Key features of new Saskatchewan Business Corporations Act: New rules for directors of Saskatchewan corporations

Published: February 1, 2023

Authors: Stathy Markatos, Samer Awadh

Categories: Corporate / Commercial, Corporate Governance, Mergers & Acquisitions

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Authors: Stathy Markatos, Samer Awadh, Ethan Reis

Incoming changes to Saskatchewan’s corporate legislation will make it easier for Saskatchewan corporations to conduct business within the province. In this first part of this blog series that examines key features of The Business Corporations Act, 2021 (the “New SBCA”), we will cover the new rules governing the qualifications of directors of Saskatchewan corporations.

 The Business Corporations Act (Saskatchewan) (the “Old SBCA”) establishes the legislative framework governing business corporations in Saskatchewan. It has been the primary source of corporate law in the province for over 40 years.

In 2020, the Legislative Assembly of Saskatchewan completed a review of the Old SBCA and developed the New SBCA”). The stated objective of the New SBCA is to implement modernized corporate legislation in Saskatchewan by, among other things, reducing red tape for businesses operating in Saskatchewan and creating efficiencies by expressly allowing for the use of modern technologies to better reflect current business practices.

The New SBCA and its associated regulations will come into force and become law in Saskatchewan on Sunday, March 12, 2023.

The New SBCA will introduce changes to Saskatchewan’s corporate legislation. One of those changes, and the focus of this post, is the implementation of new rules governing the qualifications of directors of Saskatchewan corporations.

Removal of Canadian residency requirements for directors

The Old SBCA set out the qualifications of directors of Saskatchewan corporations. It currently requires at least 25% of the directors of a Saskatchewan corporation to be resident Canadians. Moreover, if a corporation has fewer than four directors, at least one director must be a resident Canadian.

The Old SBCA defines “resident Canadian” as an individual who is:

  1. a Canadian citizen ordinarily resident in Canada;
  2. a Canadian citizen not ordinarily resident in Canada who is a member of a class of persons prescribed in the regulations;
  3. or a permanent resident within the meaning of the Immigration and Refugee Protection Act (Canada) and ordinarily resident in Canada, except a permanent resident who has been ordinarily resident in Canada for more than one year after the time at which he or she first became eligible to apply for Canadian citizenship.

The New SBCA removes the 25% residency requirement altogether. Under the New SBCA, there is no requirement for the directors of a Saskatchewan corporation to be resident Canadians. However, if none of the directors or officers of a Saskatchewan corporation reside in Saskatchewan, the corporation must appoint an attorney in Saskatchewan.

The New SBCA will also remove certain sections of the Old SBCA, which collectively provide that the directors of a Saskatchewan corporation shall not transact business at a meeting of directors unless at least 25% of the directors present at the meeting are Canadian residents, subject to limited exceptions.

The New SBCA will also replace subsection 110(1) of the Old SBCA, which provides that the directors of a Saskatchewan corporation can appoint from their number a managing director who is a resident Canadian or a committee of directors and delegate to such managing director or committee any of the powers normally enjoyed by the directors [emphasis added]. Subsection 9-16(1) of the New SBCA simply provides that the directors of a corporation may appoint from their number a managing director or a committee of directors and delegate to the managing director or committee any of the powers of the directors. No Canadian residency requirement is specified.

Additionally, the New SBCA removes the exception from the definition of “resident Canadian” for a permanent resident who has been ordinarily resident in Canada for more than one year after the time at which he or she first became eligible to apply for Canadian citizenship. As a result, the definition of “resident Canadian” is broader under the New SBCA.

New rules preventing persons convicted of corporate or fraud-related offences from serving as directors

Under the Old SBCA, the following persons are disqualified from acting as a director of a Saskatchewan corporation:

  1. anyone who is less than eighteen years of age;
  2. anyone who has been found by a court in Canada or elsewhere to lack capacity;
  3. a person who is not an individual; or
  4. a person who has the status of bankrupt.

In addition to the foregoing, the New SBCA will introduce further disqualifying features and will prohibit persons convicted of an offence in connection with the promotion, formation or management of a corporation or unincorporated business, or of an offence involving fraud from being a director of a Saskatchewan corporation, unless:

  1. the Court orders otherwise;
  2. five (5) years have elapsed since the last to occur of:
    1. the expiration of the period set for suspension of the passing of sentence without a sentence having been passed,
    2. imposition of a fine,
    3. conclusion of the term of any imprisonment, and
    4. the conclusion of the term of any probation imposed; or a pardon was granted or issued, or record suspension was ordered, in accordance with the Criminal Records Act (Canada) and the pardon or record suspension, as the case may be, has not been revoked or ceased to have effect.
  3. a pardon was granted or issued, or record suspension was ordered, in accordance with the Criminal Records Act (Canada) and the pardon or record suspension, as the case may be, has not been revoked or ceased to have effect.

Reducing red tape for Saskatchewan corporations

Removing Canadian residency requirements for the directors of Saskatchewan corporations will make it easier for non-Canadian individuals to incorporate in Saskatchewan and to manage the business and affairs of Saskatchewan corporations. At the same time, the new rules preventing persons convicted of corporate or fraud-related offences from serving as directors of Saskatchewan corporations will ensure that those who seek to do business in the province are subject to higher eligibility requirements.

The MLT Aikins corporate governance practice group has extensive experience assisting individuals and organizations as they navigate the corporate landscape in Saskatchewan. Please contact us to learn more about the changes brought about by the New SBCA and how they may affect your business.

Note: This article is of a general nature only and is not exhaustive of all possible legal rights or remedies. In addition, laws may change over time and should be interpreted only in the context of particular circumstances such that these materials are not intended to be relied upon or taken as legal advice or opinion. Readers should consult a legal professional for specific advice in any particular situation.