Federally incorporated businesses and those incorporated under Québec’s provincial law are required to hold an annual general meeting of shareholders each year. They must do so within fifteen (15) months of the previous annual general meeting. This legal obligation remains in force despite the COVID-19 crisis.
However, on March 26, 2020, Corporations Canada issued a notice acknowledging that holding annual general meetings in person during the COVID-19 outbreak was against public health boards. They are contrary to the practice of physical distancing and self-isolation to prevent the spread of the virus.
In this notice, Corporations Canada outlines two options for federal corporations to meet the obligations of the Canada Business Corporations Act during the COVID-19 crisis. Options that may also apply to companies incorporated under the Business Corporations Act (Québec), subject to certain conditions.
Corporations could have two options to hold an annual meeting, being either a virtual meeting or a partially virtual meeting, also known as “hybrid”.
What differentiates these types of meetings?
A virtual shareholder meeting takes part in whole or in part through electronic means. Thus, corporations can hold a “fully virtual” shareholder meeting, in which the meeting is held online without a physical component.
Corporations can also hold a “hybrid” shareholder meeting, that is, a meeting held at a physical location, but where technology is used to allow shareholders to participate remotely.
Several verifications must be carried out before proceeding, such as reviewing the corporations by-laws. Only federal or Québec corporations, whose by-laws allow them to hold virtual meetings, can take advantage of these options using digital technologies that comply with the regulations.
Several other requirements?
Other conditions must be satisfied before a corporation can hold a fully virtual shareholder meeting. For example, section 132(4) of the Canada Business Corporations Act provides that shareholders that participate in a virtual meeting will only be deemed to have attended the meeting if the technology being used to facilitate the meeting allows all participants to communicate “adequately” with each other.
Sections 174 and 175 of the Québec’s Business Corporations Act provide that meetings can be held only by means that allow all participants to communicate “immediately” with each other.
If a corporation’s by-laws prohibit virtual meetings or do not contain any provision on this subject, the board of directors may modify them. The change will be effective until the next meeting of shareholders, where it can be ratified or rejected.
If you are unsure if your corporation qualifies, we suggest that you contact us to validate your by-laws. We will see together whether it is possible to hold your general meetings of shareholders by electronic means or to modify your by-laws to this effect.
Here are some relevant resources on the subject:
“Annual meetings of federal corporations during the COVID-19 outbreak”, Corporations Canada
Canada Business Corporations Act, section 132 and paragraph 133(3)
Business Corporations Act (Québec), sections 163, 164, 174 and 175