Ontario removes directors residency requirement under OBCA

The relevant provisions of omnibus Bill 213, Better for People, Smarter for Business Act, 2020 (“Bill 213”), removing the requirement for resident Canadian directors under the Ontario Business Corporation Act (“OBCA”), will come into effect July 5, 2021. Bill 213 has removed subsection 118(3) of the OBCA in its entirety, which required at least 25 percent of the directors of an OBCA corporation to be resident Canadians, or if the corporation had less than four directors, at least one director to be a resident Canadian.

The removal of this requirement marks an important change to the OBCA, as many non-Canadian businesses have historically ‎had to choose between either incorporating in Ontario and locating a resident Canadian to act as a director to satisfy the residency requirement, or incorporating in other jurisdictions in Canada where there are no such requirements, such as British Columbia, New Brunswick, Nova Scotia, Prince Edward Island, Quebec, or Alberta, even though there may be no business reason to do so. 

This change is of particular importance to public companies, as they typically have a larger board of directors and require greater flexibility in reorganizing their board of directors in order to foster business relationships and grow. Many public companies have chosen, in recent times, to incorporate in British Columbia primarily for this reason. The removal of the director residency requirement under the OBCA makes Ontario a competitive alternative for the incorporation of non-Canadian businesses in Canada.

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