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A Closer Look at Bill 213: Better for People, Smarter for Business Act, 2020

6 minute read

The Ontario legislature introduced Bill 213 2020, An Act to reduce burdens on people and businesses by enacting, amending and repealing various Acts and revoking a regulation (“Bill 213”)[1] for its first reading on October 6, 2020, and it has since been working its way through the legislature, now mid-second reading. Bill 213 touches on some 46 different pieces of legislation[2] and creates 3 new universities in the province (the creation of the universities appears to be the most controversial part of the bill).[3] Among the legislative changes Bill 213 proposes, 2 are of particular interest to corporate and commercial lawyers and their clients: proposed changes to the Business Corporations Act (the “OBCA”),[4] and the Personal Property Security Act (the “PPSA”).[5]

Proposed Changes to the OBCA

Currently under the OBCA, 25% of the directors of Ontario corporations must be resident Canadians.[6] A number of Canadian jurisdictions have already done away with this requirement (e.g. the Yukon and British Columbia), which has made those jurisdictions appealing to non-Canadian businesses incorporating Canadian subsidiaries. Two common examples are in the cannabis and mining industries, where incorporation in British Columbia has become more common. Bill 213 proposes to do away with the director residency requirement,[7] potentially making Ontario corporations more appealing to non-Canadian resident incorporators.

Also notable are proposed changes in the way that certain shareholder resolutions may be passed. Under the OBCA, resolutions of the shareholders in writing must be signed by all shareholders entitled to vote at a meeting of the shareholders.[8] This can be particularly cumbersome where there are a large number of shareholders, and particularly where there are a large number of minority shareholders. Bill 213 proposes to reduce this requirement for private (non-offering) corporations such that resolutions need only be signed by the holders of a majority of the voting shares (or the number set out in the articles or unanimous shareholders’ agreement, if greater than a majority), though the minority shareholders would need to be notified of the resolution.[9] This promises to reduce some of the administrative overhead required for many housekeeping matters for private corporations.

To clarify the requirements for shareholders’ resolutions in writing, Bill 213 also proposes to expressly provide that the following changes require only an ordinary resolution of the shareholders:

  1. making, amending, or repealing the by-laws of a corporation;[10]
  2. electing and removing directors of the corporation;[11] and
  3. appointing and replacing the corporation’s auditors, and fixing the remuneration of the auditors.[12]

A higher threshold required by the articles or a unanimous shareholders agreement would continue to apply to shareholders’ resolutions in writing.[13]

Proposed changes to the PPSA

The changes proposed to the PPSA involve the introduction of the concept of a “vexatious registration.” The new proposed Part V.1 are intended to make it easier for named debtors to deal with abuse and improper use of the PPSA registration system.

Under the proposed amendments, a vexatious registration is defined as registration of a document that is tendered for the purpose of annoying or harassing the named debtor or for any other improper purpose, and that was tendered by a person who either has no security interest, or who has no security interest registrable under the PPSA.[14] Vexatious registrations are to be dealt with under the proposed Part V.1, which allows the registrar to reject and discharge vexatious registrations.[15] The proposed new Part V.1 provides for an appeal to the Divisional Court.[16]

 

[1] The current status of Bill 213, and more information is available on the Ontario legislature’s website, located here: https://www.ola.org/en/legislative-business/bills/parliament-42/session-1/bill-213

[2] The full list of affected legislation is the Business Corporations Act, Canada Christian College and School of Graduate Theological Studies Act, 1999, Change of Name Act, City of Hamilton Act, 1999, City of Ottawa Act, 1999, City of Toronto Act, 2006, Condominium Act, 1998, Co-operative Corporations Act, Education Act, Evidence Act, Family Responsibility and Support Arrears Enforcement Act, 1996, Financial Administration Act, Fish and Wildlife Conservation Act, 1997, Forfeited Corporate Property Act, 2015, Highway Traffic Act, Home Care and Community Services Act, 1994, Insurance Act, Land Titles Act, Legislation Act, 2006, Marriage Act, Metrolinx Act, 2006, Mining Act, Ministry of the Environment Act, Ministry of Training, Colleges and Universities Act, Municipal Act, 2001, Niagara Parks Act, Northern Services Boards Act, Official Notices Publication Act, Ontario Energy Board Act, 1998, Ontario Highway Transport Board Act, Ontario New Home Warranties Plan Act, Ontario Northland Transportation Commission Act, Ontario Water Resources Act, Pension Benefits Act, Personal Property Security Act, Planning Act, Private Career Colleges Act, 2005, Public Lands Act, Public Vehicles Act, Redeemer Reformed Christian College Act, 1998, Redeemer University College Act, 2000, St. Lawrence Parks Commission Act, Surveyors Act, Surveys Act, Tyndale University College & Seminary Act, 2003, and Vital Statistics Act.

[3] See Hansard: https://www.ola.org/en/legislative-business/house-documents/parliament-42/session-1/2020-10-21/hansard#para192

[4] Bill 213, Schedule 1.

[5] Bill 213, Schedule 20.

[6] OBCA, s. 118(3).

[7] Bill 213, Schedule 1, ss. 1, 5, 9, and 10.

[8] OBCA, s. 104.

[9] Bill 213, Schedule 1, ss. 3 and 8, amending OBCA ss. 104 and 154(4).

[10] Bill 213, Schedule 1, s. 4, amending OBCA s. 116(2).

[11] Bill 213, Schedule 1, ss. 2 and 6, amending OBCA ss. 5(5) and 119(4).

[12] Bill 213, Schedule 1, s. 7, amending OBCA ss. 149(1), (4), and (7).

[13] Bill 213, Schedule 1, s. 3(2).

[14] Bill 213, Schedule 20, s. 1.

[15] Bill 213, Schedule 20, s. 1, proposed new PPSA s. 66.3 and 66.4.

[16] Bill 213, Schedule 20, s. 1, proposed new PPSA s. 66.5.

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