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A Win for Foreign Investment in Ontario

2 minute read

Under Ontario’s Business Corporations Act, certain classes of individuals were previously disqualified from qualifying as directors of a business corporation. For instance, no one under 18 years of age could be a director. Individuals found incapable by a court – in Canada or elsewhere – were prohibited from being a director as well as individuals who are bankrupt.

However, as of July 5, 2021, there is one group of individuals, previously disqualified, who may now become directors of Ontario business corporations. Prior to this date, a minimum of 25% of an Ontario business corporation’s directors had to be resident Canadians.[1]

This section of the law was repealed. In other words, it is no longer necessary for any director(s) of an Ontario business corporation to be resident Canadian. The change applies to both existing and newly incorporated business corporations. The elimination of this requirement has brought Ontario into line with British Columbia, Nova Scotia, New Brunswick, and Quebec. For the directors of federally incorporated business corporations, though, Canadian residency requirements remain.

What is the rationale for this change in Ontario? Where previously a foreign-owned and managed Canadian subsidiary may have been incorporated in British Columbia, that corporation could now be started in Ontario. By eliminating the director residency requirement, the idea is to remove an impediment to foreign investment in Ontario. With this barrier out of the way, foreign investment could become another way to grow Ontario’s economy.

There are many things directors of business corporations need to consider, from fiduciary duties to environmental obligations and financial performance. In Ontario, at least, the directors’ residency is no longer one of them.

If you need advice in selecting your board of directors or any other corporate matters, call us at Lerners.  Our team of corporate lawyers are here to make your business our priority.

[1] “Resident Canadian”, in this context, meant an individual who was: (1) a Canadian citizen ordinarily resident in Canada; (2) certain limited groups of Canadian citizens who are not ordinarily resident in Canada; or (3) a permanent resident of Canada ordinarily resident in the country.

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Clark Armstrong

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