The Ontario government has issued an order to extend the timeframe for corporations incorporated under the Business Corporations Act (Ontario) to hold their annual shareholder meetings and to allow virtual meetings. Businesses should be aware that virtual meetings must meet specific requirements in order to be validly held.
What you need to know
- The Business Corporations Act (Ontario) (the Act) requires corporations to hold a shareholder meeting within 18 months of formation and within every 15-month period thereafter. Under the Act, corporations are permitted to hold their meetings electronically unless their articles or by-laws provide otherwise. However, it is not possible to hold in-person meetings of more than 5 people at this time due to emergency measures enacted to counter COVID-19.
- To avoid non-compliance under the Act, the Ontario government issued an order to extend the timelines to hold shareholder meetings and to provide that all director and shareholder meetings can be held electronically, regardless of whether the articles or by-laws provide otherwise.
- Virtual or hybrid shareholder meetings, which have particular requirements, may be new to some corporations. Please refer to our previously issued article “Virtual and hybrid shareholder meetings in response to COVID-19”.
Meetings for corporations
Similar to the relief recently granted to issuers listed on the Toronto Stock Exchange and the TSX Venture Exchange, the Ontario government issued an order relieving corporations subject to the Act from certain meeting requirements: under normal circumstances, corporations subject to the Act are required to hold shareholder meetings within 18 months of formation, and thereafter within every 15-month period (see section 94(1) of the Act). Furthermore, corporations are not permitted to hold shareholder or director meetings electronically if their articles or by-laws prohibit it (see sections 94(2) and 126(13) respectively).
On March 17, 2020 the Ontario government declared a state of emergency pursuant to the Emergency Management and Civil Protection Act to help fight the spread of COVID-19. Shortly thereafter, the Ontario government ordered all non-essential businesses to close (see the list of essential businesses). Additionally, the government restricted meetings of more than 5 people and public health authorities across the country are pleading with citizens to stay home and practice physical distancing. In these extraordinary times, it has become impossible for corporations to hold their meetings in person, and many are not in a position to validly hold them electronically under their by-laws and articles. In light of this, the Ontario government enacted Ontario Regulation 107/20 on March 31, 2020, an order (the order) under the Emergency Management and Civil Protection Act. Schedule 2 of the order temporarily amends the Act to (i) extend the time period for shareholder meetings to be held, and (ii) allow director and shareholder meetings to be held electronically regardless what the articles or by-laws of the corporation provide.
Meeting dates extended
The time extension for shareholder meetings under the order varies depending on when the meeting was originally supposed to have been held:
- If the meeting was required to be held within the period of the declared emergency, corporations must now hold the meeting within 90 days of the termination of the state of emergency.
- If the meeting was required to be held within the 30-day period following the termination of the declared emergency, the meeting must be held within 120 days of the termination of the state of emergency.
All time periods above start running the day after the state of emergency is lifted.
By way of example, suppose the state of emergency is lifted on June 30, 2020. In (a), if Corporation A had until April 1, 2020 to hold their annual shareholder meeting (since their last shareholder meeting was 15 months ago on January 1, 2019), the order provides that Corporation A must now hold their meeting within the 90-day period beginning on July 1, 2020. In (b), if Corporation B had to hold their meeting on July 15, 2020 (since their last shareholder meeting was 15 months ago on April 15, 2019), the order provides that Corporation B must now hold their meeting within the 120-day period beginning on July 1, 2020.
While the order extends the time period to hold shareholder, it does not directly address the requirement under Section 154(a) of the Act that financial statements presented to shareholders at the annual meeting must be aged less than six months. For corporations that have completed their financial statements (for tax purposes or other reasons), this could result in non-compliance with the Act depending on when the declared emergency is terminated. We are following this issue closely and will advise promptly of updates.
Electronic meetings permitted
Schedule 2 of the orders temporarily amends sections 94 and 126(13) of the Act to allow corporations to hold shareholder and director meetings electronically regardless of whether their by-laws or articles provide otherwise.
The requirements for an electronic meeting remain unchanged and are outlined in sections 94 and 126(13) of the Act, as well as Ontario Regulation 463/97 – Electronic Meetings. Virtual meetings may be new to some corporations. Consideration must be given to meeting the obligations outlined in Regulation 463/97 to ensure the meeting is properly held. BLG has advised numerous corporations regarding electronic meetings. For a full discussion on holding a virtual AGM, please refer to our previously issued article "Virtual and hybrid shareholder meetings in response to COVID-19".
The above changes apply retroactively to March 17, 2020, the date Ontario declared a state of emergency.
Takeaway
OBCA corporations have been temporarily provided with greater flexibility for meeting their annual general meeting deadlines while managing the numerous complexities associated with the pandemic: shareholder meetings can be scheduled within the extended timeframes once the state of emergency is lifted, and Virtual meetings (both director and shareholder) are also permitted, regardless of whether a corporation’s by-laws and articles provide otherwise. However, careful consideration must be given to meeting the regulated requirements for electronic meetings in order to properly hold the meeting. For those corporations who have elected to hold their 2020 annual general meetings using the hybrid approach – where a physical location for the meeting is available but shareholders are encouraged to attend virtually – the meeting should either be deferred until the order prohibiting public events in excess of 5 people is lifted, or the meeting should be held exclusively using a virtual platform.
Finally, we are aware of at least one commentator who has approached the government to confirm Cabinet’s authority to have passed the order under the Emergency Management and Civil Protection Act. We are also following this issue closely, and will advise promptly of updates.
BLG has created a COVID-19 Resource Centre to assist businesses on a variety of topics, including investment management, labour and employment, contractual risks, public disclosure requirements, education and criminal law.
