Directors and officers owe fiduciary duties to the corporations they serve. This means that directors and officers must exercise caution not to exploit or divert certain business opportunities that they find as a result of their position. Failing to do so could result in personal liability as the corporation or any of its shareholders could claim that a director or officer breached its fiduciary obligations to the corporation by taking advantage of a business opportunity that rightfully belonged to the corporation.
Alberta's Bill 84, Business Corporations Amendment Act ("Bill 84"), which received Royal assent on December 2, 2021 and is expected to come into force in early 2022, will amend the Alberta Business Corporations Act to make Alberta the first Canadian jurisdiction to allow corporations to provide corporate opportunities waivers.
Corporate opportunity waivers allows a corporation to waive interest or expectations in relation to specific business opportunities or certain types or categories of business opportunities offered to the corporation or its directors, officers or shareholders, thus allowing its directors or officers to pursue those business opportunities themselves either personally or through another corporation.
In order to take advantage of this new provision, the corporation's Articles of Incorporation and/or unanimous shareholders agreement ("USA") must include provisions permitting the corporation to provide such a waiver of opportunity.
It is not uncommon for individuals to serve as directors and officers of multiple corporations – this amendment aims to increase venture capital investment and private equity where previously these individuals were not permitted to serve on multiple boards without approval due to potential conflicts of interest. Over the years, the issue of whether a director or officer took advantage of certain corporate opportunities as a result of their position has resulted in a lot of litigation. Accordingly, the new corporate opportunity waiver provisions make it easier and more efficient for corporations and their directors and officers to agree ahead of time that directors and officers may pursue certain types of business opportunities without seeking specific approvals.
This change to the legislation will allow corporations to reduce the risk of litigation for all parties by encouraging the corporation to establish clear guidelines and rules governing waivers of opportunities.
We will be releasing weekly articles in February 2022 summarizing Bill 84's need to know amendments. Up next week, Part 2: Director's Protections and Responsibilities.
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.
