and Partners in the Chambers Global 2024 Guide released today. Recognition from… -
Shareholder Activism
Jon Feldman at the 2024 Activist Investor Conference
Join Jon Feldman at the 2024 Activist Investor Conference for the session "Evolution of Shareholder and Management Rights". The Activist Investor Conference is a forum for discussing…