Significant amendments to the Alberta Business Corporations Act (ABCA) have come into force

Significant amendments to the Business Corporations Act of Alberta (ABCA) came into force on May 31, 2022. These changes include new corporate opportunity waivers, a reduced threshold for shareholder approvals in certain circumstances, facilitation of electronic signatures and delivery by electronic means and changes related to plan of arrangement transactions. 

Background

Bill 84 received Royal Assent on December 2, 2021 and came into force on May 31, 2022, marking the latest steps in Alberta’s plan to cut red tape, reduce regulatory burdens and attract investment. This follows a broader aim by the provincial government to not just bring Alberta’s legislation in line with other provinces and the CBCA, but in fact make Alberta the “destination of choice” for businesses, ultimately growing and diversifying the province’s economy.

Corporate opportunity waivers

As a result of their fiduciary duty (also known as the duty of loyalty), directors must be careful not to exploit business opportunities that are offered to the corporation. The amendments to the ABCA introduce the concept of a corporate opportunity waiver – a first in Canada. Corporations now have the option of adding waiver provisions to their articles of incorporation or unanimous shareholder agreement to allow directors to participate in specified types of corporate opportunities. The purpose is to facilitate investment by private equity funds, venture capitalists and other institutional shareholders who invest in multiple corporations in the same lines of business and consequently sit on multiple boards of directors.

When the amendments were first proposed in November 2021, the Government of Alberta indicated that regulations would lay out how and when such waivers could be used and in what specific circumstances. We note that those regulations have not yet been published, but are expected to provide details such as the types, classes and categories of opportunities that can or cannot be waived, the procedures for waiving and the disclosures required to be made in such circumstances.

Shareholder approval requirements: written resolutions

Matters requiring shareholder approval can be passed at a shareholder meeting by a simple majority or, in the case of a matter of business requiring a special resolution, by a majority of not less than 2/3 of the votes cast by shareholders. As an alternative, shareholders can pass resolutions outside of a meeting by signing a written resolution. Prior to the amendments to the ABCA (and as is still the case in most other jurisdictions of Canada), such written resolutions required the signature of 100% of the shareholders. As a result of the amendments, corporations that are not reporting issuers can now pass a written resolution with the signatures of 2/3 of the shareholders entitled to vote on that matter. It is anticipated, although not certain, that further amendments to the ABCA will clarify that such a resolution requires the signatures of shareholders holding at least 2/3 of the shares (as opposed to 2/3 of the shareholders).

We note that Ontario passed somewhat similar amendments to the Ontario Business Corporations Act (OBCA) in 2021, whereby ordinary resolutions for a privately-held OBCA corporation can be passed in writing if it is signed by only those shareholders who hold a majority of the shares entitled to vote on that resolution.

Dispensing with an auditor

In order to save time and expense, corporations that are not reporting issuers can choose to dispense with the requirement to appoint an auditor. Prior to the amendments to the ABCA (and as is still the case in most other jurisdictions of Canada), this decision required approval by 100% of the shareholders. As a result of the amendments, it can be approved by 2/3 of the shareholders entitled to vote on that matter.

Electronic signatures and delivery by electronic means

A number of amendments have been made to the ABCA to facilitate the use of electronic signatures and delivery of documents by electronic means. For example, the ABCA now expressly provides that security certificates may be issued in electronic form. Likewise, financial statements may be signed by directors using an expanded concept of electronic signature. In addition, the ABCA now provides that, unless the corporation’s constating documents expressly provide otherwise, documents required to be sent to shareholders, directors and the corporation may be sent by electronic means. We also note that the requirement to publish record dates in a newspaper has been removed. 

Court-approved arrangement transactions

The arrangement provisions of corporate statutes are frequently used to effect M&A transactions in Canada. A number of amendments have been made to the arrangement provisions in the ABCA. These include the requirement to give the Registrar of Corporations notice of the interim and final court applications and the opportunity to appear and be heard at the application. A number of other amendments to the procedural requirements expand court discretion and bring the ABCA closer in line to the Canada Business Corporations Act (CBCA).

Additional contact information

One potentially new onerous requirement relates to the type of contact information that corporations are required to collect and maintain in respect of their shareholders. While the basic requirement is to maintain a register of the names and addresses of all securityholders, the amended ABCA provides that, if requested by the Registrar, the register must also include the securityholders’ telephone numbers and email addresses. Similar changes have been made regarding the contact information requirements for directors and for holders of debt obligations issued under a trust indenture.

Additional information

Other amendments to the ABCA impact the disputes risk profile of corporations and directors, being amendments to directors’ duties of care and loyalty, indemnification and insurance rights and limitations and insider trading civil liability provisions. A separate legal update on those changes will follow.