Updated Ontario Emergency Order Expands Temporary Relief for Shareholder and Director MeetingsTuesday, May 5, 2020
Pursuant to Ontario Regulation 178/20 (the “Order”) made under the Emergency Management and Civil Protection Act (the “EMCPA”) on April 24, 2020, the government of Ontario expanded the temporary relief granted to Ontario corporations from certain provisions of the Business Corporations Act (Ontario) (the “OBCA”) in respect of shareholder meetings and director meetings. The Order amends a previous order made on March 30, 2020, which we summarized here: Relief from the Regulators - Shareholder Meetings during the COVID-19 Pandemic. As was the case with the initial order, the Order is retroactive to March 17, 2020, the date that an emergency was declared in Ontario under the EMCPA.
Highlights from the Order include:
- Relaxed timelines for holding annual shareholder meetings and for the presentation of annual financial statements.
- Virtual and hybrid shareholder meetings and virtual director meetings are permitted despite any provisions to the contrary in a corporation’s constating documents.
- Guidance on voting and sending notice in respect of virtual and hybrid shareholder meetings.
A cumulative summary of the Order as it applies to OBCA corporations follows below. Please note that the Order makes similar accommodations for corporations governed by the Corporations Act (Ontario), the Co-Operative Corporations Act (Ontario) and the Condominiums Act (Ontario).
Ordinarily, the directors of a corporation governed by the OBCA must call an annual meeting of shareholders not later than 18 months after the corporation came into existence and subsequently not later than 15 months after the date of the last annual meeting. However, in keeping with the initial order, the Order has temporarily extended these deadlines as follows:
- if the last day on which a meeting is required to be held is a day that falls within the period of the declared emergency, the last day on which the meeting is instead required to be held is no later than the 90th day after the day the emergency is terminated under the EMCPA; and
- if the last day on which a meeting is required to be held is a day that falls within the 30-day period that begins on the day after the day the emergency is terminated, the last day on which the meeting is instead required to be held is no later than the 120th day after the day the emergency is terminated under the EMCPA.1
In addition, the Order clarifies that, if the date of a corporation’s annual shareholder meeting is set pursuant to the extended meeting deadlines, the date must be reasonable in the circumstances.
Presentation of Annual Financial Statements
The Order permits a corporation that holds its annual shareholder meeting on a date within the period beginning March 17, 2020 and ending 120 days after the declared emergency is terminated to present annual financial statements in respect of the corporation’s most recently completed financial year at that meeting despite the deadline that would otherwise apply but for the Order. Ordinarily, an OBCA corporation must present financial statements at its annual general meeting for its most recently completed financial year within six months of completion of such financial year. This change addresses a technical omission from the initial order, which allowed corporations to delay annual shareholder meetings but still required corporations to comply with the six-month deadline for the presentation of their annual financial statements.
Virtual and Hybrid Shareholder Meetings
Like the initial order, the Order provides that a corporation governed by the OBCA may temporarily hold a virtual or hybrid shareholder meeting despite any provisions to the contrary in its articles, by-laws or unanimous shareholder agreement. For more information on virtual and hybrid shareholder meetings, please refer to our previous update: Shareholder Distancing: Virtual Shareholder Meetings.
The Order confirms that, if an OBCA corporation holds a virtual or a hybrid meeting, voting may be conducted by alternate means where voting by a show of hands or by a ballot is not feasible. While voting at virtual and hybrid meetings is typically conducted by way of electronic ballot, this change provides added flexibility to adjust and conform voting procedures to the chosen electronic medium.
Notice of Meeting
The Order confirms that an OBCA corporation is not required to send a new notice of meeting to shareholders in the event that such corporation needs to change the date, time or place of a meeting in order to hold such meeting as a virtual or hybrid meeting but has already sent a notice of meeting to shareholders without that information. In that case, the corporation is required to notify shareholders in a manner and within a timeframe that is reasonable in the circumstances.
This change is consistent with recommendations from the Canadian Securities Administrators, which suggest that a corporation may notify shareholders of changes required to hold a virtual or hybrid meeting if the corporation promptly:
- issues a news release announcing the change in the date, time or location;
- files the news release on SEDAR; and
- takes all reasonable steps necessary to inform all of the parties involved in the proxy voting infrastructure (such as intermediaries, transfer agents, and proxy service providers) of the change.
Similar to the initial order, the Order temporarily permits an OBCA corporation to hold a meeting of directors or of a committee of directors by phone or other electronic means so long as all persons participating in the meeting are able to communicate simultaneously and instantaneously, despite any provisions to the contrary in its articles, by-laws or unanimous shareholder agreement.
If you have any questions with respect to this legal update, please contact Troy Pocaluyko (firstname.lastname@example.org), Al Wiens (email@example.com), Sanjeev Patel (firstname.lastname@example.org), Peter Volk (email@example.com), Michael Rennie (firstname.lastname@example.org), Jeff Bookman (email@example.com), Melissa Smith (firstname.lastname@example.org) or any other member of our Corporate Governance practice group.
This update is intended as a summary only and should not be regarded or relied upon as advice to any specific client or regarding any specific situation.
1We note that the OBCA requires a corporation to “call” an annual meeting within 15 months or 18 months as applicable, while the language in the Order extends the last day on which an annual shareholder meeting can be “held.” Until this discrepancy in language is clarified, we recommend that if a corporation cannot call the meeting in the 15 or 18 month timeframe that would ordinarily apply, that it be held no later than the last day of the extended period temporarily permitted by the Order.