Alberta’s Bill 84, Business Corporations Amendment Act, 2021 (Alberta) received Royal Assent on December 2, 2021, and came into force on May 31, 2022. Bill 84 introduced significant amendments to the Business Corporations Act (Alberta) (the “ABCA”) as part of the Alberta government’s goal to reduce red tape and administrative burdens in order to attract investment into the province and diversify its economy. In this update, we break down the key changes to the ABCA resulting from Bill 84 (the “ABCA Amendments”)

Corporate Opportunities—Waivers

Generally, the corporate opportunity doctrine prevents directors and officers from personally participating in or taking advantage of business opportunities of which, they become aware as a result of their position as a fiduciary to a corporation.

Pursuant to the ABCA Amendments, a corporation governed by the ABCA now has the option to waive its interest in certain corporate opportunities offered to it or its officers, directors or shareholders (which would then allow its officers, directors or shareholders to separately participate in a specified business opportunity, or specified classes or categories of business opportunities). To utilize this waiver, a corporation’s articles of incorporation or unanimous shareholder agreement must include provisions permitting the corporation to provide such a waiver of opportunity (and so existing ABCA corporations will likely need to amend their articles (or their unanimous shareholder agreement, if one exists) in order to use this waiver concept, subject to the forthcoming regulations). This is the first time that statutory corporate opportunity waivers have been introduced in Canada, although they do exist in some U.S. states, and contractual waivers have been used in unanimous shareholder agreements for some time as well. These waivers are intended to be helpful to facilitate investment by certain institutional investors (including private equity and venture capital funds) who invest in multiple portfolio companies in the same lines of business and therefore would have representatives sitting on multiple boards of directors in those same lines of business. Since Alberta is the first Canadian jurisdiction to introduce this statutory corporate opportunity waiver concept, investors on boards of directors of portfolio companies organized under other Canadian jurisdictions will still need to obtain specific case-by-case waivers for non-ABCA corporations.

We note that the amended ABCA provisions relating to the waiver of corporate opportunities remain subject to further regulations, which (as of May 31, 2022) have not yet been published.

Plans of Arrangement

A plan of arrangement is a court-sanctioned procedure that allows a corporation to reorganize itself, combine with another corporation or otherwise to effect one or more fundamental corporate changes. The Canada Business Corporations Act (the “CBCA”) and its provincial and territorial counterparts (including the ABCA) allow a wide range of transactions to be implemented by plan of arrangement. The ABCA Amendments to the plan of arrangement provisions of the ABCA enhance the flexibility and discretion of a court in respect of such arrangements. For instance, similar to equivalent CBCA provisions that already exist, courts now have broad discretion under the ABCA to "make any interim or final order it thinks fit" in connection with a plan of arrangement, including allowing the court to:

• grant a corporation’s request for a stay of proceedings at the outset of the arrangement proceeding which allows the corporation additional time to focus on the arrangement without facing the risk of collateral proceedings; and
• approve a plan of arrangement without first obtaining shareholder approval in circumstances in which shareholder rights are not affected or material to the arrangement.

Prior to the ABCA Amendments, the ABCA required a meeting and vote by a corporation's shareholders and a two-third majority approval on a proposed arrangement even where shareholder rights were not material to the arrangement, unless there was a unanimous shareholder resolution to this effect. With the ABCA Amendments, it is now within the discretion of the court on whether shareholder approval will be required. Additionally, previous ABCA provisions also required a two-thirds majority approval from each class of creditors and holders of debt obligations (where the court considered such stakeholders affected by the arrangement). The ABCA Amendments do not require a minimum voting threshold for affected stakeholders and the court will have broad discretion in the circumstances.

The ABCA Amendments to the plan of arrangement provisions are favourable to financially distressed companies that historically may have chosen to change their home jurisdiction and continue as a CBCA corporation in order to benefit from some of the flexibility offered by the equivalent CBCA provisions.

The ABCA Amendments adopt some of the more favorable and flexible elements in the CBCA plan of arrangement provisions but go even further in not requiring a company to be solvent to pursue a plan of arrangement coupled with the express language permitting an arrangement in the nature of a compromise between a corporation and its creditors. It is expected that the ABCA Amendments will encourage more Alberta based corporations to pursue a debt restructuring plan of arrangement under the ABCA rather than changing jurisdictions and continuing under the CBCA to pursue same. The ABCA Amendments may have the effect of decreasing the number of formal insolvency proceedings but for more contentious matters where solvency of the corporation is at issue, proceedings related to debt restructurings for financially distressed companies will likely continue to be dealt with under the Companies’ Creditors Arrangement Act, RSC 1985, c. C-36.

We also note that the ABCA Amendments introduce a requirement that the applicant for an order in connection with ABCA plans of arrangement must give the Registrar of Corporations appointed under the ABCA notice of the application to allow the Registrar to appear and be heard in connection with the application, if deemed necessary by the Registrar.

Shareholder, Director and Officer Responsibilities and Protections

Expanding circumstances of good faith defence

The ABCA provides that directors of ABCA corporations will not be liable for breach of the duty of care if the director demonstrates they relied in good faith on an opinion or report of a person, including a lawyer, accountant, engineer, appraiser or employee of the corporation, whose profession or expertise lends credibility to a statement made by that person. Prior to the ABCA Amendments, the equivalent ABCA provision did not expressly include employees of a corporation to the list of parties on whose opinions or reports a director may rely on in good faith in order to be relieved of liability for certain actions in respect of a breach of the duty of care.

Enhancing indemnification provisions

Pursuant to the ABCA Amendments, directors and officers of ABCA corporations are also afforded greater protections for indemnification from the corporation than they were previously, as such persons may now be indemnified in respect of:

• “investigative” proceedings in addition to civil, criminal, and administrative proceedings;
• investigations, actions and proceedings in which the person is not a formal party but rather, is involved by reason of being or having been a director or officer of the corporation; and
• cases where the director was not judged by a court or competent authority to have committed any fault or omitted to do anything that the director ought to have done (in contrast to the former ABCA requirement of being substantially successful on the merits in the director's defence of the action and being fairly and reasonably entitled to an indemnity).

Prior to the ABCA Amendments, the ABCA provided that, generally, a corporation may indemnify a director or officer for costs incurred in connection with a civil, criminal, or administrative action or proceeding to which the director or officer is made a party, provided the director or officer acted in good faith.

Additionally, the ABCA Amendments remove current barriers against a corporation purchasing directors’ and officers’ insurance for liability related to that person's failure to act honestly and in good faith with a view to the best interest of the corporation.

Material Interest

The ABCA generally requires directors to disclose and abstain from voting where they have a material interest in any contracts or transactions, subject to certain exemptions. These exemptions are expanded by the ABCA Amendments, as directors are now permitted to vote on a contract or transaction in which they have an interest but only where the director’s interest would benefit the corporation, such as guaranteeing a loan.

Shareholder Discretion

The ABCA Amendments specifically provide that a shareholder who is a party to a unanimous shareholder agreement may "fetter" their discretion when exercising the powers of a director under such unanimous shareholder agreement. This enables shareholders to rely on the advice or written reports of others when making decisions, bringing Alberta in line with similar provisions already existing in Ontario legislation as well as the CBCA.

Reducing administrative burdens

The ABCA Amendments allow the administration of corporations to be more streamlined and flexible, particularly for corporations with no securities that are publicly traded. Such amendments include the following, among others.

Shareholder voting

For a corporation that is not a reporting issuer (a “Non-Reporting Issuer”), the ABCA Amendments have purported to reduce the threshold approval for a written shareholder resolution from unanimity to at least two-thirds of the shareholders entitled to vote on that resolution or at that shareholder meeting. We understand that further amendments to the ABCA are expected to be proposed in order to clarify and clean up the language used in the ABCA Amendments (which language leaves some uncertainty). Note that the language in the ABCA Amendments speaks to counting the number of shareholders (regardless of the number of shares held by such shareholders), whereas other jurisdictions with non-unanimous written resolutions such as Ontario and British Columbia require signatures from shareholders holding at least two-thirds (or other applicable threshold) of the applicable shares.

Lower approval threshold for dispensing with audit requirement

The ABCA Amendments allow a Non-Reporting Issuer to dispense with auditor requirements by passing a special resolution of the shareholders, thereby requiring approval from shareholders holding two-thirds of the voting shares of the corporation (unless otherwise provided in the corporation’s articles or in an unanimous shareholders agreement). Previously, approval by of all voting and non-voting shareholders was necessary to dispense with the requirement to appoint an auditor under the ABCA. This will reduce administrative burden and costs for Non-Reporting Issuers who choose to forego the appointment of an auditor and the provision of audited financial statements. This change differentiates the ABCA from most other jurisdictions in Canada which still require unanimous shareholder approval to dispense with auditor and audited financial statements. Minority shareholders with less than two-thirds of the voting shares of a corporation will not be able to compel an ABCA corporation on a go forward basis to obtain audited financial statements.

Notice period

For Non-Reporting Issuers, after the ABCA Amendments, the notice period for shareholder meetings may now be a minimum of 7 days and to a maximum of 60 days (if permitted in the corporation’s by-laws), whereas this range was formerly between a minimum of 21 days to a maximum of 50 days.

Revival of dissolved corporations

The ABCA Amendments extend the time in which a dissolved corporation may be revived by the Registrar, from five to ten years, and removes the current five-year revival period for non-profit companies, societies, and cooperatives altogether. These extended timelines allow more flexibility for corporations to resume business or resolve outstanding legal issues which may arise following dissolution including those involving litigation or assets.

Modernizes by repealing provisions that are repetitive, unnecessary, or addressed by other legislation

The ABCA Amendments include various changes involving the repeal of provisions that are repetitive, unnecessary, or addressed by other legislation, including provisions pertaining to:

• allowing corporations to issue securities certificates in electronic form, rather than as a physical certificate;
• expanding acceptable contact information to include email; and
• removing references in legislation that require faxed or handwritten documents.

Key Take-Aways

The ABCA Amendments seek to modernize the ABCA and reduce administrative burdens on companies to save time and money for management teams and boards of Alberta corporations. The amendments to the corporate waivers and plan of arrangement provisions along with the shareholder voting for a Non-Reporting Issuer are the most substantial changes to the ABCA. Further regulations and amendments are expected to clarify the application of the ABCA Amendments. It remains to be seen if these amendments will encourage more corporations to incorporate in Alberta and keep Alberta as its home jurisdiction.

The authors would like to acknowledge the support and assistance of Aya Taher, articling student at law.