Corporations Act (Ontario) amended to remove class vote to continue share capital social clubs

December 13, 2023 | Natasha Smith, Dana Kriszenfeld

As previously reported, Bill 139 proposed to amend Ontario’s Corporations Act to remove the requirement of share capital social clubs (“Social Clubs”) to obtain approval from each class of shareholders in order to effect a continuance under one of the specified acts. On December 4, 2023, Bill 139 received Royal Assent, which now codifies the proposed amendment. Social Clubs with multiple classes will welcome this change. Now, there is no requirement to obtain approval from each class of shareholders, including those that were otherwise non-voting. Instead, only the shareholders entitled to vote may vote (collectively) to approve the continuance to one of the specified acts. Additionally, this amendment will allow many Social Clubs to more easily achieve quorum at their respective continuance meetings.

While this amendment is generally facilitative, Social Clubs will still need to ensure that they adhere to other provisions of their by-laws governing meetings, including those which may require notice of the relevant continuance meeting be given to non-voting classes.

If you require assistance with your club’s continuance, Miller Thomson’s Social Impact Group would be pleased to assist.


This summary was originally published August 2, 2023

Summary of proposed changes to Ontario’s Corporations Act for share capital social clubs

Background

Currently, Share Capital Social Clubs (“Social Clubs”) incorporated under Ontario’s Corporations Act (“OCA”) are required to continue under one of three (3) specified acts to avoid dissolution before October 19, 2026.  The specified acts are as follows:

  1. Business Corporations Act (“OBCA”);
  2. Not-for-Profit Corporations Act (“ONCA”); or
  3. Co-operative Corporations Act (“CCA”)

(collectively, the “Specified Acts”).

To continue under one of the Specified Acts, the OCA presently requires that each class of shareholder must vote separately, as a class, to approve the continuance.  As a result of separate class voting, many Social Clubs have been facing an arduous process to both notify shareholders and coordinate voting for all classes of shareholders of their club (including otherwise non-voting classes).  In light of the fact that failure to continue will result in dissolution, many Social Clubs have asked the Ministry of Public and Business Service Delivery (the “Ministry”) to consider amendments that would soften the stringent voting requirements that would allow the club to continue under one of the Specified Acts.

Overview of proposed changes

In response, the Ministry has proposed amendments to the OCA that would, if passed, make it easier for a Social Club to continue under one of the Specified Acts.  This amendment proposes to remove the requirement of each class of shareholders to vote separately as a class and instead, only shareholders entitled to vote may vote (collectively) to approve the continuance.  This proposed amendment aligns with other continuance provisions in other Ontario corporate law statutes that do not require all classes of shareholders to vote on continuance.

Currently, where a corporation is unable to obtain quorum for a class of shareholders, the corporation can apply to a court for an order waiving shareholder approval of that class.  A court may make the order only if it is satisfied that reasonable efforts have been  made to locate and notify the shareholders.  The timing and cost of a court application can be quite cumbersome and expensive.

Invitation for feedback

The Ministry is seeking input from the public and stakeholders on the proposed amendments to the OCA.  This window will close by 11:59pm on August 9, 2023.  Respondents may provide feedback on the proposal, including responses to the following inquiries:

  1. Are you supportive of the proposal to make it easier for social clubs to continue under one of the other specified Acts by removing the requirement that each class of shareholder must vote separately as a class, and clarifying that only a social club’s shareholders entitled to vote may vote on continuance? Why or why not?
  2. Are there any changes to the draft proposed amendments that the ministry may wish to consider that would add more clarity? If so, how?
  3. Are there any changes necessary to the continuance provisions of the receiving statutes (OBCA, ONCA, or the CCA) that the ministry may wish to consider? If so, why?
    • The OBCA requires separate class voting on the articles of continuance in certain circumstances regardless of whether the class has a right to vote. E.g., see s.180(3) and s.170. Would this cause a barrier for social clubs continuing under the OBCA? If so, please explain.
  1. Are there any transition issues that the ministry should be aware of? If yes, please describe the circumstance you wish the ministry to consider.
  2. Are there any risks and/or impacts associated with these draft proposed amendments that should be considered? If so, why?
  3. Do you have any related comments that the ministry may wish to consider?

If you wish to provide a submission with respect to the proposed amendments, you may do so by sending an email to BusinessLawPolicy@ontario.ca or by directly submitting your comments.

It is not yet known at this time when these proposed amendments would take effect.

If you require assistance with your club’s continuance, Miller Thomson’s Social Impact Group would be pleased to assist.

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