Key Takeaway
Companies incorporated in Ontario no longer need to have a resident Canadian director on their board. This makes Ontario a more appealing jurisdiction to incorporate for foreign companies wishing to establish operations in Canada.
Here are the details:
Up until July 5, 2021, Ontario corporations were required to have a board of directors that was comprised of at least 25% resident Canadians, pursuant to section 118 (3) of the Ontario Business Corporations Act (OBCA). For foreign corporations or investors looking to incorporate in Ontario, this requirement added to the time, complications, and cost of setting up operations because they would need to find a resident Canadian to serve as a director. As a result, many foreign corporations chose to incorporate in other Canadian jurisdictions that do not have resident director requirements.
The OBCA was amended by the Better for People, Smarter for Business Act, 2020 (Bill 213). One of those amendments came into effect on July 5, 2021, and eliminated the resident director requirements for Ontario corporations.
This makes Ontario a more inviting jurisdiction for foreign corporations and investors looking to establish operations in Ontario and Canada.
This amendment is also important for existing Ontario corporations, since they may consider reorganizing and restructuring their Board of Directors to benefit from this amendment. And for corporations that are incorporated in other provinces of Canada (that do not have resident director requirements), this amendment gives them the opportunity of continuing under the OBCA as an Ontario corporation.
