Ontario’s New Corporate Law Amendments: A Synopsis

Ontario has introduced significant changes to its corporate law, making it more accommodating for businesses. Here’s a breakdown of the key amendments: 

• Elimination of Director Residency Requirement: 

• Ontario’s Bill 213 has removed the necessity for corporations to have a resident Canadian director. 
• Before this change, the Ontario Business Corporations Act (OBCA) mandated that at least 25% of an Ontario corporation’s directors be resident Canadians. For corporations with fewer than four directors, at least one had to be a Canadian resident. 
• This amendment aligns Ontario’s corporate law with other provinces like British Columbia, Alberta, Quebec, Nova Scotia, and New Brunswick, which don’t have such a requirement. 
• The change simplifies the process for foreign entities wanting to establish a company in Ontario. Previously, they had to either find a resident director or incorporate in a province without this requirement and then register in Ontario, leading to extra paperwork and costs. 
• This shift in the OBCA positions Ontario as a competitive choice for non-Canadian businesses looking to incorporate in Canada. 

• Written Shareholder Resolutions: 
• Private corporations can now pass “ordinary resolutions” through a written resolution signed by shareholders holding a majority of the voting shares. 
• Prior to this, written shareholder resolutions could only replace a shareholder meeting if all shareholders entitled to vote signed the resolution. 
• This amendment is limited to “ordinary resolutions” and doesn’t apply to “special resolutions” which need two-thirds of the votes. 
• If a corporation’s foundational documents demand more than a simple majority for an ordinary resolution, that higher threshold remains in effect. 
• Corporations are obligated to notify all shareholders entitled to vote on such a resolution (who didn’t sign it) within 10 business days after its passage. This notice should detail the resolution’s text, description, and rationale. 

• Tax Implications: 
• A corporation incorporated in Canada will be deemed a resident in Canada under the Income Tax Act. If not incorporated in Canada, it’s considered resident if its central management and control are in Canada. 
• There’s a distinction between “other corporation” and Canadian Controlled Private Corporation (CCPC). A CCPC enjoys a lower tax rate in Ontario on active business income up to $500,000 compared to 26.5%. A primary requirement for a CCPC is that it shouldn’t be controlled by non-residents. 

• Recommendations: 
• Existing corporations should review their by-laws and other governance documents. Any references to director residency requirements or voting thresholds might need modification to benefit from these amendments.