Bill 84: Business Corporations Amendment Act, 2021 (“Bill 84”) received Royal Assent on December 2, 2021, with a stated goal of modernizing business legislation and reducing red tape for Alberta businesses.
Although Bill 84 is not yet in force, it will introduce significant amendments to the current version of the Business Corporations Act (Alberta) (“BCA”) when it is proclaimed into force, which is expected sometime in the upcoming term. These amendments are part of the Alberta government’s extensive red tape reduction measures, and were designed to attract innovators, entrepreneurs and job-creators to Alberta as part of the government’s Alberta Recovery Plan to grow and diversify the Alberta economy. Several of these amendments would make Alberta’s business legislation a leader in Canada.
Some of the significant amendments to the BCA that will be introduced by Bill 84 include provisions:
- clarifying directors’ responsibilities and protections;
- expanding corporate opportunities for directors and officers;
- providing a larger timeframe for dissolved corporations to get back into business;
- reducing administrative burdens on corporations around approvals;
- aligning the BCA with the Ontario Business Corporations Act (“Ontario BCA”) and the Canada Business Corporations Act (“Canada BCA”); and
- modernizing the BCA by repealing provisions that are repetitive, unnecessary, or addressed by other legislation.
Clarifying directors’ responsibilities and protections
One of the goals of Bill 84 was to make it easier for directors to carry out their important roles in corporations, and to attract the best and brightest directors. Under the current BCA, directors must disclose and abstain from voting whenever they have a material interest in any contracts or transactions. With the amendments, directors will be able to vote on agreements in which they may have a material interest, but where the director’s interest would benefit the corporation, such as in guaranteeing a loan.
The amendments will also:
- expand circumstances of the good faith defense available to directors;
- enhance indemnification provisions; and
- clarify the scope of directors’ duty of care owed to the corporation.
With the enactment of these amendments, the BCA will be the most flexible business legislation in Canada for directors voting on agreements in which they may have a material interest, but nonetheless benefit a corporation.
Expand corporate opportunities for directors, officers
The amendments to expand corporate opportunities for directors and officers of a corporation would make Alberta the first jurisdiction in Canada to include such a provision in their business legislation, making Alberta’s BCA one of the most modernized corporate pieces of legislation in the country. Specifically, the amendments will allow corporations the option of adding waivers into their Articles of Incorporation or a Unanimous Shareholder Agreement to allow directors to participate in specific types of corporate opportunities.
These corporate opportunity waivers were designed to be particularly useful for venture capitalists, who choose to invest in corporations in the same lines of business.
Provide a larger timeframe for dissolved corporations to get back into business
The amendments will extend the period to revive a dissolved corporation, from the current limit of five years to ten years, and will also remove the current five year revival period for non-profit companies, societies, and cooperatives entirely. This measure was intended to reduce the administrative burden on corporations.
Reduce administrative burdens around approvals
The amendments will change the current requirement of unanimous shareholder approval to 2/3 approval in the following limited circumstances:
- if a 2/3 majority of shareholders agree to waiving the requirement of audited financial statements of privately-held non-distributing corporations; and
- when passing a written resolution signed by a two-thirds majority of shareholders, instead of holding a shareholder meeting.
Further align the BCA with similar federal and Ontario legislation
Incorporating a company under Ontario or federal jurisdiction is often the first choice when a Canadian company is deciding where to incorporate. One of the goals of these amendments was to align the BCA with both the Ontario BCA and the Canada BCA to make Alberta a more attractive place to incorporate.
One of the amendments that will better align the BCA with the Ontario BCA and Canada BCA will allow shareholders, while acting as directors, to “fetter their discretion” (by relying on the advice of others or written reports when making decisions).
Modernize by repealing provisions that are repetitive, unnecessary, or addressed by other legislation
Many of the changes being introduced by these amendments were designed to further reduce administrative burdens and to repeal provisions that are repetitive, unnecessary, or addressed by other legislation, including:
- simplifying processes for corporations by removing redundant or out-of-date requirements, amending provisions to match modern communication methods, and modernizing the meaning of “contact information”;
- providing more flexibility in seeking advice on financial statements and other documents; and
- removing references in legislation that require faxed or handwritten documents.
Restoring the Alberta Advantage for Alberta businesses
When these amendments come into force, the BCA will make Alberta a more attractive and competitive jurisdiction for companies in Canada, and a leader over other jurisdictions in many respects. Attracting investment to Alberta is a critical part of the Alberta Recovery Plan. These measures should signal to investors and businesses alike that Alberta is the best place do business in North America.
CARSCALLEN LLP’S CORPORATE GOVERNANCE EXPERTISE
Carscallen LLP’s business lawyers advise a wide range of business organizations, including public and private companies, partnerships, not-for-profit companies, and registered charities. We are committed to understanding your business needs and offering timely, targeted legal advice that helps meet your requirements.
Please feel free to contact any member of our Corporate Governance group if you have any questions about how the BCA amendments may affect your business or organization.*This update is intended for general information only on the subject matter and is not to be taken as legal advice.