OBCA Amends Director Residency and Shareholder Resolution Rules

Effective July 5, 2021, Ontario has made two important changes to the Ontario Business Corporations Act (the "OBCA").

The first relates to the director residency requirement. Previously, at least 25% of the directors of an Ontario corporation had to be resident Canadians (or at least one director had to be resident if there were less than four directors). The requirement has now been removed and, as a result, there is no longer a Canadian residency requirement for directors.

The second permits written resolutions by shareholders of a non-offering corporation (in general terms, a corporation which is not listed on a stock exchange) to be signed by a majority of the shareholders. Shareholder resolutions can be made through meetings or by written resolution. Previously, written resolutions had to be signed by all of the shareholders entitled to vote. This could be onerous where there are a large number of shareholders and a shareholder meeting would need to be held if a shareholder did not want to sign the written resolution. The new changes provide that a written resolution can now be signed by at least a majority of the shareholders who are entitled to vote on the resolution at a meeting. This applies to ordinary resolutions (items requiring a simple majority), not special resolutions (which require two-thirds approvals). Notice of the resolution must be given to all shareholders who were entitled to vote on the resolution and who did not sign it.