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Ontario Removes Residency Requirements for Directors and Permits Majority Written Shareholder Resolutions

August 18, 2021
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  • Ontario Removes Residency Requirements for Directors and Permits Majority Written Shareholder Resolutions

Removal of Residency Requirement

As of July 5, 2021, the Ontario Business Corporations Act has been amended to delete any requirement to have 25% of the board of directors on any Ontario corporation be resident Canadians. Specifically, section 118(3) of the Act has been repealed and this may be of particular interest to foreign companies looking to set up satellite or subsidiary businesses in Canada. Before this amendment, these foreign investors were only left with the option of finding a resident Canadian who would consent to being on the board, or incorporating in another provincial jurisdiction that did not have the residency requirement and obtaining an extra-provincial licence to operate in Ontario.

The repeal of the residency requirement also brings Ontario in line with the provinces of British Columbia, Alberta, Quebec, Nova Scotia, and New Brunswick, all of whom previously removed their requirements.

Even with these changes, we understand that the forms to be filed with the Ontario Ministry of Government Consumer and Government may still require a declaration of a director’s residency status, but that these will be soon phased out as these forms are updated.

Majority Written Shareholder Resolutions

In the same bill that removed the residency requirement, section 104(1) of the Act was also amended to permit shareholders to pass resolutions in writing without a formal meeting if at least a majority of shareholders signed the resolution. Previously, an Ontario corporation could only do this if all shareholders (and not just a majority) signed the resolution.

The corporation is required to provide written notice of the written resolution, as well as a description of and the reasons for the business dealt with by the resolution, within 10 business days of its passing to the shareholders entitled to vote on the resolution who did not sign it.

The ability to pass these majority resolutions in writing, however, is subject to any restrictions in the corporation’s articles or in any unanimous shareholders’ agreement where more than a simple majority of the shareholders may be required for certain matters. In these types of situations, the written resolutions must be signed by the minimum number of shareholders set out in the articles or the unanimous shareholders’ agreement.

Although not cited in the amendments, it may also be prudent of a corporation to review its by-laws and any other corporate governance documents to ensure that any references to residency requirements of its board of directors or higher voting thresholds be amended, if desirable, to take advantage of these amendments to streamline the corporate governance process.

If you have any questions or require any assistance to review and amend your corporate documentation, please contact anyone within our corporate-commercial group.

The information contained in this article is for general information only and is not intended as legal advice or opinion.  Should you require any advice or assistance with this or any other issue affecting your business, then please do not hesitate to contact us.

For further information,  please contact Derwin Wong by telephone at (416) 368-0600 or by email at dwong@businesslawyers.com

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