A panel of legal practitioners and academics appointed by Ontario's Ministry of Government and Consumer Services (Panel) has recommended potential updates and revisions to a number of corporate and commercial Ontario statutes in a June 2015 report entitled Business Law Agenda (Report).
The Report considers 19 different corporate and commercial Ontario statutes, including the Business Corporations Act (Ontario) (OBCA), and focuses on areas "where Ontario may be currently at a competitive disadvantage".
The Report's recommendations cover a number of topics linked to "five key themes":
- Establishing a regular and formal process to keep corporate and commercial law current
- Making Ontario a jurisdiction of choice for business
- Supporting greater market certainty and confidence in market transactions
- Modernizing laws relating to secured lending and other commercial activity
- Facilitating market activity and promoting small business growth through greater certainty, clarity and efficiency in business legislation
Within the foregoing themes, the Panel was guided by a number of principles, including the objectives of strengthening corporate governance and investor confidence and harmonizing Ontario legislation with other provinces and federally, where appropriate.
The Report recommends that the OBCA be reviewed and updated to take account of technological advancements and legislative and case law developments in Canada and elsewhere, with priority being given to:
- Contemplating electronic meetings and communications
- Providing greater certainty regarding the standards of responsibility, liabilities and available defences and protections of directors and officers
- Allowing shareholders to vote against candidates for election to the board
- Removing Canadian residency requirements for boards of directors
- Determining how best to make available to beneficial shareholders the rights and remedies available to registered holders
As the Report is intended to identify areas requiring review as the first stage in a reform process, many of the recommendations on corporate law changes are quite broad in scope, briefly described, and are intended to solicit input on what changes should be contemplated by the Ontario legislature.
It will be interesting to see what proposals arise from the recommendation to "provide greater certainty about the standards to which directors and officers will be held, the liabilities to which they are exposed and defences and protections available to them." This recommendation might suggest possible changes to the long-standing and well-established fiduciary duty and duty of care currently found in many corporate statutes, including the OBCA, to delineate the standards relating to directors' and officers' conduct. As well, the recommendation potentially encompasses changes to personal liabilities imposed by the OBCA on directors and officers, such as those relating to unpaid employee wages, or improper dividend payments. The wording of the recommendation also suggests potential changes to the ability of corporations to indemnify directors or officers.
The Report's broad recommendation to "make available to beneficial shareholders the rights and remedies of registered shareholders will need to be considered within the context of the complex system of beneficial ownership for public companies that has been established within Canadian capital markets, involving intermediaries such as brokerages, central clearing systems and other participants, and the existing interplay between corporate law, securities rules and contractual arrangements relating to beneficial holders. Potential changes to the OBCA in this respect could include permitting beneficial shareholders to more easily requisition shareholder meetings.
The federal government commenced a consultation process in 2013, regarding possible changes to the Canada Business Corporations Act, although no specific amendments to that statute have been yet proposed. For information regarding Industry Canada's consultation paper concerning possible changes to the Canada Business Corporations Act, see our December 2013 Blakes Bulletin: CBCA Consultation: Another Cook in the Corporate Governance Kitchen.
The Report also recommends, among other things, that:
- The Limited Partnerships Act (Ontario) be amended to make Ontario a more attractive jurisdiction for business by, among other things, reducing the risk of unlimited liability faced by limited partners who take part in the control of an Ontario limited partnership
- Ontario permit the incorporation of unlimited liability corporations, a structure that is already available in Nova Scotia, Alberta and British Columbia
- The Partnerships Act (Ontario) be amended to resolve challenges for Ontario business partnerships (e.g., lack of clarity around the definition of partnership and how the property of a partnership is owned)
- The availability of the limited liability partnership be expanded to further professionals and businesses
- The Assignments and Preferences Act (Ontario) and the Fraudulent Conveyances Act(Ontario) each be repealed and the Uniform Law Conference of Canada's Reviewable Transactions Act be adopted
- The Bulk Sales Act (Ontario) be repealed
The ministry is seeking comments from the public until October 16, 2015, on these recommendations as well as the recommendations relating to other statutes, including Ontario's Personal Property Security Act, Repair and Storage Liens Act, Arthur Wishart Act (Franchise Disclosure), and Business Information and Registration Legislation.
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