2020 has been a year of many changes, including changes in corporate law across Canada. In this article, we provide a summary of recent corporate developments in various provinces.
British Columbia
British Columbia introduced a new type of corporation in 2020, called a "benefit company". A benefit company differs from a standard BC company in three ways: (1) a company is a "benefit company" if its notice of articles contains a statement indicating that it is a benefit company; (2) a benefit company must include in its articles a provision that specifies the public benefits to be promoted by it and a commitment to conduct the benefit company's business in a responsible and sustainable manner and to promote the public benefits that are to be promoted by it; and (3) a benefit company is required to annually publish a benefit report.
Benefit companies are a trend started in the United States and while British Columbia has now formalized benefit companies as a distinct type of corporate entity, there is no compelling legal reason or need for them in Canada, as the common law in Canada (unlike the United States) already allows directors to take various interests into account in making corporate decisions.
For more information about benefit companies, see our January 2021 article.
Also in British Columbia, as a result of amendments to the Business Corporations Act (British Columbia), each British Columbia private company must now have in place, and thereafter maintain, a transparency register which lists potentially sensitive information about certain "significant individuals" who own or control a significant number of its shares or who control the selection of a majority of its directors.
In essence, if an individual falls into one of the two following categories of ownership or control, he or she will be a "significant individual" and must be identified on the transparency register:
- Category 1 – Share Ownership - An individual who is the registered or beneficial owner of, or has indirect control over, either 25% of the issued shares of a company, or 25% of the voting shares of a company; or
- Category 2 – Rights Regarding Directors - An individual who has the right, or indirect control of the right, to elect, appoint or remove a majority of the directors of a company. This includes the ability to exercise direct and significant influence over an individual with such right or indirect control.
For more information about BC's transparency register, see our April 2020 article.
Ontario
The Government of Ontario passed legislation which amends numerous Ontario business laws in an effort to allow businesses to continue to operate while complying with both physical distancing guidelines and legal requirements as a result of the COVID-19 pandemic. For more information on Ontario business laws, see our May 2020 article.
In addition, the Government of Ontario has passed new legislation, Better for People, Smarter for Business Act, 2020 that addresses certain issues affecting the business community in Ontario and seeks to make Ontario a more welcoming province for business. This Act does so by amending the Ontario Business Corporations Act to: (a) eliminate the long-standing requirement that at least 25% of the directors of an Ontario corporation be Canadian residents; and (b) lower the approval threshold for written shareholder resolutions passed in lieu of a meeting, from unanimity to a majority, in the case of ordinary business at privately held corporations only. For more information about the Act, see our October 2020 article.
Alberta
Alberta has passed legislation that will, upon coming into force, remove director residency requirements currently in place under the Business Corporations Act (Alberta) and the Companies Act (Alberta). 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. For more information on director residency requirements, see our August 2020 article.
Quebec
In Quebec, the government tabled draft legislation, Bill 78, An Act mainly to improve the transparency of enterprises. If enacted in its current form, all businesses will be required to disclose in Quebec's Enterprise Register, a public registry, the identity of their "ultimate beneficiaries". These measures reflect the government's objective of addressing tax avoidance, criminal activity and corruption. For more information about Bill 78, see our January 2021 article.
Overall, during 2020, the provincial governments in the above-noted Canadian jurisdictions have shown flexibility and forward-thinking in the face of COVID-19 and have looked to modernize the corporate law in their respective jurisdictions.