The Bill 213 of Ontario

Proposed Changes

On October 6th, two changes were proposed by the Ontario government. They were introduced through the Bill 213, which is an act of 2020 that was considered smarter for businesses and better for people. The intention behind this act was to make incorporation for foreign-owned or foreign-controlled corporations more welcoming.

The two changes were amended by Prabmeet Singh Sarkaria, the Associate Minister of Small Business and Red Tape Reduction. They were stated in schedule 1:

  • At least twenty-five percent of the directors of an Ontario corporation requirement should be removed. And the directors should be Canadian residents.
  • Lowering the threshold approval for written normal stockholder resolutions of companies that are privately owned by the OBCA from accord to majority shareholders, who are entitled to vote.

Director Residency Requirements

According to section 118.3 of the OBCA, at least 25% of the directors in an Ontario corporation must be residents of Canada. However, this act is not considered necessary in some jurisdictions like British Columbia, Nova Scotia, and Quebec, knowing that Alberta already introduced the Red Tape Reduction Implementation Act, 2020 Act to modernize their Business Corporations. Therefore, these other jurisdictions don’t have a director residency requirement.

This rule of the act is considered overrated and can create some setbacks. By canceling this rule businesses can focus on effective selection of board members regarding their expertise, not their residency. Therefore, if this change is implemented it would open up more opportunities for the state of Ontario. It will attract more foreign businesses to establish their operations without worrying about jurisdiction regulations.

Ordinary Resolutions in Writing

It is according to section 104 (1) of the OBCA, that a written resolution conducted by the shareholders can be approved without the meeting of the members. It is good enough for them to write their vote and sign the papers without attending the meeting. However, if there are any complications with unresponsiveness by individuals of the board, it is then necessary to hold a meeting and all the shareholders must attend. Conducting a meeting will be very costly and will create unnecessary delays.

The Bill 213 act states that the approval for ordinary resolutions in writing must be facilitated to corporations that are privately held. According to this new rule, it will make approving these resolutions much easier and convenient, as it only requires the signing of the majority of the shareholders. This will add flexibility to corporations in Ontario. It is also a better solution for the COVID 19 pandemic that complicates the process of attending meetings. However, this rule still needs to set the standards for the shareholders that need to vote as a minimum amount to meet.

Even though the new suggestion has no demand to send any advance notice to the minority of the shareholders of the resolution, it still needs to be sent to the shareholders that haven’t voted in the last ten business days after it passed. This written notice should conjointly embrace a duplicate of the text of the bulk written resolution and an announcement of the outline and the reasons for the business handled by the majority written resolution.

Note that the suggested change in this act can only be applied to ordinary resolutions. However, in some cases, they don’t apply to special kinds of resolutions by the shareholders. These resolutions can be changes to the corporations’ articles, amalgamations and dissolutions, reductions to the stated capital account, or other related resolutions. In general, this change is suggested to help make the business decision process much easier and somewhat faster. It is also to give a voting chance for the minorities of shareholders in a business.

Our Tip

There is a chance that the Bill act will be implemented soon. So, we suggest that you go over your corporation documents and try to analyze what your next move might be considering the circumstances of the Bill 213. You can always ask us for help at Tohme Accounting.


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