Residency requirement for directors of Ontario corporations has been removed

Overview

Effective July 5, 2021, businesses incorporated under Ontario’s Business Corporations Act (OBCA) will no longer be required to have at least 25% of directors to be resident Canadians. Prior to that, the OBCA required that at least one forth of the directors of an Ontario corporation be residents of Canada, or where there were fewer than four directors, that at least one director must have been a “resident Canadian”.

This change provides greater flexibility for businesses that wish to incorporate in Ontario without needing to find resident Canadians willing to act as directors. Historically, many foreign businesses have chosen to incorporate in other jurisdictions such as British Columbia, New Brunswick, Nova Scotia, Prince Edward Island, Quebec, or Alberta where there is no such requirement. Now Province of Ontario joins that list.

The removal of the director residency requirement under OBCA adds competitive advantage to the Province of Ontario and helps attract foreign businesses that are currently looking to establish their subsidiaries in Canada. It will take a burden off foreign investors and portfolio companies planning to incorporate special purpose vehicles in Canada to perform cross-boarder acquisitions. OBCA corporations will still be required to include their director residency information when registering a business in Ontario. Section 118(3) of the OBCA is now amended to allow all the directors of a Canadian corporation to be non-residents of Canada.

Benefits of Incorporating in Canada

Registering a Canadian Corporation will allow companies to access the talented Canadian workforce and may also qualify your company for many tax incentive programs such as SR&ED tax credit, OIDMTC, and many other programs. Other advantages of incorporating in Canada may include:

  • Increased credibility with supplies and customers
  • Access to financing and grant programs
  • Establishing presence and building partnerships in a fast-growing economy

Whether you are a resident Canadian or a non-resident company wishing to establish business in Ontario, we will be happy to answer your questions and lead you though the process of registration. Contact us for more information on non-resident tax filing, cross-boarder taxation, and corporate tax benefits.

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