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:
- Business Corporations Act ("OBCA");
- Not-for-Profit Corporations Act ("ONCA"); or
- 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:
- 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?
- Are there any changes to the draft proposed amendments that the ministry may wish to consider that would add more clarity? If so, how?
- 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.
- Are there any transition issues that the ministry should be aware of? If yes, please describe the circumstance you wish the ministry to consider.
- Are there any risks and/or impacts associated with these draft proposed amendments that should be considered? If so, why?
- Do you have any related comments that the ministry may wish to consider?
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