Canadian corporate law updates for trusts and estates practitioners
By Andreea Muth, Pallett Valo LLP
On 05 July 2021, two amendments to the Business Corporations Act (Ontario) (OBCA) came into effect that will significantly impact trust and estate planning for family businesses.
First, corporations incorporated under the OBCA are no longer required to maintain a minimum number of Canadian residents on their boards of directors. Previously, at least 25% of the board was required to be Canadian residents. This has benefits for cross-border estate planning. Prior to the OBCA amendments, a family whose key decision-makers resided outside of Canada would have faced complications operating a business or using a holding corporation in Ontario. Available options to circumvent this would have added significant costs and administrative complications to the estate planning process.
However, cross-border families incorporating in Ontario will still have tax implications that need to be carefully analysed. An OBCA corporation is deemed to be a resident of Canada for income tax purposes, regardless of its directors’ residencies. For directors exercising “central management and control” located outside of Canada, it could mean the corporation is also deemed a tax resident of another jurisdiction. Where multiple residences for tax purposes are undesirable, a director structure that maintains management and control in Canada may be preferred.
Second, the OBCA now makes written shareholder resolutions easier to execute for private companies. Certain resolution types can now pass by simple majority, as opposed to requiring full approval. This allows shareholders to pass routine matters like financial statement approval with greater ease.
Both OBCA updates give muchneeded flexibility to corporate governance planning and execution. Any existing OBCA corporation wishing to take advantage of these changes must first review and possibly amend its by-laws, articles of incorporation, and shareholders’ agreement to match the OBCA amendments.
You can read the article in more detail here.
Andreea MuthGGI member firm
Pallett Valo LLP
Law Firm Services
Mississauga (ON), Canada
T: +1 905 273 33 22
Pallett Valo LLP is one of Ontario’s Top 10 Regional Law Firms. The firm practices in the areas of business law, commercial litigation, commercial real estate, construction, insolvency and corporate restructuring, employment and labour, and wills, estates, and trusts.
Andreea Muth is a member of the Business Law Practice. Andreea has a general corporate/commercial law practice, representing start-ups and mature business owners. She also has a developing expertise in trust and estate planning for business owners.
Published: Trust & Estate Planning Newsletter, No. 08, Autumn 2021 l Photo: zatevakhin - stock.adobe.com