Take 2: Ontario Relaxes Corporate Meeting Requirements in Response to COVID-19

Practical Law Canada Legal Update w-025-2122 (Approx. 6 pages)

Take 2: Ontario Relaxes Corporate Meeting Requirements in Response to COVID-19

by Practical Law Canada Corporate & Securities

Background

Meetings of shareholders or members of Ontario corporations have historically been conducted in Canada as physical meetings at which the shareholders (or, in the case of a corporation without share capital, members) participate by attending the meeting in person or by appointing a proxy.

In recent years, many Ontario business corporations (particularly public companies) have used webcasting and other technology to permit shareholders to view the proceedings remotely and participate electronically to enhance the traditional shareholder meeting and increase shareholder access.

It is also possible for Ontario corporations to hold a virtual meeting of shareholders (or, in the case of a corporation without share capital, members) that is different from a physical meeting (or a meeting that is physically convened and webcast). In a virtual meeting, a physical meeting is not convened, and the meeting is held entirely by electronic means without any in-person participation.

To date, the use of virtual meetings has been relatively rare in Canada due to the specialized technology and related cost required to conduct such meetings.

The outbreak of the 2019 novel coronavirus disease (COVID-19) and the current best public health practices to avoid unnecessary meetings have forced Ontario corporations to consider using available technology to:

Limit in-person attendance at their physical shareholder meetings by making available and encouraging the use of remote participation.
Replace their physical shareholder (or membership) meetings with a virtual meeting.

Effects of Amended O. Reg. 107/20

Effective March 17, 2020 (which is the day that the pandemic was declared an emergency under O. Reg. 50/20 under the Emergency Management and Civil Protection Act, R.S.O. 1990, c. E-9), the Ontario government has enhanced the flexibility of Ontario corporations by issuing O. Reg. 107/20. However, the original regulation contained some gaps and omissions, such as the failure to relax the requirements to hold an annual meeting within six months after the end of a corporation's financial year.

As a result, amendments to O. Reg. 107/20 were made on April 24, 2020, retroactive to March 17, 2020.

Amended O. Reg. 107/20:

Suspends the deadline for holding an annual meeting of shareholders under the Business Corporations Act, R.S.O. 1990, c. B.16 (OBCA) until:
- 120 days after the COVID-19 declared emergency has been terminated if the deadline for holding the meeting would otherwise have fallen within 30 days after that termination date; and
- in all other cases, 90 days after the declared emergency has been terminated.
Suspends the deadline for holding an annual meeting of members of a corporation incorporated under the Corporations Act, R.S.O. 1990, c. C.38 (OCA) (including a corporation without share capital incorporated under Part III) until:
- 120 days after the declared emergency has been terminated if the deadline for holding the meeting would otherwise have fallen with within 30 days after that termination date; and
- in all other cases, 90 days after the declared emergency has been terminated.
Suspends the deadline for holding a meeting of shareholders and members for the election of directors of an insurance company incorporated under Part V of the OCA from the first three months of 2020 until 90 days after the declared emergency has been terminated.
Suspends the deadline for holding an annual meeting of members of a corporation incorporated under the Co-operative Corporations Act, R.S.O. 1990, c. C.35 (CCA) until:
- 120 days after the declared emergency has been terminated if the deadline for holding the meeting would otherwise have fallen with within 30 days after that termination date; and
- in all other cases, 90 days after the declared emergency has been terminated.
Suspends the deadline for holding an annual general meeting of owners of a condominium corporation under the Condominium Act, 1998, S.O. 1998, c. 19 (Condo Act) until:
- 120 days after the declared emergency has been terminated if the deadline for holding the meeting would otherwise have fallen with within 30 days after that termination date; and
- in all other cases, 90 days after the declared emergency has been terminated.
Overrides any provision of the articles, by-laws or unanimous shareholder agreement of an OBCA corporation so that:
- the corporation has the option to hold a meeting of shareholders by telephonic or electronic means;
- a shareholder who, through those means, votes at the meeting or establishes a communications link to the meeting is deemed to be present at the meeting;
- a meeting of the board of directors (or a committee of directors) of the corporation may be held by such telephone, electronic or other communications facility as permit all persons participating in the meeting to communicate with each other simultaneously and instantaneously; and
- a director participating in the meeting by such means is deemed to be present at the meeting.
Overrides any provision of the letters patent, supplemental letters patent or by-laws of an OCA corporation so that:
- the corporation has the option to hold a meeting of members (or, in the case of a Part V insurance company, meeting of members and shareholders) by telephonic or electronic means;
- a member (or, in the case of a Part V insurance company, shareholder) who, through those means, votes at the meeting or establishes a communications link to the meeting is deemed to be present at the meeting;
- a meeting of the board of directors (or a committee of directors) of the corporation may be held by such telephone, electronic or other communications facility as permit all persons participating in the meeting to communicate with each other simultaneously and instantaneously; and
- a director participating in the meeting by such means is deemed to be present at the meeting.
Overrides any provision of the articles or by-laws of a co-operative corporation (including a non-profit housing co-operative) so that:
- the corporation has the option to hold a meeting of members by telephonic or electronic means by which all members participating in the meeting can hear each other;
- a member who, through those means, votes at the meeting or establishes a communications link to the meeting is deemed to be present at the meeting;
- a meeting of the board of directors (or an executive committee) of the corporation may be held by means of conference, telephone or other communications equipment by means of which all persons participating in the meeting can hear each other; and
- a director participating in the meeting by such means is deemed to be present in person at the meeting.
Overrides any by-law of a condominium corporation (including a non-profit housing co-operative) so that:
- the corporation has the option to hold a meeting of owners by telephonic or electronic means;
- an owner or a mortgagee who, personally or by proxy, through those means, votes at the meeting or establishes a communications link to the meeting is deemed to be present at the meeting or represented by proxy; and
- a meeting of the directors of the corporation may be held by teleconference or another form of prescribed communications system.

Timing Rules for Annual Meetings

Amended O. Reg. 107/20 takes the pressure off Ontario corporations to hold an annual meeting (or annual general meeting) until at least 90 days after the declared emergency has been lifted. There is extension of a further 30 days applicable where the corporation would have been required to hold its annual meeting within 30 days of the end of the declared emergency. For example, suppose that a corporation has a January 31 financial year end and that the declared emergency ends on July 15, 2020. In the absence of amended O. Reg. 107/20, the corporation would have been required to hold its annual meeting not later than July 31. But, because this period falls within the first 30 days after the declared emergency is terminated, the corporation will as a result of O. Reg. 107/20 now have until November 13, 2020, to hold its annual meeting.

Therefore, the corporation has the initial choice between holding or deferring its annual meeting.

Hybrid and Virtual Meetings

If the corporation wishes to hold its annual meeting (or any other meeting of the shareholders, members, owners, directors or members of a board committee), amended O. Reg. 107/20 facilitates the use of telephonic and electronic means.

As a result of amended O. Reg. 107/20, the OBCA, OCA, CCA and Condo Act allow corporations to hold all meetings (whether of directors, shareholders, in the case of an OCA corporation without share capital, members and, in the case of a condominium corporation, owners) by telephonic or other electronic means notwithstanding any contrary provision of the corporation's constating documents. Before amended O. Reg. 107/20, the constating documents could have prevented the corporation from holding a meeting by telephonic or other electronic means.

These new provisions override any contrary provisions of the articles, by-laws or, in the case of a corporation without share capital, letters patent or supplementary patent. They are mandatory and no longer opt-out.

Where shareholders (or members or owners) participate remotely in a physical meeting through a communication facility, there is a meeting at a physical location at which the chair of the meeting and other representatives of the corporation will be in attendance. The shareholder (or member or owner) will have the choice between attending in person or participating remotely through a communications link. This is referred to as a hybrid meeting because it combines a physical meeting and remote participation.

In a virtual meeting, the meeting is held entirely by a telephonic, an electronic or other communication facility. Shareholders (or members or owners) cannot otherwise attend the meeting held at a specific physical location. The chair could be conducting the meeting from his or her office, home, cottage or overseas location. The only option for shareholders (or members or owners) and any directors or others participating at the meeting is to participate by way of the corporation’s chosen communication facility, which could be by conference call, video-conference, Microsoft Team®, Webex®, Zoom® or other means.

The same flexibility has also been extended to meetings of directors and board committees of OBCA, OCA, CCA and Condo Act corporations.

Take 2: Ontario Relaxes Corporate Meeting Requirements in Response to COVID-19 | Practical Law