By Mercedes Simon, Gregory Prekupec
On May 31, 2022, Alberta’s Business Corporations Amendment Act, 2021 was proclaimed into force, bringing significant changes to the Alberta Business Corporations Act (“ABCA”). This came as part of a larger series of legislative changes enacted in late 2020 under the Red Tape Reduction Implementation Act, 2020 which aimed to- as the name suggests- cut the red tape in 12 pieces of legislation to keep business in the province and invite new business in by making the regulatory and administrative aspects faster and less burdensome. Unsurprisingly, this move was compared to the U.S. state of Delaware, whose General Corporation Law resulted in an explosion in business entities moving to the jurisdiction.
In part, Alberta’s bid is possible because Canadian businesses enjoy the privilege of incorporating in their jurisdiction of choice. This can often be a strategic move, as choosing a jurisdiction with less red tape, tax advantages, and other business-friendly provisions can be financially strategic.
But how does “Delaware North” stack up to similar provincial and federal legislation? The chart below provides a breakdown of the ABCA’s amendments, as compared to the Business Corporations Act of both the federal and Ontario governments (“CBCA” and “OBCA”, respectively). As can be seen, in many cases the ABCA is not pushing the envelope as much as it is removing redundancies and bringing outdated provisions more in line with other jurisdictions.
In the case of residency and registration requirements, Alberta is craving a different path, departing from the increasing move towards corporate accountability seen in Ontario and federally. Similarly, by allowing a wider range of transactions and opportunities which the corporation might take advantage of, the province now has what is undoubtedly the most investor-friendly corporate statute. While the ABCA amendments will surely be advantageous for investors, possible implications surrounding corporate accountability and liability will remain to be seen. Already, in a King’s Bench decision on September 2023, the Court rejected a defendant’s interpretation of the self-interested transactions provision (see below) to seek compensation for managerial work while also being a voting shareholder.
| ABCA (Old) | ABCA (New) | OBCA | CBCA |
| Shareholder/ “Transparency” Register | |||
| n/a | No requirement | Must have a register of “individuals with significant control” | Must have a register of “individuals with significant control” |
| Director Residency Requirement | |||
| At least 25% must be resident Canadians | No requirement – board appointments can be from any place of residence |
No requirement – board appointments can be from any place of residence*
*This was amended in 2021 |
At least 25% must be resident Canadians |
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Corporate Opportunity Waivers (COWs)
Here Alberta has taken direct inspiration from Delaware, who has offered COWs since 2000. These waivers run counter to the predominate doctrine in Canada which prohibits fiduciaries (like directors and officers) from personally benefitting from opportunities which ‘belong’ to the corporation. |
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| n/a | May waive “any interest or expectancy of the corporation in or to, or in being offered an opportunity to participate” in an opportunity offered/presented by an officer, director or shareholder | n/a | n/a |
| Due Diligence Defence | |||
| Directors will not be liable for a breach of the duty of care where the director can demonstrate the relied in good faith on the financial statements of the corporation, or the opinion or report of certain people “whose profession or expertise lends credibility to a statement made by that person” | Expanded to now include interim financial statements, and the list of people whose “profession or expertise lends credibility to a statement made by that person” now includes: “person” generally, as well as employees | Director will not be liable for breach of duty of care, including reliance in good faith on financial or interim financial statements of the corporation, or the opinion or report of auditor, report or advice of officer/employee, report of certain people “whose profession or expertise lends credibility to a statement made by that person” | Same wording as Ontario, but doesn’t specify interim financial statements, and states only “person whose profession or expertise lends credibility to a statement made by that person” |
| Special Consideration to Nominating Shareholder Interests | |||
| n/a | A nominee director may now give special (but not exclusive) consideration to the interests of their nominating shareholder | n/a | n/a |
| Director Self-Interested Transactions | |||
| n/a | Directors may vote on agreements where that director may have a material interest but such interested may benefit the corporation | n/a | n/a |
| Indemnification & Insurance | |||
| Limited to “civil, criminal and administration” proceedings | Now extends to “investigate” and “other” proceedings | Limited to “civil, criminal and administration” proceedings | Limited to “civil, criminal and administration” proceedings |
| Director/officer must be a direct “party” | Extends to proceedings where a director is “involved” | Extends to proceedings where a director is “involved” | Extends to proceedings where a director is “involved” |
| Director/officer must be “substantially successful on the merits” and prove they were “fairly and reasonably” entitled to indemnification | Must merely prove they had not been “judged by a court […] to have committed any fault or omitted to do anything that [the director/officer] ought to have done” | Must prove they had not been “judged by a court […] to have committed any fault or omitted to do anything that [the director/ officer] ought to have done” | Must prove they had not been “judged by a court […] to have committed any fault or omitted to do anything that [the director/ officer] ought to have done” |
| Shareholder Voting by Written Resolution | |||
| Unanimity of Shareholders | Shareholders representing “at least 2/3 of the shares” of the corporation | Unanimity of Shareholders | Unanimity of Shareholders |
| Calling a Shareholder Meeting | |||
|
Mandatory Minimum Notice Period – 21 days
Maximum Notice Period – 50 days |
Mandatory Minimum Notice Period – 7 days
Maximum Notice Period – 60 days |
Mandatory Minimum Notice Period – 10 days
Maximum Notice Period – 50 days |
Mandatory Minimum Notice Period – 21 days
Maximum Notice Period – 60 days |
| Passing Resolution to Dispense with Auditor Appointment | |||
| Unanimity of Shareholders | 2/3rds of Shareholders | Majority vote | Unanimity of Shareholders |
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Revival of Dissolved Corporation
Ideally, extending the period of time to revive a corporation should give businesses time to collect and account for assets, resolve possible legal issues and recommence their business. |
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| 5 years | 10 years | 20 years |
Not specified in the Act.*
*However, the federal government’s policy direction lays out the process to revive a corporation, as well as common grounds for refusal (one being the corporation “has been dissolved for a while”, stating 2 years as an example) |
| Filings | |||
| n/a | Alberta now has the CORES registry allows for instantaneous filing for some filings, including limited corporation incorporations and amendments to a limited corporation’s articles | n/a | n/a |
| Some electronic filings permitted |
The ABCA now includes expanded electronic filings, including:
· Issuing security certificates · Financial statements can be signed electronically; and · Shareholders, directors and the corporation can be sent documents electronically |
No similar provision, but some electronic filings permitted | No similar provision, but some electronic filings permitted |
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Arrangements
This is a court-sanctioned and supervised procedure where a corporation may complete a range of transactions which fundamentally alter the corporation, such as mergers and acquisitions, cancellation or creation of share classes, or amalgamations. The amendments under the ABCA will likely allow for greater flexibility structuring and implementing major changes in a corporation, including any exits. |
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| Meeting of creditors and debtholders must be held prior to court approval of a proposed plan | Court may make any order “it thinks fit” in connection an arrangement | Court may make any order “it thinks fit” in connection an arrangement | Court may make any order “it thinks fit” in connection an arrangement |