Changes are coming to the Alberta Business Corporations Act (the "Act"). On December 2, 2021 the Government of Alberta's Bill 84: Business Corporations Amendment Act, 2021 ("Bill 84") received Royal Assent. Bill 84 will come into force on proclamation, expected to be some time after the accompanying regulations have been developed.
Overall, these amendments aim to bring Alberta's corporate legislation in line with other provinces and to attract investment by making Alberta a more attractive jurisdiction to incorporate or grow a business in the eyes of directors, private equity investors, and entrepreneurs.
Bill 84 updates and streamlines some of the language used in the Act and modernizes several provisions, including by allowing for electronic delivery of notices by the Registrar, allowing corporate records to be made available for examination electronically and replacing the concept of "distributing corporation" with "reporting issuer."
Additionally, there are several key changes we wish to highlight.
Directors’ Responsibilities and Protections
Many of the amendments in Bill 84 centre around the duties, responsibilities and liabilities of a corporation's directors. These changes expand the defences available to directors when acting in good faith for the corporation and enhance a corporation's ability to indemnify its directors.
Bill 84 will allow directors to vote on resolutions to approve material contracts or transactions in which they have disclosed an interest, if, and to the extent that, the director is undertaking an obligation for the benefit of the corporation (for e.g. guaranteeing a loan to the corporation). This is broader than the existing subsection 120(6)(a) of the Act that this amendment replaces, which currently only allows a director to vote on such resolutions if the transaction or contract is an arrangement by way of security for money lent to or obligations undertaken by the director.
Amendments to subsection 122(1) of the Act will clarify that a director's duties are owed to the corporation, reflecting a longstanding principle in Canadian common law.
Bill 84 introduces amendments to subsection 123(3) of the Act, which will add employees of the corporation to the list of parties on whose opinions or reports a director may rely on in good faith in order to be relieved of liability for certain actions under Section 118 of the Act.
The actions or proceedings for which a corporation can indemnify its directors and officers are expanded by amendments to Section 124 to include investigative or other actions or proceedings, in addition to civil, criminal and administrative actions or proceedings. Directors and officers who acted honestly and in good faith, and reasonably believed their conduct was lawful, will be entitled to indemnity by the corporation for costs and expenses reasonably incurred for the defence of actions or proceedings in which they are involved by reason of being a director or officer of the corporation, provided they were not judged to have committed any fault or to have done any action they should not have. These amendments will also remove the current barriers against a corporation purchasing directors and officers insurance for liability related to that person's failure to act honestly and in good faith with a view to the best interest of the corporation. This last amendment may have less of an effect in practice, depending on available insurance offerings, but aligns the provision more closely with the Canada Business Corporations Act.
Corporate Opportunity Waivers
Currently, Alberta corporate law prevents directors of a corporation from taking advantage of business opportunities which may be considered to belong to the corporation. Bill 84 will create a new Section 16.1 in the Act to allow a corporation to waive the opportunity to participate in a particular business opportunity, or certain specified classes or categories of business opportunities, that are offered to the corporation or one or more of its officers, directors or shareholders. This waiver must be enabled by the corporation's articles of incorporation ("Articles") or a unanimous shareholder agreement ("USA"), if one exists, and will also be subject to future regulations. To be operative, Section 173 will be amended so that a corporation may amend its Articles to waive, modify or revoke a waiver in an interest or offer under Section 16.1.
These changes will likely be useful for private equity and other investors in Alberta who may invest in multiple similar businesses and sit on multiple boards. The amendment will make Alberta unique amongst Canadian jurisdictions as the first province to legislate corporate opportunity waivers.
Revival after Dissolution
Under the current version of the Act, a corporation may be revived by the Registrar within five years of its dissolution. Bill 84 increases this timeline to 10 years (and also removes the five year timeline altogether for non-profit companies under the Companies Act, societies under the Societies Act and cooperatives under the Cooperatives Act). This extended timeline includes applications by interested persons applying to revive a dissolved corporation under Section 210 of the Act. These new timelines for revival will allow more time for entities to resume business or deal with assets or legal issues which may arise after dissolution.
Several of the amendments contained in Bill 84 will affect shareholder voting and the exercise of shareholder decision making powers.
For corporations that are not reporting issuers, Bill 84 creates a new Section 141(2.1) eliminating the requirement for all shareholders to sign any written resolution. Instead, the signatures of at least 2/3 of the shareholders who would be entitled to vote at the shareholder meeting will be sufficient for resolutions in writing. Additionally, only a 2/3 majority will be required to waive the requirement to appoint an auditor for non-reporting issuers by special resolution, instead of the unanimous resolution currently required. This change will differentiate Alberta's legislation from most other jurisdictions in Canada which still require unanimous shareholder approval to dispense with the requirement to appoint an auditor or to require audited financial statements.
Bill 84 also adds the clarification that voting at a shareholder meeting may be done by show of hands or by a voice count, unless the corporation's bylaws provide otherwise. In addition, Section 152 of the Act will be amended to allow for proxyholders to vote at shareholder meetings by electronic means, unless the bylaws, Articles or a USA provides otherwise.
New subsection 146(10) will be added which allows shareholders to "fetter" their discretion when exercising the powers of directors under a USA. This means shareholders will be able to rely on the advice of others or written reports when making decisions. This change brings Alberta in line with similar provisions already existing in Ontario and Federal legislation.
Court Approved Arrangements
Bill 84 makes several clarifications to Section 193 of the Act and the process for court-approved arrangements. New to the Act is a requirement that an applicant under Section 193 provide notice to the Registrar of their application and gives the Registrar a right to be heard on the application. The amendments also clarify the Court's powers to make any interim or final order it thinks fit under this section, beyond the current powers in subsection 193(4) of ordering meetings of shareholders or other rights holders and appointing counsel. This may include orders to give or dispense with notice of the application to any interested person, other than the Registrar, permitting shareholders to dissent, and approving an arrangement proposed by the corporation or amended by the Court. Currently, subsection 193(9) would require a corporation to return to the Court following a meeting ordered under subsection 194(4) to obtain a decision on the arrangement. Subsection 193(9) will be repealed once Bill 84 comes into force.
Electronic Security Certificates
Finally, Bill 84 will amend Section 48 of the Act to allow a corporation to issue security certificates in electronic form, rather than as a physical certificate.
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