Recent Amendments to the Business Corporations Act (Ontario) During the
COVID-19 State of Emergency
On May 12, 2020, the Ontario legislature passed Bill 190, Covid-19 Response and Reforms to Modernize Ontario Act, 2020 which amended various provisions of the Business Corporations Act (Ontario) (the “Act”). The primary purpose of these amendments is to address various corporate governance matters which are likely to be impacted by the Covid-19 pandemic. In particular, they relate to the fact that in person meetings of shareholders or directors are not appropriate for public health reasons during the state of emergency.
Among other things, Bill 190 added a new Part XIX to the Act which applies during the “temporary suspension period”. The “temporary suspension period” is the period of the emergency and a further period that ends on the 120th day after the day the declared emergency is terminated and, if the regulations so provide for the section, a further prescribed period of time immediately following the end of the 120-day period.” Meanwhile, “emergency” is a reference to the emergency declared pursuant to Order in Council 518/2020 (Ontario Regulation 50/20) on March 17, 2020 pursuant to section 7.0.1 of the Emergency Management and Civil Protection Act.
A summary of some of these amendments which are only applicable during the temporary suspension period is as follows:
1. Shareholders Meetings
The first series of amendments extend the time period under which a meeting of the shareholders is required to be held under the Act. According to subsection 94(1)(a) of the Act, the directors “shall call an annual meeting of shareholders not later than eighteen months after the corporation comes into existence and subsequently not later than fifteen months after holding the last preceding annual meeting”. As a result of Bill 190, if the last day on which an annual meeting of the shareholders was originally required to be held is a day that falls within the period of the declared emergency, the last day on which the meeting is required to be held is no later than the 90th day after the day the emergency is terminated. Further, if the last day on which the meeting of the shareholders was originally required to be held falls within the 30-day period that begins on the day after the day the emergency is terminated, the last day on which the meeting is required to be held is no later than the 120th day after the day the emergency is terminated.
2. Notice of Shareholders Meetings
A second amendment deals with when a notice of a shareholder meeting was sent prior to the emergency, but the time or place of the meeting has changed to accommodate an electronic meeting. In these instances, if a notice of a meeting of shareholders has been sent for a meeting to be held on a day that falls within the period of the declared emergency and, after the notice is sent, the date, time or place of the meeting is changed in order to hold the meeting by telephone or electronic means, another notice of meeting is not required to be sent but the persons entitled to receive the notice must be informed of the change in a manner and within a time that is reasonable in the circumstances.
3. Manner of Voting at Shareholders Meetings
Prior to the emergency, unless otherwise provided by by-law, the voting of the shareholders at a shareholders meeting should be conducted by a show of hands. This may be difficult to accommodate in some cases where there is a meeting by telephone or electronic means. To accommodate virtual or other electronic meetings, the chair shall conduct the vote by a show of hands or by a ballot if that is feasible; otherwise the chair may direct voting by alternate means.
4. Directors Meetings by Electronic Means
The amendments allow for meetings of the directors by telephone or other electronic means, despite any provision of the Act or the by-laws of the corporation. In particular, the amendments allow a meeting of directors, or of a committee of directors, to be held by means of such telephone, electronic or other communication facilities as may be needed to permit all persons participating in the meeting to communicate with each other simultaneously and instantaneously, and a director participating in such a meeting by such means is deemed for the purposes of this Act to be present at that meeting.
5. Information to be Laid Before Annual Shareholders Meeting
Prior the emergency, the directors were required to provide to the shareholders at an annual meeting financial statements for the period that began immediately after the end of the last completed financial year and ended not more than six months before the annual meeting. During the emergency, financial statements must be presented for the period that began immediately after the end of the last completed financial year and ended before the annual meeting.
It is important to remember that these amendments to the Act will longer be of any force or effect after the end of the temporary suspension period.
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