Canada: Bill 152 – Ontario Ministry Of Government Services Consumer Protection And Service Modernization Act, 2006

Last Updated: August 16 2007

By The Corporate Commercial Group

Bill 152, the Ministry of Government Services Consumer Protection and Service Modernization Act, 2006 received Royal Assent on December 20, 2006 and will come into force on August 1, 2007. The bill will effect amendments to 47 provincial statutes. The bill is aimed at strengthening consumer protection, bolstering public safety, and modernizing the province’s corporate and business laws.

This Corporate Alert focuses on amendments to the Business Corporations Act (Ontario), the Partnerships Act and the Corporations Act.

Business Corporations Act ("OBCA")

Schedule B to Bill 152 contains amendments to the OBCA. The following summarizes key provisions.

  • Directors’ residency requirements: Changing the directors’ residency requirement under section 118(3) of the OBCA to 25%. At present, the majority of directors of a business corporation must be resident Canadians. This change would put the OBCA in line with the CBCA.
  • Facilitating proxy solicitation: Eliminating the need to circulate a dissident circular if the total number of shareholders whose proxies are being solicited is fewer than 16 or if the solicitation is, in the prescribed circumstances, conveyed by public broadcast, speech or publication.
  • Unanimous Shareholder Agreements ("USA"): Amending section 108 of the OBCA to extend the same defences as are available to directors to shareholders who are party to a USA. The amendments provide that nothing will prevent the shareholders from fettering their own discretion when exercising the powers of directors under a USA
  • Dissolution and revival: Eliminating the two-year limit in section 237 of the OBCA for the voluntary dissolution of corporations that have never issued shares and have not commenced business. The amendment to section 241 imposes a 20-year limit on the revival of a corporation that has been involuntarily dissolved. At present, there is no time limit.
  • Conflict of interest rules for directors and officers: Amending section 132 of the OBCA to require directors to notify the corporation of any material changes in the nature of their conflict of interest. Consequently, conflicted directors will be prohibited from attending the portions of meetings at which a matter being discussed if they have a conflict with respect to such matter. To prevent a possible loss of quorum due to conflicts, the remaining directors are deemed to constitute quorum with residual power of approval being given to the shareholders.
  • Liability of directors and defences: Amending sections 134, 135, and 136 of the OBCA to make it clear that directors and officers owe their fiduciary obligations exclusively to the corporation. Additionally, the amendments provide for a reasonable diligence defence and expand the good faith reliance defence with respect to interim and other financial reports.
  • Insurance and Indemnification: Amending section 136 of the OBCA to increase the indemnification provisions for directors and officers. These provisions will now cover individuals who act on the corporation’s behalf in a managerial capacity. Furthermore, subject to court approval, corporations will be authorized to advance defence costs to directors, officers and other indemnifiable persons.
  • Shareholder communications: The amendments to section 99 of the OBCA allow the beneficial owners of shares in a corporation to present proposals and have them circulated.
  • Minority shareholder rights and remedies: Providing beneficial owners of shares of a corporation with the same rights as shareholders in a number of areas, including but not limited to rights to access corporate records, receive information and make applications to court.
  • Financial assistance disclosure: Repealing the financial assistance disclosure requirements.
  • Corporate Finance: Amending section 22 of the OBCA to allow two or more classes or series of shares to exist without differences in their respective rights, privileges and conditions.
  • Audit committee exemptions: Amending section 158 of the OBCA to allow an offering corporation to seek an exemption from the audit committee requirements.

Corporations Act

Bill 152 amends the audit requirements of the Corporations Act. At present, for a company to be exempt from the audit requirements, it must have annual income of less than $10,000. Bill 152 will increase this threshold to $100,000.

Bill 152 also repeals the current s.133(2.1) of the Corporations Act. This would entitle charitable corporations to the same exemptions from the audit requirements of the Act as are presently offered to other companies.

Partnerships Act

Bill 152 amends the Partnerships Act to implement what are known as "Full Shield" limited liability partnerships (LLP) in Ontario.

At present, partners in an LLP are shielded only from the negligence and not the wrongful acts of other partners or employees while being jointly and severally liable for the general obligations of the LLP. A partner is also responsible for his or her negligence and for the negligence of those under his or her direct supervision or control.

Under the amendments, a partner will be liable only for the negligence of those under his or her direct supervision and not for the non-professional debts or wrongful acts of the LLP, other than criminal acts or fraud.

Notwithstanding that amendment, a partner will be liable for the negligent or other wrongful act of another partner or employee if he or she knew, or ought to have known, about the negligent or wrongful act, unless reasonable steps were taken to prevent it.

Please contact a member of our Corporate Commercial Group if you would like more information about Bill 152 the Ministry of Government Services Consumer Protection and Service Modernization Act, 2006.

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The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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