Corporate Governance Considerations During the Covid-19 Pandemic

Sabrina Saltmarsh, B.A. (Hons), J.D.Business Interruption, Business Law, Business Litigation, Business Torts | Economic Torts, By-laws, Closely-Held Business Disputes, Commercial, Commercial and Contract Litigation, Commercial Contracts, Commercial Law, Commercial Leasing, Commercial List Matters, Commercial Litigation, Contract Disputes, Coronavirus, Corporate Disputes, Corporate Litigation, COVID-19, Derivative Actions, Directors' and Officers' Liability, Family Business Disputes, Oppression Remedies, Partnership Dispute, Partnerships and Shareholder Disputes, Retail Disputes, Retail Litigation, Sale of Business Disputes, Shopping Mall Lease Disputes, Shopping Mall Lease Litigation0 Comments

Corporate governance issues are top of mind for directors and businesses who are attempting to navigate through the Covid-19 Pandemic related closures and emergency measures.

Boards of Directors still need to operate and make decisions in the best interests of the corporation, and this can involve tough decisions, particularly where there is little guidance as to how measures to lift Covid-19 related restrictions will play out. By example, while it may be in the best interest of investors and shareholders that the Board act to lay off employees in the short term, the impact of staff shortages when Covid-19 restrictions are lifted may pose it’s own challenges.

Many businesses must consider how to hold governance meetings during Covid-19 times. On March 30, 2020, Ontario passed an Order under the Emergency Management and Civil Protection Act (EMCPA), (Ontario Regulation 107/20) entitled “Meetings for Corporations” making temporary changes to the Business Corporations Act (OBCA) to allow for greater flexibility in conducting corporate governance operations during the Covid-19 Pandemic and applies these temporary measures retroactively to March 17, 2020.

The Regulation allows for board meetings and member meetings to be conducted electronically irrespective of stipulations or requirements as set out in the Corporations By-Laws or related constating documents. For those businesses intending to hold virtual or electronic meetings, clear instructions should be provided on the logistical details of a virtual or remote meeting including how to access the meeting remotely and how to vote in such a meeting.

The Regulation also extends the timeline to hold Annual General Meetings that fall within the period of the declared state of emergency to 90 days after the day the emergency expires. The timeline for those which fall within 30 days of the expiry of the emergency is extended to 120 days after the day the emergency expires. For those businesses considering postponing the date of a previously announced meeting in response to the pandemic, proper notifications need to be sent, including an announcement of the change in date, time and location and information on proxy voting.

As various levels of governments begin to announce plans to adjust social distancing measures once the infection curve flattens, businesses will need to adapt to changing operations based on a gradual and phased lifting of restrictions in order to avoid a resurgence in Covid-19 infections. What this will look like is beginning to unfold, however it is clear that some form of social-distancing measures will continue until a vaccine is made available or immunity is achieved on a broad basis.

It will be important for businesses to understand the legislative intent of a gradual loosening of restrictions and implement such strategies in a manner which aligns with the interests of all stakeholders. By example, if employees are allowed to return to work, this may be done on a 50% of workforce or otherwise reduced basis, whereby social distancing measures will still need to be implemented at offices and workplaces. There may remain encouragement from governments to allow employees to work remotely where possible. Occupational health and safety and public safety measures will need to be carefully considered particularly in public facing sectors such as retail and restaurants.

There are many aspects of the Covid-19 Pandemic, related closures, and gradual lifting of such closures, that businesses will need to consider in navigating through the Covid-19 Pandemic. If you need assistance or guidance with policy development, contract issues or disputes, tenancy issues, or corporate governance issues the lawyers at Gilbertson Davis LLP have experience in assisting businesses, directors and executives through governance challenges. Contact us to see if we can help.

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About the Author

Sabrina Saltmarsh, B.A. (Hons), J.D.

Practitioner in a broad range of business and civil litigation matters including commercial, real estate and condo disputes. Experienced at all levels of Ontario Courts. Bio | Contact

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