Federal business corporations and Quebec business corporations are legally 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, Corporations Canada published a notice acknowledging that holding annual general meetings in person during the COVID-19 pandemic went against public health advice. They are contrary to the practices of physical distancing and self-isolation recommended to prevent the spread of the virus.
In this notice, Corporations Canada presents two options for federally incorporated companies to meet their obligations under the Canada Business Corporations Act during the COVID-19 crisis. These options may also apply to Quebec corporations, subject to certain conditions.
A joint-stock company can hold either a virtual meeting or a partially virtual meeting, commonly referred to as a “hybrid” meeting.
What’s the difference between these types of assembly?
A virtual shareholders’ meeting is held entirely or partly by electronic means. For example, companies can hold an “entirely virtual” meeting, i.e. one that is held online and has no physical component.
Companies can also hold a “hybrid” shareholders’ meeting, i.e. a meeting held in a physical location, but where technology is used to enable shareholders to participate remotely.
Several steps must be taken, such as consulting a company’s by-laws before proceeding. Only federal or Quebec companies whose by-laws allow virtual meetings can take advantage of these options, using digital technologies that comply with the law.
Several other conditions to be met?
Other conditions must be met before a corporation can hold a fully virtual shareholder meeting. For example, subsection 132(4) of the Canada Business Corporations Act provides that shareholders participating in a fully virtual meeting will only be deemed to have attended the meeting if the technology used to facilitate the meeting allows all participants to communicate “adequately” with each other.
Sections 174 and 175 of the Business Corporations Act (Quebec) provide that meetings may be held only by a means that allows all participants to communicate “immediately” with each other.
If the by-laws of a company prohibit virtual meetings or contain no provision to that effect, the Board of Directors may amend them. The change will be effective until the next shareholders’ meeting, at which time it may be ratified or rejected.
If you’re not sure whether your company qualifies, we suggest you contact us to validate your by-laws. Together, we’ll see if it’s feasible to hold your shareholders’ meetings electronically, or to amend the by-laws accordingly.
Here are some relevant resources on the subject:
“ Annual meetings of federal corporations and non-profit organizations during the COVID-19 pandemic”, Corporations Canada
Canada Business Corporations Actsection 132 and subsection 133(3).
Business Corporations Act (Quebec)sections 163, 164, 174 and 175.
