10 Dec 2015
By Jacquelyn Johnson and Katy Hughes 2015/12/10
Ontario’s Ministry of Government Services recently published a Report calling for the transformation of the province’s business legislation. A comprehensive review of Ontario’s corporate legislation is long overdue. Not only does it fail to accommodate technological advancements, many provisions also create barriers to successful business development and innovation. To remain effective and relevant, corporate legislation must be updated to account for the impact of today’s global economy and technological advancements. The recommendations in the Report are aimed at enhancing Ontario’s position as a place of choice for businesses and creating a corporate climate in which businesses can thrive. The Report focuses on the need to keep corporate law current, calling for a system of regular review and consultation. Ongoing maintenance of corporate legislation would encourage the flexibility that corporate law needs in order to account for today’s evolving economic environment.
The recommendations in the Report are extensive; however, the major focus is on the need to foster Ontario’s reputation as an attractive jurisdiction for businesses. The Report recommends that the Ontario Business Corporations Act be updated to include provisions with respect to increased clarity regarding the liability of corporate directors, improving the accessibility of rights and remedies to shareholders, and eliminating strict Canadian residency requirements for boards of directors. Allowing shareholders more autonomy in composing corporate boards of directors would significantly enhance Ontario’s position as a corporate destination. The current provisions of the Act are unattractive to foreign investors, pushing them to seek incorporation in jurisdictions such as Nova Scotia where such stringent requirements do not exist. Furthermore, the Report suggests provisions that contemplate the effect of technology on business in order to account for electronic meetings and communications, which are currently hindered by the need for formal consent and approval.
Updated legislation would promote Ontario’s position as a leading business jurisdiction, encourage innovation and attract investment. The changes called for in the Report would also support greater market certainty. Developing laws that encourage market confidence directly correlates with successful businesses and therefore a successful economy. Encouraging market confidence also stems from the recommendation calling for the repeal of the provincial Fraudulent Conveyances Act and Fraudulent Preferences Act, and the adoption of the federal Reviewable Transaction Act (RTA). The RTA contains clear rules that would reduce creditor uncertainty and help to increase access to credit for growing businesses. The Report also encourages the repeal of the Bulk Sales Act (BSA), as Ontario is the only province that has yet to do so. While the BSA was drafted with the intention of protecting trade creditors, there is now new legislation that does a better job of this, such as the Personal Property Security Act (PPSA) and the Bankruptcy and Insolvency Act (BIA). The BSA is a burden for businesses, as the necessary compliance documents that it requires can add to legal fees. The Report also outlines significant revisions with respect to the PPSA, which would encourage harmonization across Canada and further modernization of laws relating to secured lending. The Report recognizes the need for a synchronized approach to corporate law across Canada. While most other provinces have updated their corporate laws, Ontario remains an outlier in this respect.
Despite the call for change, business owners shouldn’t hold their breath. Changes to corporate law in Ontario have historically been subject to major delays. The new Ontario Not-for-Profit Corporations Act, for example, was enacted in 2010 and likely won’t come into effect until at least 2020 – more than ten years later! While the Report and its recommendations are a step in the right direction, legislative change on this scale will likely take a significant amount of time.
Jacquelyn Johnson is a lawyer in the corporate-commercial group at SorbaraLaw, with experience in business law, commercial leasing, asset & share transactions, technology & intellectual property, corporate reorganizations, corporate finance & institutional lending. Katy Hughes is an articling student.
20 Feb 2014
Real Estate – Jacquelyn Johnson
If you are thinking of purchasing a home in the near future, the federal government has implemented some new mortgage rules that you need to be aware of. These new rules came into effect July 9, 2012, and will affect home buyers or owners who are mortgaging a property.
Most notably, for new government-backed insured mortgages, the amount of equity that can be borrowed against a property has been reduced, from 85% to 80% of the value of the property.
Another more contentious change is the reduction of the maximum amortization period from 30 years to 25 years. An amortization period is the amount of time it will take a homeowner to pay back the principal amount of a mortgage. This new shorter period means that the principal will be paid back quicker by the borrower, resulting in savings on the total amount of interest paid on that principal amount. However, it also means that the individual payments will be higher because there is less time to pay the principal back in full. This change has the effect of decreasing the total cost of a home a buyer is able to finance.
In making these changes, the government is attempting to help homeowners build up the equity in their homes quicker and to pay off their mortgages sooner, with the ultimate goal of strengthening Canada’s housing finance system. Finance Minister Jim Flaherty is seeking to cool down what many experts see as an “overheated” mortgage market, with many Canadians carrying debt loads that are beyond their comfort ranges. In fact, the average rate of debt to disposable income currently in Canada is an alarming 152%.
But in spite of the Minister’s aggressive push to inform the public of these new rules, a recent poll conducted for the Bank of Montreal showed the majority of Canadians are unaware of the changes.
Given that a home is the largest purchase most Canadians will make in their lifetimes, it is important to be aware of the rules and consequences relating to the mortgages used to finance such purchases.
* * This article is intended only to inform and educate. It is not legal advice. Be sure to contact a lawyer to obtain legal advice on any specific matter.
Author: Jacquelyn Johnson is a Lawyer at Sorbara, Schumacher, McCann LLP, one of the largest and most respected regional law firms in Ontario. Jacquelyn may be reached at (519) 741-8010 or <firstname.lastname@example.org>.