Repeal of OBCA Directors’ Residency Requirement and Lowering of Threshold for Written Ordinary Resolutions of Shareholders
Recent amendments to the Ontario Business Corporations Act (the “OBCA”) came into force on July 5, 2021, which were included in the Better for People, Smarter for Business Act, 2020 (Bill 213).
Two of the most notable amendments were:
- Repeal of the requirement that OBCA corporations have a minimum of 25% of resident Canadian directors. Effective July 5, 2021, Ontario corporations joined many other provinces that have removed resident Canadian requirements for directors.
- Lowering the approval threshold for a written ordinary resolution of shareholders of a non-offering corporation to holders of at least a majority of the voting shares. This replaces the prior requirement for 100% of all voting shareholders to sign a written ordinary resolution of shareholders with a simple majority of those shareholders (for example shareholders holding 50.1% of the votes entitled to be cast at a meeting). This enables the holders of shares carrying a majority of the votes entitled to vote on the resolution, to pass a written resolution without input from the minority shareholders. The minority shareholders who do not sign the resolution must receive notice within 10 business days that the resolution was passed. The notice must set out the text of the resolution and state a description of and the reasons for the business dealt with by the resolution. This new rule does not override provisions of the by-laws or a shareholder’s agreement that may have requirements that all shareholders sign resolutions in writing. Therefore, by-laws and any shareholders agreement should be reviewed prior to relying on this new rule.
The requirement for 100% of all voting shareholders to sign a written special resolution and 100% of all directors to sign a written board resolution, remain in place.