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Navigating Ontario’s Business Corporations Act

According to the December 2022 report, there are over 440 thousand small businesses operating in the Canadian province of Ontario. This number indicates a highly competitive business space in which corporations cannot afford to ignore legal compliance.

So, if you decide to register a new Ontario business, you should know and follow the legal requirements set by Ontario’s Business Corporations Act (OBCA). But what is OBCA, and how can your corporation comply with this corporation’s act? Don’t worry – we will explain!

In this blog, you will find out everything about the Business Corporations Act of Ontario, incorporating corporations under this act and other useful info!


Ontario’s Business Corporations Act – A Quick Overview

Source: Pix4free

The Ontario Business Corporations Act (OBCA) describes the legal requirements for corporations operating in Ontario. This act seeks to establish a general and flexible governance system for corporations.

Key Elements

  • Board of Directors: The OBCA sets out principles about the management of corporate affairs and the responsibilities of directors and shareholders. As per the act, every corporation is required to have a board of directors responsible for the management and leadership of the corporation.
  • Rights of Shareholders: The OBCA creates certain rights of shareholders, including the right to vote on business matters, obtain information about the corporation, and receive dividends. Shareholders can also initiate certain actions if they think the corporation has been mismanaged or their rights have been breached.
  • Corporate Finance: This act regulates the issue of shares and their transfer. Besides that, it specifies the process of corporate financial transactions and the payment of dividends.
  • Amalgamations and Mergers: The OBCA deals with the amalgamation of corporations (combining two or more corporations into one corporation) and mergers (the opposite of an amalgamation) in Ontario. This legislation also outlines the necessary steps to obtain the approvals required for these processes.

Key Requirements for Incorporation of a Business Under the OBCA

Incorporating a business under the Business Corporations Act (OBCA) of Ontario involves the following basic considerations:

  • Business Name: The name you pick should not already be in use by another registered business entity in Ontario. Plus, it should also not contain any restricted words or imply any official status of government sponsorship (without permission). Name availability can be checked through the NUANS system. You can also choose to have a numbered corporation (and register a business name at a later time).
  • Type of Corporation: You can incorporate your corporation federally or provincially. Provincial incorporation is the norm for most small businesses operating in Ontario, and it is governed by OBCA.
  • Directors: A minimum of one director is required for Ontario corporations. Directors are responsible for the overall administration of the corporation and ensure legal compliance.
  • Articles of Incorporation: These are the documents that set out details about the corporation, such as its name, first directors, and share structure.
  • Government Filing: The Articles of Incorporation must be filed with the Ontario government, along with any accompanying documents and the applicable filing fee. 
  • Creation of Corporate Bylaws: Bylaws set out the internal affairs of the corporation, like the way meetings are conducted, shareholder rights, voting majority, etc.
  • Issuing of Shares and Shareholder Agreement: You must establish a share structure and distribution of shares. If there are multiple shareholders a Shareholder Agreement should be established setting out the rights, privileges, and obligations to the shareholders between themselves.
  • Licenses and Permits: Depending on your type of business, you may need various licenses and permits to legally carry on business.
  • Register for Taxes: Registration with the Canada Revenue Agency under your corporate name is required to obtain a Business Number (BN) for tax purposes and other government activities like GST/HST.

Ongoing Legal Requirements for Corporations

Corporations in Ontario must follow a number of ongoing legal requirements to maintain compliance with provincial and federal regulations. These requirements include:

  • Annual Filings and Corporate Records: All corporations must maintain proper corporate records and file annually with the provincial government. These corporate records contain information about the corporation’s directors, officers, and shareholders, as well as minutes of meetings and resolutions.
  • Transparency and Reporting Requirements: Private corporations are now required to keep a record of persons with significant control. This new requirement promotes transparency and accountability, especially in financial activities?.
  • Compliance with Legal Requirements for Special Resolutions: Many corporate actions, such as amendments to the articles of incorporation, mergers, or dissolution of corporations, require the passage of special resolutions. Such resolutions require a higher level of approval, typically two-thirds of the voting rights, to be obtained.

Recent Amendments Regarding Legal Requirements for Corporations

Several amendments were introduced in the OBCA. The latest ones are as follows:

1. Corporate Director Residency Requirements

Ontario used to have corporate director residency requirements, meaning that at least 25% of the corporation’s directors must be residents of Canada. This requirement has been removed to provide more flexibility for non-resident corporations and investors.

2. Approval of Shareholder Resolutions

The previous law required that all voting shareholders sign written resolutions for approval. This used to cause delays because getting every shareholder’s signature can be difficult. If even one shareholder didn’t sign, the company had to organize a meeting to get approval.
The new change in the law helps private companies act more quickly. Now, they only need the signatures of the majority of voting shareholders to pass ordinary resolutions. This makes it easier for companies to handle common tasks, like appointing directors, without needing every shareholder’s signature.

Partner with Epstein & Associates for Smooth Corporate Compliance

Navigating Ontario’s Business Corporations Act is crucial for the efficient and lawful operation of your corporation in Ontario. By adhering to the specific legal requirements outlined in the Act, businesses can ensure compliance with the law.

For businesses seeking expert guidance in navigating the complexities of the Ontario Business Corporation Act, Epstein & Associates offers a robust solution. Our team of experienced lawyers can provide guidance on every aspect of corporate law compliance, from the initial incorporation process to ongoing operational requirements.

Beyond just ensuring legal compliance, we provide comprehensive support in various other legal aspects of running a business, such as negotiating contracts, handling mergers and acquisitions, and advising on employment issues. This extensive support streamlines business operations and mitigates legal risks, allowing you to focus on growth and innovation.

Contact us today to learn how Epstein & Associates can help your business reach its full potential in a legally sound manner.