Gardiner Roberts clarifies resident requirement for Ontario businesses

The province of Ontario recently revoked an ordinance that required any company in the province to have at least 25% of its board of directors composed by Canadian residents. Below is a text produced by lawyers Barbara Doherty and Eliane Leal da Silva, from the Gardiner Roberts firm, specialized in supporting companies that plan to incorporate or expand their business in Ontario.

Ontario eliminates Canadian resident director requirement

The Province of Ontario, through Bill 213, “Better for People, Smarter for Business” (“Bill 123”), repealed subsection 118 (3) of the Ontario Business Companies Law (“OBCA” “), which requires that at least 25 percent of the directors of an OBCA corporation be resident in Canada. Bill 213 received actual authorization on December 8, 2020, and the parties revoking this requirement were enacted and will come into effect on July 5, 2021.

Prior to its revocation, section 118 (3) of the OBCA required that at least 25 percent of a company’s directors be Canadian residents and, if the company had fewer than four directors, at least one of the directors was a Canadian resident.

The requirement for a Canadian resident director has been a deterrent to foreign investors looking to incorporate their Canadian operations in Ontario. Typically, foreign investors who establish their business in Canada through company incorporation do not have access to a Canadian resident individual who can act as a director of the corporation. That means they would have to find another jurisdiction that does not have this incorporation requirement. Additional records were then required to allow the company to operate in Ontario.

With the repeal of subsection 118 (3), foreign investors can establish and incorporate their businesses in Ontario without the need to have a minimum number of Canadian resident directors. If foreign companies are able, not to appoint or retain a Canadian resident director, they will no longer have to incorporate their business in another jurisdiction.

 Se as empresas estrangeiras não puderem nomear ou reter um diretor residente canadense, elas não terão mais que incorporar seus negócios em outra jurisdição.

 Although no longer required, the foreign investor may still want to hire a Canadian resident to be a director of their new Ontario corporation. It may be beneficial for the operation to have a Canadian resident director with knowledge of the legal and business environment in Ontario. Under the right circumstances and with the proper protections, the Gardiner Roberts legal team would be able to provide such director.

The Ontario government is focused on ensuring that Ontario has modern laws that facilitate a thriving business climate and reduce the burden on business. By removing this requirement and making other changes, Ontario offers more flexibility, reduces bureaucracy, makes it easier for people to do business in Ontario, and boosts economic growth, investment and job creation in the province.

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*Source: Gardiner Roberts