Own a Business? Here are Some Changes to Know About

By Martin Rumack

December 6, 2021

If you are an incorporated small- or medium-sized business owner governed by the Ontario Business Corporations Act (OBCA), then this article is for you. There have been some significant recent changes to that legislation that can affect corporations all across province, and regardless of size.

Removal of Residency Requirements for Corporate Directors

Under changes to the OBCA that came into force on July 5, 2021, the composition of a Board of Directors is no longer fettered by strict Canadian residency requirements. (And this impacts not only existing corporations, but also any that are newly-formed, or else incorporated out-of-province but “continued” here under the OBCA.)

Previously, the OBCA required that for all Ontario corporations, the membership of the Board of Directors must include at least 25 percent who are “resident Canadian(s)”. For Boards having fewer than four members, at least one of them must have satisfied this residency requirement. There were also precise rules around what constitutes a “resident Canadian”, with the focus being on Canadian citizenship or certain classes of permanent residency.

Now, under the recent changes, the residency requirements have been loosened up, by eliminating that 25 percent Canadian residency requirement as of July 5, 2021. However, with respect to certain filings made with the Ontario Ministry of Government and Consumer Services, all OBCA corporations must still include their Directors’ residency information in the filed documents.

The changes serve to modernize the OBCA, and put it on even footing with other Canadian jurisdictions (like Alberta, British Columbia, the Maritime provinces, the Territories, and Quebec) where there is no such residency threshold. It also adds corporate flexibility, by making it easier for corporations to cast a wider net and choose the best candidates for the Board of Directors, regardless of their residency. It also means that there could be an in

Changes to Requirements for Written Resolutions

Another important change for corporate business owners involves the approval threshold for written corporate resolutions.

Formerly, ordinary shareholder resolutions that were in writing had to be signed by all of the shareholders of the corporation, in place of a shareholder meeting.

Now, under a newly-added provision of the OBCA, corporate resolutions in writing can be effective if they are signed by the shareholders that hold a majority of the votes (or else a higher threshold, if one has been stipulated in the corporate articles, or in a shareholders’ agreement). In other words, there is no longer a requirement that certain written resolutions must be unanimously signed by all shareholders.

As long as the resolution otherwise addresses OBCA-matters, certain shareholder meetings can be replaced by a written resolution that is merely endorsed by a majority of the shareholder. There are certain notice requirements, however: Any shareholder who would have been entitled to vote on the resolution but did not do so, is entitled to receive notice within 10 days that a written resolution has been passed by a majority of shareholders in this manner.

Needless to say, this adds considerable flexibility to corporations of all types, but especially to those that are privately-held.

The Practical Take-Away

OBCA corporations that are impacted by these changes should take the opportunity to review and update their corporate articles, by-laws, unanimous shareholder agreements, polices and practices. For example, the by-laws of some Ontario corporations may have used language in their by-laws that repeated the wording of the former OBCA requirement; these can now be removed in light of the recent legislative changes.

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