May 07, 2007
A reduction in the Canadian residency requirement for corporate boards of directors is one of several changes in Bill 152 aimed at modernizing Ontario’s business laws.
The reduced residency requirement, mandating boards to comprise 25% Canadians, rather than a majority of 51%, is just one amendment to the Ontario Business Corporation Act (OBCA) that falls short of achieving par with other provinces. For corporations to have the same the same flexibility in Ontario that they do in other jurisdictions across Canada (except Alberta, whose mandated percentage is also 25%), the mandated percentage of Canadians would be 0.
On the other hand, Bill 152, which received royal assent December 20, 2006 and comes into effect August 1, 2007, does not maintain a requirement for a minimum number of Canadians to attend board meetings, nor mandatory Canadian representation on board committees.
Along with the changes to the OBCA, the Ministry of Government Services Consumer Protection and Service Modernization Act includes new consumer protection legislation.
John Cameron, chair of the OBA’s personal property security legislation committee, says the legislation simplifies administrative and technical requirements. “It reflects a highly symbolic move to make business laws more modern. This is a really positive development. What’s really interesting and what’s really important is that the government is willing to do something about these technical issues.”
He says the changes will greatly assist lawyers and their clients. “Lawyers like to be able to say to their clients, ‘Here’s what the law is and here’s what it takes to get this done.’ Lawyers don’t like to say to their clients that the law is unclear so we’ll have to do it three different ways because we don’t know which way is right, so it’s going to cost you three times as much.”
The changes mean lawyers will be able to revisit their standard corporate bylaws to integrate increased flexibility that the amendments introduce. These include indemnification for individuals who manage a non-corporate entity on behalf of the corporation—such as partnerships, trusts, joint ventures, limited liability companies, or unincorporated organizations—or who act for a corporation as a director or officer of another corporation. Indemnification is extended beyond civil, criminal, and administrative proceedings to include, for example, an investigation by a securities commission.