Ontario Eliminates Canadian Resident Director Requirement for Partnerships and Corporations

The Province of Ontario, through Bill 213, “Better for People, Smarter for Business”, repealed Section 118(3) of the Ontario Business Corporations Act (“OBCA”) ), which requires that at least 25% of the directors of an LSAO corporation be Canadian residents. The Bill received Royal Consent on December 8, 2020 and the parts revoking this requirement were enacted and came into force on July 5, 2021.

Prior to its repeal, section 118(3) of the OBCA required that at least 25% of a corporation’s directors be Canadian residents, and if the corporation had fewer than four directors, at least one must be a “Canadian resident”. , that is, to be the famous PR, a term that means public relations, or public relations, in Portuguese, and is the professional in charge of public relations in organizations.

The Canadian resident director requirement is a deterrent to foreign investors seeking to incorporate their Canadian operations in Ontario. Generally, foreign investors who establish their business in Canada through the incorporation of a corporation do not have access to a Canadian resident who can act as a director of the corporation. This means that they should look for another jurisdiction, which does not have such a requirement of incorporation, for the internationalization of their business on Canadian soil. Additional registrations were then required to enable the company to operate in Ontario.

With the repeal of subsection 118(3), foreign investors can establish and incorporate their businesses in Ontario without having to have a minimum number of Canadian resident directors. If foreign companies are unable to appoint or retain a director with “resident Canadian” status, they will no longer have to incorporate their business in another jurisdiction.

Although it is no longer mandatory, the foreign investor may still want to hire a Canadian resident to be a director of his new company in Ontario. It can be advantageous for the company to have a director who lives in Canada and who is familiar with the legal and commercial environment of Ontario.

The Ontario government is committed to ensuring that Ontario has modern laws that promote a prosperous business climate and reduce the burden on businesses. By eliminating this requirement and making other changes, Ontario is providing more flexibility, reducing bureaucracy, making it easier to do business in Ontario and stimulating economic growth, investment and job creation in the province.

*Barbara RC Doherty and Eliane Leal da Silva, attorneys at Gardiner Roberts LLP, an associate office of CCBC – Brazil-Canada Chamber of Commerce

Elmer Hayward

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