Welcome Amendments to the Alberta Business Corporations Act

Written by Reed Boothby, JD Candidate 2023 | UCalgary Law

On May 31, 2022, amendments to the Alberta Business Corporations Act (“ABCA”)[1] came into force. In line with Alberta's Recovery Plan, the intention underlying the amendments is to attract investment and make Alberta a more appealing jurisdiction for incorporation. Three key benefits as a result of these amendments include: (1) streamlined administrative processes; (2) enhanced director and officer protections; and (3) corporate opportunity waivers.

Streamlined Administrative Processes:

(a) Shareholder Approval Requirements for Non-Reporting Issuers:

There are a variety of matters specified in the ABCA that require shareholder approval by way of ordinary or special resolution. Shareholders may approve resolutions by: (1) voting at a shareholder meeting;[2] or (2) signing a written resolution.[3]

Voting during a shareholder meeting was unchanged by the amendments. During a shareholder meeting, ordinary resolutions are still passed by a simple majority vote,[4] and special resolutions passed by a majority vote of not less than two-thirds of the votes cast.[5]

The amendments did change the requirements to pass a written resolution, however. Prior to the amendments, written resolutions required the signature of every shareholder. If a single shareholder was unwilling or unable to sign a written resolution, the corporation was forced to call a shareholder meeting on at least 21 days' notice (changes to notice periods are discussed below). This led to delays and an increased administrative burden on the corporation.

Pursuant to the amendments, a non-reporting issuer (i.e., a private company)[6] may now pass a written resolution with the signatures of only two-thirds of the shareholders,[7] reducing the ability of any one shareholder to delay business activity.

(b) Reduced Notice Period for Shareholder Meetings for Non-Reporting Issuers:

The minimum notice a non-reporting issuer is required to provide prior to a shareholder meeting has been reduced from 21 days to 7 days.[8] This change increases flexibility and enables the corporation to more quickly address issues as they arise.

(c) Electronic Signatures and Delivery by Electronic Means:

A variety of changes were made to the ABCA to facilitate the use of electronic signatures and allow for delivery of documents by electronic means. For instance, security certificates may now be issued in electronic form, rather than paper.[9] Similarly, financial statements may now be signed by directors using electronic signatures, rather than requiring a wet-ink signature.[10] Furthermore, unless the corporation's bylaws or articles of incorporation indicate otherwise, any documents that must be sent to shareholders, directors or other stakeholders of the corporation may be sent by electronic means.[11]

(d) Revival of a Corporation:

Corporations may be dissolved or wound-up for a variety of reasons. Prior to the amendments, the ABCA permitted the revival of a corporation within five years of its dissolution. Now, a corporation may be revived for up to 10 years after dissolution.[12] This provides interested parties with more flexibility to resume activity under a previously dissolved corporate entity.

Enhanced Director and Officer Protections:

(a) Expanded circumstances of “good faith” defense for Directors:

The ABCA provides a defense wherein a director will not be liable for a breach of their duty of care if the director can demonstrate they relied in good faith on an opinion provided by a list of persons whose profession or expertise lends credibility to a statement made by that person.[13] Prior to the amendments, this list included only lawyers, accountants, engineers and appraisers. The amendments expanded the scope of this list to include employees of the corporation, meaning directors and officers may now benefit from the good faith defense by showing reliance on the opinions of employees who have credibility due to their profession or expertise.

(b) Enhanced Director and Officer Indemnification:

The ABCA amendments expand the scope of director and officer indemnification. Pursuant to the amendments, directors and officers may now be indemnified with respect to:

(i) “investigative “ proceedings in addition to civil, criminal, and administrative proceedings;

(ii) investigations, actions and proceedings in which the director or officer is not named as a formal party but rather, is involved by reason of being (currently or formerly) a director or officer of the corporation.

Prior to the amendments, a corporation was generally limited to indemnifying a director or officer for costs related to civil, criminal, or administrative actions or proceedings to which the director or officer was named as a formal party.

Furthermore, the amendments now provide a corporation with the option to purchase directors' and officers' insurance benefiting directors and officers even where they have failed to act honestly and in good faith with a view to the best interest of the corporation.[14] Previously, liability caused by a director or officer failing to act honestly and in good faith with a view to the best interest of the corporation was excluded from insurance coverage.

Corporate Opportunity Waivers:

As part of their fiduciary duty, directors and officers are generally prevented from personally exploiting business opportunities offered to the corporation. The amendments to the ABCA now give a corporation the option of including a “corporate opportunity waiver” (the first of its kind in Canada) within its articles of incorporation or unanimous shareholders agreement. Under a corporate opportunity waiver, the corporation waives any “interest or expectancy” of the corporation to participate in a business opportunity that has been offered to it.[15] This enables directors and officers to personally participate in a particular business opportunity they may otherwise have been prevented from participating in by virtue of their fiduciary duty.

The waiver is beneficial for any directors or officers involved with multiple corporations. In particular, institutional investors, such as private equity or venture capital firms, commonly invest in multiple companies and consequently have representatives that sit on multiple boards of directors. The corporate opportunity waiver provides added certainty to these directors and officers that their actions will not violate the fiduciary duties they would otherwise owe to each individual corporation.

Conclusion:

The recent amendments to the ABCA make Alberta a more attractive jurisdiction in which to incorporate and operate a business by: (1) streamlining administrative processes; (2) enhancing director and officer protections; and (3) introducing a corporate opportunity waiver.

Note that a corporation's constating documents may require amendments to implement some of the changes outlined in this post. For assistance with amending constating documents, or for further information about the ABCA generally, please contact the BLG Business Venture Clinic.

Endnotes

[1] Business Corporations Act (Alberta), RSA 2000, c B-9. [ABCA]

[2] ABCA, s. 139.

[3] ABCA, s. 141.

[4] ABCA, s. 1(w).

[5] ABCA, s. 1 (ii).

[6] “non-reporting issuer” means a private corporation that is not required to file continuous disclosure documents pursuant to National Instrument 51-102 – Continuous Disclosure Obligations (NI 51-102).

[7] ABCA, s. 141(2.1).

[8] ABCA, s.134(1.1).

[9] ABCA, s. 48(7.1)

[10] ABCA, s. 158(1).

[11] ABCA, s. 255(5).

[12] ABCA, s. 208(1).

[13] ABCA, s. 123(3)(b).

[14] ABCA, s.124.

[15] ABCA, s. 16.1.