Blog

AGM's during a pandemic

David van der Woerd Oct 12, 2021

Introduction
The recent Covid-19 global pandemic has created a unique situation for provincial and federal corporations. In particular, the implementation of social distancing orders which require individuals to remain 6 feet apart from one another at all times has caused significant problems for corporations conducting their regular course of business. In particular, these social distancing orders were especially tricky to navigate if a corporation’s Annual General Meeting (AGM) fell within the timelines of the social distancing orders.
This paper will discuss the most recent amendments to Federal and Provincial (Ontario) legislation and will aim to provide general guidance for corporations looking to host their AGM during the Covid-19 Pandemic. 

What is the AGM? 
The AGM is a yearly (or slightly longer) mandatory gathering of a corporation’s interested shareholders and board of directors where directors of the company present the annual report containing information for shareholders about the company’s performance in the last fiscal year (since the last AGM). The company’s performance may also be analysed, future strategy discussed, and shareholders or members are presented with an opportunity to question the board on their performance. It is additionally a time to elect the corporation's directors and address other administrative issues. All other business is generally considered to be special business, which may also be conducted at a special meeting of the shareholders. A special shareholders’ or members’ meeting and the AGM can, and often are combined for ease and time saving purposes. 
The directors of a corporation may convene an AGM at any time, however proper notice must be provided. The time and mode of notice changes depending on what Act governs the corporation. The timeline however of hosting AGM’s whether under Ontarian or Federal governance remains exactly the same:

AGMs must be held within 15 months of the previous AGM and no more than six months after the organization's last financial year-end.

Outlined below are the notice periods for most governing Acts under Federal and Ontario legislation.
 
 
 
 

Governing Act	Notice Provisions
Canada Business Corporations Act: Section 135.1	For the purpose of subsection 135(1) of the Act, the prescribed period for the directors to provide notice of the time and place of a meeting of shareholders is not less than 21 days and not more than 60 days before the meeting.(SOR/2001-512)[1], [2]
Canada Non-for-Profit Corporations Act: Section 162.1	For the purpose of subsection 162(1) of the Act, one or more of the following manners is a prescribed manner of giving notice: (a) by mail, courier or personal delivery to each member entitled to vote at the meeting, during a period of 21 to 60 days before the day on which the meeting is to be held; (b) by telephonic, electronic or other communication facility to each member entitled to vote at the meeting, during a period of 21 to 35 days before the day on which the meeting is to be held; (c) by affixing the notice, no later than 30 days before the day on which the meeting is to be held, to a notice board on which information respecting the corporation’s activities is regularly posted and that is located in a place frequented by members; and (d) in the case of a corporation that has more than 250 members, by publication (i) at least once in each of the three weeks immediately before the day on which the meeting is to be held in one or more newspapers circulated in the municipalities in which the majority of the members of the corporation reside as shown by their addresses in the register of members, or (ii) at least once in a publication of the corporation that is sent to all its members, during a period of 21 to 60 days before the day on which the meeting is to be held.[3],[4]
Canada Cooperatives Act: Section 51.1	For the purpose of subsection 52(1) of the Act, the prescribed period for the directors to provide notice of the time and place of a meeting is not less than 21 days and not more than 60 days before the meeting.[5],[6]
Ontario Business Corporations Act: Section 96.1	Notice of the time and place of a meeting of shareholders shall be sent, in the case of an offering corporation, not less than twenty-one days and, in the case of any other corporation, not less than ten days, but, in either case, not more than fifty days, before the meeting.[7]
Ontario Corporations Act: Section 93.2	The by-laws of the company shall not provide for fewer than ten days notice of meetings of shareholders and shall not provide that notice may be given otherwise than individually.[8]
Ontario Non-for-Profit- Corporations Act: Section 55.1	Notice given in accordance with the by-laws, but in any event not less than 10 days and not more than 50 days before the meeting.[9]

 
            Again, the exact rules that govern AGM’s vary according to jurisdiction, and differ only slightly. The rules tend to be more stringent for publicly traded companies compared to private companies, where public corporations must also abide by rules set by the relevant exchange. 

Issues Caused by Covid-19
As the AGM is a mandatory meeting that involves the gathering of individuals in an enclosed area, it presents a problem with the given social distancing orders during the Covid-19 pandemic.  This problem is even more prevalent for large corporations, where the number of shareholders or members may be in the thousands, all of which may be entitled to attend the AGM.
The Government of Canada has recognized that the hosting an in-person AGM would contradict public health advice to practice physical distancing and self-isolation to prevent the spread of the virus. As such, temporary, and in some cases permanent amendments have been made to the Federal and Ontario legislature to help corporations continue to function and adhere to physical distancing guidelines. These changes are discussed in detail below.

Part A: Federal Corporations
The introduction of social distancing rules resulted in widespread disruptions and delays making it unclear for corporations to follow ordinary procedures, including hosting AGM’s. In May 2020, the Minister of Innovation, Science and Industry issued an order pursuant to subsection 7(1) of the Time Limits and Other Periods Act (COVID-19) extending the time frame for all federally incorporated corporations hosting their AGM and presenting their financial statements. The order was in effect from March 13, 2020 to December 31, 2020 and was retroactively applicable.[10] Additionally Federal corporation were provided with 3 primary solutions in hosting their AGMS[11].

1. Hold a virtual meeting

 
If the by-laws of the corporation expressly permit, the corporation has the ability to hold meetings virtually through using various digital platforms. Sometimes by-laws also allow corporations to also host partially virtual meetings where some members attend in person and others participate in the meeting through digital platform. In both cases, it is vital that the by-laws expressly allow the corporation to host the meeting through a digital manner. Further the digital platform must allow the corporation to gather votes in a way that allows them to be verified, tallied and presented while maintaining the anonymity of the votes. 
 
If the corporation's by-laws prohibit virtual meetings or are silent on holding them, the board of directors may change the by-laws with the change effective until the next meeting of shareholders or members (when the change can be confirmed or rejected).
 

2. Replace the meeting with a resolution in lieu of the AGM

 
For corporations, not-for-profits and cooperatives with a small number of shareholders or members, corporations have the ability to approve a resolution in-lieu of holding a meeting of the members or shareholders. At a minimum the resolution must address the election of directors, considering the corporation’s financial statements, appointing an auditor or public accountant or waiving the requirement for the appointment of an auditor or public accountant and must be signed by all of the members or shareholders who are entitled to vote.
 
3. Delay calling the annual general meeting for Non-For-Profit-Corporations
 
Finally, non-for-profit corporations can apply to delay the calling of their AGM when it would be detrimental to call the meeting within the normal timeframe. Not-for-profits have to apply, either online or by email at ic.corporationscanada.ic@ised-isde.gc.ca at least 30 business days before the notice calling the meeting is to be sent to members. To delay an AGM for CBCA and CCA incorporated businesses, court approval is required and is granted on a case-by-case basis.
 
Since the special order granted by the Minister of Innovation, Science and Industry was not extended, as of January 1, 2021 normal rules for calling AGM and presenting financial statements apply. These rules are discussed below.
 
Current Laws
A.        Canada Business Corporations Act: 
Section 132.4 CBCA allows shareholders the ability to attend an AGM by means of a telephonic, electronic or other communication facility that permits all participants to communicate adequately with each other during the meeting.[12]

Section 132.5 further provides the director of a corporation the means to host an AGM entirely by means of a telephonic, electronic or other communication facility that permits all participants to communicate adequately with each other during the meeting, if the by-laws so provide.[13]

Finally under Section 133.3, CBCA corporations that are unable to host their AGM’s as a result of social distancing orders and which did not host an AGM for their respective financial year may apply to the courts for further delaying their AGM. [14]

Since January 1, 2021 CBCA corporations are required to host their AGM within the prescribed time periods under the CBCA. If a corporation is unable to host its AGM within the prescribed time, the CBCA allows the corporation to apply to the courts to receive an extension on a case-by-case basis. Additionally, It is important to note that if the AGM is being held virtually, the digital platform being used must allow for the corporation to gather votes in a way that allows them to be verified, tallied and presented while maintaining the anonymity of the votes. Further the By-laws of the corporation must expressly allow the corporation to host its AGM through a virtual platform otherwise the bylaws must first be amended.

B.        Canada Non-For Profit Corporations Act:
Section 159.4 CNCA provides individuals the ability to participate in AGM’s virtually suggesting that “any person entitled to attend a meeting of members may participate in the meeting, in accordance with the regulations, if any, by means of a telephonic, an electronic or other communication facility that permits all participants to communicate adequately with each other during the meeting, if the corporation makes available such a communication facility”.[15]

Section 159.5 deals with AGM’s being hosted by electronic means and “allows shareholders the ability to attend an AGM by means of a telephonic, electronic or other communication facility that permits all participants to communicate adequately with each other during the meeting”.[16]

Section 160.2 CNCA grants corporations the option to delay hosting their AGM’s to extend the time for calling an annual meeting if the Director reasonably believes that members will not be prejudiced.[17]

Under the CNCA corporations are required to submit an application to Corporations Canada requesting an extension for hosting its AGM. It is important to note that Corporations Canada assesses these requests on a case-case-basis and a Corporation must apply for the extension within the prescribed time frame and must demonstrate that hosting the AGM during the prescribed time period would be detrimental for the corporation.

C. Canada Cooperatives Act
Section 48.3 CCA provides a member or a shareholder the ability to participate in a meeting of the cooperative, in accordance with the regulations, if any, by means of a telephonic, electronic or other communication facility that permits all participants to communicate adequately with each other during the meeting, if the cooperative makes available such a communication facility.[18]

Section 48.3.1 also provides the director the ability to determine that the meeting shall be held, in accordance with the regulations, if any, entirely by means of a telephonic, electronic or other communication facility that permits all participants to communicate adequately with each other during the meeting, if the by-laws so provide. [19]

Section 50.3 allows the directors the ability to apply to the court for an order extending the time for calling an annual meeting, so long as the application is made within the prescribed time.[20]

Final Points
On December 31, 2021 the ministerial order issued by the Minister of Innovation, Science and Industry expired and as of January 1, 2021 normal rules for hosting AGM’s came into effect for federal corporations. It is clear that the expectation for federal corporations is that they are required to host their AGM’s within the prescribed times under the various Acts and should have adjusted to the Covid-19 pandemic. Only in certain situations applications can be made to the court for delaying hosting the AGM.

Part B: Ontario Corporations:
On March 17, 2020, the Government of Ontario issued Ontario Regulation (O. Reg 107/20) under the Emergency Management and Civil Protection Act. This regulation made temporary amendments to the Business Corporations Act (Ontario), the Corporations Act, the Co-operative Corporations Act, and the Condominium Act 1998, providing temporary relief for corporations including suspending the provisions requiring AGMs to be held within 15 months of the previous AGM. Additionally the temporary suspension period was stated to end on the 120th day after the day the declared emergency is terminated.[21]
 
On May 12, 2020 O.Reg 107/20 was repealed (retroactively applicable to March 17, 2020) and was replaced with Bill 190, the COVID-19 Response and Reforms to Modernize Ontario Act, 2020.[22]
 
Bill 190 introduced various temporary amendments to the Business Corporations Act (Ontario), the Corporations Act, the Co-operative Corporations Act, and the Condominium Act 1998, as well as others though incorporating schedules in each of these Acts. [23] It is important to note that Bill 190 was passed on May 12, 2020 and was retroactively applied to March 17, 2020 to fill the gap created by repealing O. Reg 107/20.
 
The current situation for provincial corporations is discussed in detail below.
 

1. Ontario Business Corporations Act: O. Reg. 542/20 and 250/21

 
On October 1, 2020 the Ontario provincial government passed O. Reg 542/20 under which certain sections of the Schedule to the OBCA introduced by Bill 190 were extended until May 31, 2021[24]. However on April 6, 2021, the Ontario government further passed O. Reg 250/21 which extended the temporary extension period from May 31, 2021 to December 31, 2021.[25] 

Section 1 of the Schedule suspends section 94 OBCA until December 31, 2021 and allows corporations to host a meeting by telephonic or electronic means.  Additionally, a shareholder who, through those means, votes at the meeting or establishes a communications link to the meeting shall be deemed for the purposes of the Act to be present at the meeting, so long as the bylaws of the corporation permit.[26]

Section 3 deals with voting rights under the act and suspends Sections 103 (1), (2) of the Act. Under Section 3 of the schedule shareholders are allowed to vote at a meeting by a show of hands, except where a ballot is demanded by a shareholder or proxyholder entitled to vote at the meeting. The Chair of the meeting has the ability to conduct the vote by a show of hands or by a ballot if feasible, otherwise the chair may direct voting by alternate means.[27]

Finally Section 4 states that despite any provision in the articles, by-laws or a unanimous shareholder agreement that provides otherwise, a meeting of directors or of a committee of directors may be held by means of such telephone, electronic or other communication facilities as permit all persons participating in the meeting to communicate with each other simultaneously and instantaneously. This essentially gives the directors the ability to override the articles and bylaws to host a meeting by virtual means.[28]

2. Ontario Corporations Act: O. Reg. 544/20 and 251/21

On October 1, 2020 the provincial the Ontario provincial movement passed O. Reg 544/20 under which certain sections of the Schedule to the OCA were extended until May 31, 2021. This deadline was again extended on April 6, 2021when O. Reg 251/21was passed under which Sections 3, 5, and 6 of Schedule 2 of the OCA were extended to December 31, 2021.[29]^{, [30]}

Section 3 of Schedule 2 deals with hosting meeting through electronic means and suspends Section 125 (1) giving Corporations the ability to host meetings through virtual means. Section 3 states that despite any provision in the letters patent, supplementary letters patent or by-laws of a corporation, a meeting of the members or shareholders of a corporation may be held by telephonic or electronic means and a member or shareholder who, through those means, votes at the meeting or establishes a communications link to the meeting is deemed for the purposes of this Act to be present at the meeting.
 
Section 6 of Schedule 2 addresses voting rights. Section 6 suspends the operation of subsection 287(1) of the OCA the expiry of the temporary suspension period on December 31, 2021. Under section 6 despite any provision of the OCA or the regulations, where a meeting of shareholders or members is held by telephonic or electronic means in accordance with subsection 125.1 (1), the chair shall conduct a vote or election by ballot or by such other manner as the by-laws of the corporation prescribe, if feasible, otherwise the chair may direct the vote or election by alternate means.
 

3. The Co-operative Corporations Act: O. Reg. 543/20 and 252/21

 
On October 1, 2020 Ontario provincial government passed O.Reg 543/20 which amended the Co-operative Corporations Act by extending certain sections of the Schedule to May 31, 2021. On April 6, 2021, the Ontario government further passed O.Reg 252/21 extending Sections 1, 3, 4, 6 and 7 of the Schedule under the Act until December 31, 2021. 

Section 1 of the Schedule under the Act deals with meetings by electronic means. Under Section 1, the operation of subsection 74 (3) to (5) of the Act is suspended until December 31, 2021, when the temporary suspension period is set to expire.[31]

Under section 1 of the Schedule, Co-Operative Corporations have the ability (whether or not the articles or by-laws of a co-operative so provide) to host meetings by telephonic or electronic means by which all members participating in the meeting can hear each other, and a member who, through those means, votes at the meeting or establishes a communications link to the meeting is deemed for the purposes of this Act to be present at the meeting.[32]

Subsection 1(5) of the Schedule also defines ‘telephonic or electronic means’ as telephone calls or messages,
facsimile messages, electronic mail, transmission of data or information through automated touch-tone telephone systems, transmission of data or information through computer networks, any other similar means or any other prescribed means.

Section 6 of the Schedule deals with voting matters in situations where meeting are held through electronic means. Under Section 6, the operation of subsection 90 (1) of the Act is temporarily suspended until December 31, 2021. Section 6 (1.1) of the Schedule provides where a general meeting of members is held by telephonic or electronic means in accordance with subsection 74 (3), the chair shall conduct a vote or election by ballot in the manner prescribed by section 91, otherwise the chair may direct the vote or election by alternate means.[33]

4. Condominium Act, 1998: O. Reg. 541/20 CA and 253/21

On October 1, 2020 the Ontario provincial government passed O.Reg 541/20 under which the provincial government granted relief by extending certain sections of the Schedule to the Condominium Act, dealing with the temporary suspension period to May 31, 2021. However on April 6, 2021 the provincial government extended only sections 1,2,5,6 and 7 of the schedule from May 31, 2021 to December 31, 2021 with the passing of O.Reg 253/21.[34] [35]

Section 3 of the Schedule under the Act deals with time extensions for AGM’s. It should be noted that O.Reg 253/21 did not include section 3 under the temporary suspension period meaning that Condominium corporations are required to host their AGM as per the requirements prescribed in the Act. Condominium corporations therefore are required to host their AGM within 18 months of the previous AGM and no more than six months after the organization's last financial year-end. 
 

5. Ontario Non-For-Profit Corporations Act:

 
On June 3, 2021, the Ontario provincial government passed the Bill 276, Supporting Recovery and Competitiveness Act, 2021, amending the Ontario-Non-For-Profit Corporations Act by providing temporary relief measures for ONCA corporations.
 
Schedule 17 of the Supporting Recovery and Competitiveness Act introduces amendments under Schedule 1 of the ONCA y way of incorporating a schedule, which will takes effect on October 19, 2021 when the Act is set to receive Royal Assent.[36]
 
Schedule 1 under the ONCA will operate from October 19, 2021 and is set to expire on December 31, 2021 with the expiration of the temporary suspension period. It should be noted that the ONCA is not yet in effect and only after October 19, 202 Non-for-Profit Corporations will be governed under the ONCA.[37]
 
Section 2 of Schedule 1 deals with meetings hosted by electronic means. Under Section 2, the operation of subsection 53(4) of the Act is temporarily suspended until December 31, 2021 and a meeting of the members of the corporation may be held by telephonic or electronic means and a member who, through those means, votes at the meeting or establishes a communications link to the meeting is deemed for the purposes of this Act to be present at the meeting. [38]
 
Sections 3 and 4 of the Schedule deal with voting requirements during the temporary suspension period. Section 3(3) particularly states that despite any provision of the ONCA or the regulations, where a meeting of the members is held by telephonic or electronic means in accordance with subsection 53 (4), the chair shall conduct a vote or election by ballot or by such other manner as the by-laws of the corporation prescribe, if feasible, otherwise the chair may direct the vote or election by alternate means.[39]
 
Finally Section 4.1 allows corporations to override the articles or the bylaws of the Corporation to allow individuals to vote by mail or by telephonic or electronic means.
This essentially allows individuals to vote at meetings virtually and removes the requirement to vote in person even if it is a requirement under the bylaws or the letters patent of the Non-for-profit corporation. [40]
 
Final Points:
 
It is evident that the Ontario provincial government made a series of legislative changes and passed new legislation to allow corporations more flexibility to operate during the Covid-19 Pandemic.
 
Currently, in Ontario temporary rules are to corporations and non-for-profit corporations in regards to hosting their AGM until December 31, 2021. The Ontario government has made clear corporations will not be granted an extension to host an AGM and that they should instead focus on adapting to pandemic and host their AGM’s within the prescribed times. However, measures have been introduced which have created a flexible and viable framework for corporations looking to host their AGMs throughout the pandemic. Ontario corporations are essentially required to adapt to the Covid-19 pandemic and be compliant to the various provincial acts in regards to hosting their AGM’s.
 
Conclusion
In summary, COVID-19 presented a unique situation for corporations to host their AGMs as corporations are required by statute to hold an AGM within certain timeframes, but doing so would violate the newly enacted physical distancing orders. To remedy this, both the Ontario and Federal governments had enacted temporary legislation providing corporations the flexibility to navigate the uncertainties of the Covid-19 pandemic. However both the Federal and Ontario governments have made clear that time extensions will not be granted for hosting AGM’s and corporations are required to adapt be compliant to the various acts.