Act
Proposed Changes to the Corporations Act to Simplify Voting Requirements for Share Capital Social Clubs to Continue Under Another Specified Act
Regulation Number(s):
N/A
Instrument Type:
Act
Bill or Act:
Corporations Act
Summary of Proposal:
Share Capital Social Clubs (social clubs) under the Corporations Act (CA) must continue under one of three specified Acts (the Business Corporations Act (OBCA), the Not-for-Profit Corporations Act, 2010 (ONCA), or the Co-operative Corporations Act (CCA)) by October 19, 2026, or else they will be dissolved.
To continue under another specified Act, the CA currently requires each class of shareholder to vote separately, as a class, to approve the continuance. As a result, social clubs may face a complex and time-consuming process to notify shareholders and facilitate voting for all classes of shareholders of the club. Because not passing the vote to continue by the specified deadline results in the forced dissolution of the social club, some social clubs have asked the ministry to consider amendments to simplify the voting requirement.
In response, the ministry is proposing amendments to the CA that, if passed, would 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. The proposed changes, if passed, are ultimately intended to reduce the risk of dissolution of social clubs, so that they can continue to operate and serve their members and communities, as well as reduce burden on social clubs by simplifying the voting process. Additionally, the proposed changes would align the CA with certain continuance provisions in the ministry's other relevant business law statutes that do not require all classes of shareholders to vote on a continuance.
The ministry is now seeking public and stakeholder feedback on the draft proposed legislative amendments to the CA. This posting will close by 11:59 pm on August 9, 2023. Respondents may provide feedback with regard to the proposal, including by providing responses to the below questions:
1. 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?
2. Are there any changes to the draft proposed amendments that the ministry may wish to consider that would add more clarity? If so, how?
3. 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?
a. 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.
4. Are there any transition issues that the ministry should be aware of? If yes, please describe the circumstance you wish the ministry to consider.
5. Are there any risks and/or impacts associated with these draft proposed amendments that should be considered? If so, why?
6. Do you have any related comments that the ministry may wish to consider?
To continue under another specified Act, the CA currently requires each class of shareholder to vote separately, as a class, to approve the continuance. As a result, social clubs may face a complex and time-consuming process to notify shareholders and facilitate voting for all classes of shareholders of the club. Because not passing the vote to continue by the specified deadline results in the forced dissolution of the social club, some social clubs have asked the ministry to consider amendments to simplify the voting requirement.
In response, the ministry is proposing amendments to the CA that, if passed, would 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. The proposed changes, if passed, are ultimately intended to reduce the risk of dissolution of social clubs, so that they can continue to operate and serve their members and communities, as well as reduce burden on social clubs by simplifying the voting process. Additionally, the proposed changes would align the CA with certain continuance provisions in the ministry's other relevant business law statutes that do not require all classes of shareholders to vote on a continuance.
The ministry is now seeking public and stakeholder feedback on the draft proposed legislative amendments to the CA. This posting will close by 11:59 pm on August 9, 2023. Respondents may provide feedback with regard to the proposal, including by providing responses to the below questions:
1. 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?
2. Are there any changes to the draft proposed amendments that the ministry may wish to consider that would add more clarity? If so, how?
3. 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?
a. 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.
4. Are there any transition issues that the ministry should be aware of? If yes, please describe the circumstance you wish the ministry to consider.
5. Are there any risks and/or impacts associated with these draft proposed amendments that should be considered? If so, why?
6. Do you have any related comments that the ministry may wish to consider?
Analysis of Regulatory Impact:
The proposal is intended to reduce the risk of the dissolution of social clubs, by making it easier for them to continue under another specified Act.
The social clubs governed under this act are self-governing, and the CA and the statutes social clubs may continue under are framework statutes that set out rules for internal governance for the corporations. As such, the ministry has no oversight of the corporations' internal operations, and no data to calculate the cost of the proposed changes. However, based on assumptions and estimates made for the purposes of this assessment, the ministry anticipates a modest cost savings for social clubs due to the simplified vote, if the proposal is approved.
This consultation is being conducted by the Ministry with respect to a consultation draft of the proposed amendments that would make legislative changes to the continuance provision for social clubs under the Corporations Act.
The collection of this information is authorized pursuant to the Ministry's responsibility for this Act and is necessary to consider the draft proposed amendments. Please note that the Ministry is subject to the Freedom of Information and Protection of Privacy Act (FIPPA) and may disclose the information you or your organization provides in accordance with FIPPA.
Please note that unless agreed otherwise by the Ministry, all submissions received from organizations or individuals affiliated with organizations will be considered public information and may be used and disclosed by the Ministry to help evaluate the proposals and help the Ministry analyze whether the proposed changes are needed within the scope of this consultation.
Submissions received from individuals who do not indicate an affiliation with an organization will not be considered public but may be used and disclosed by the Ministry to help evaluate the proposals. Any personal information such as an individual's name and contact details will not be disclosed by the Ministry without the individual's prior consent unless permitted or required by law.
If you or your organization have any questions about the collection of this information, please contact BusinessLawPolicy@ontario.ca.
The social clubs governed under this act are self-governing, and the CA and the statutes social clubs may continue under are framework statutes that set out rules for internal governance for the corporations. As such, the ministry has no oversight of the corporations' internal operations, and no data to calculate the cost of the proposed changes. However, based on assumptions and estimates made for the purposes of this assessment, the ministry anticipates a modest cost savings for social clubs due to the simplified vote, if the proposal is approved.
This consultation is being conducted by the Ministry with respect to a consultation draft of the proposed amendments that would make legislative changes to the continuance provision for social clubs under the Corporations Act.
The collection of this information is authorized pursuant to the Ministry's responsibility for this Act and is necessary to consider the draft proposed amendments. Please note that the Ministry is subject to the Freedom of Information and Protection of Privacy Act (FIPPA) and may disclose the information you or your organization provides in accordance with FIPPA.
Please note that unless agreed otherwise by the Ministry, all submissions received from organizations or individuals affiliated with organizations will be considered public information and may be used and disclosed by the Ministry to help evaluate the proposals and help the Ministry analyze whether the proposed changes are needed within the scope of this consultation.
Submissions received from individuals who do not indicate an affiliation with an organization will not be considered public but may be used and disclosed by the Ministry to help evaluate the proposals. Any personal information such as an individual's name and contact details will not be disclosed by the Ministry without the individual's prior consent unless permitted or required by law.
If you or your organization have any questions about the collection of this information, please contact BusinessLawPolicy@ontario.ca.
Further Information:
Corporations Amendment Act - A Consultation Draft
Corporations Act
Proposal Number:
23-MPBSD010
Posting Date:
July 26, 2023
Comments Due Date:
August 9, 2023
Contact Address:
BusinessLawPolicy@ontario.ca