Alberta to remove residency requirements for directors

3 minute read
01 August 2020

Alberta has recently passed legislation that will, upon coming into force, remove director residency requirements currently in place under the Business Corporations Act (Alberta) (ABCA) and the Companies Act (Alberta). These changes put Alberta in line with other Canadian jurisdictions, such as Quebec, British Columbia, Nova Scotia, New Brunswick and Prince Edward Island, that do not have residency requirements for directors under their respective legislation.

Gowling WLG Focus

For foreign-owned corporations looking to incorporate or acquire Alberta-based subsidiaries, this will be a welcome change. Historically, foreign-owned corporations that couldn't meet the residency requirements under the ABCA chose to incorporate subsidiaries outside of Alberta in provinces where there was no such residency requirement. Alternatively, to meet the residency requirements in Alberta, foreign shareholders have also appointed Alberta or Canadian residents as directors to meet the applicable residency requirements, but the foreign shareholders have then assumed the director's powers to manage the business and affairs of the corporation to maintain control over the Alberta subsidiary.

As a result of the legislative changes, Alberta will be a more inviting jurisdiction for foreign-owned corporations to incorporate and acquire Alberta and Canadian-based subsidiaries by removing restrictive residency requirements.

Current Framework

Currently, a corporation incorporated under the ABCA is required to have at least 25% of the directors of the corporation be resident Canadians and, subject to certain exceptions, directors may not transact business at a directors meeting unless at least 25% of the directors present are resident Canadians. Further, powers held by directors may not be delegated to a managing director unless the managing director is a resident Canadian or to a committee of directors unless at least 25% of the committee members are resident Canadians.

Entities incorporated under the Companies Act must currently adhere to more restrictive residency requirements. Under the Companies Act, at least 50% of the members of the board must be resident Albertans and business may only be transacted at a board meeting if at least 50% of the members of the board of directors present at the meeting are resident Albertans.

The legislative changes removing these residency requirements will come into force on proclamation. We invite you to contact a member of the Gowling WLG Corporate Finance team if you have any questions regarding these upcoming changes.

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