Fasken lawyers in Alberta argue the case for why companies should set up in the province
Alberta is the new Delaware – or at least, that’s what the province wants to become.
In the US, the tiny state punches well above its weight class with the number of business registrations. By the end of the year, the state government estimates Delaware will be home to over two million business entities. Playing a significant role in attracting businesses looking for a place to domicile is Delaware's General Corporation Law, which is considered to be very business-friendly.
According to Alberta-based lawyers at Fasken Martineau DuMoulin, the Alberta government had the Delaware statute in mind when it revised Alberta’s Business Corporations Act in 2022. They say the province aims to set itself up as the Canadian destination of choice for investors and business leaders.
“They want to encourage foreign investment… and advertise to both Canadians and the world at large that this is where you should come if you are looking for a business-friendly jurisdiction, which is the reputation Delaware has as well,” says Jason Giborski, counsel at Faskens.
His colleague, Brad Schneider, a partner at the firm, agrees and adds the push to attract business registrations is part of the province’s goal to grow its overall economy.
“The Government of Alberta, over the last few years, has been looking to diversify our economy outside of just an oil and gas economy. One way we can do that is by attracting more private equity venture capital into the province and investing in areas like tech, for example.”
Despite revising its business rules, Giborski says the province hasn’t seen an uptick in registrations. While there can be several reasons, counsel Paul Blyschak suspects that Canadians and people doing business in Canada tend to forget that companies can be registered anywhere in the country, even if their operations or activities mainly occur in a different region or province.
“The advantages of the ABCA should not be thought of as limited to business in Alberta. Because there hasn’t been much competition between jurisdictions, like in the United States, to attract business through business-friendly and investor-friendly provisions like those that are now in the ABCA, people have just sort of lost sight of the fact that businesses in Canada are completely mobile. You can incorporate in Alberta, even if your intention is just to do business in BC or in Ontario.”
The amended act includes several changes, but the most significant is the corporate opportunities waivers (COWs), which allow directors to engage in some types of corporate opportunities that are typically prohibited. It is a measure designed mainly for venture capitalists with multiple or competing interests, explains Schneider, noting it is essentially copied word-for-word from the Delaware statute.
“Where that becomes relevant from a private equity or VC perspective is if you sit on multiple boards and this opportunity could be beneficial to the multiple companies you sit on, you’re not in that awkward position where you're trying to figure out which company do I need to present this opportunity to? It just puts you in a really awkward and uncomfortable position. You can just wave that whole doctrine under Alberta law now.”
Another change that has implications for investors, especially foreign investors, is the removal of residency requirements for directors. According to Giborski, one-quarter of the directors had to be Canadian before the change.
He also notes the amendments did away with the transparency registry, which aligns Alberta with other major Canadian jurisdictions.
Other changes to the act address giving board members expended liability protections (such as during investigations or different types of proceedings) and allowing executives and board members to act upon interim financial statements and reports or opinions of company employees presented in good faith.
There is also more flexibility under the act regarding managing shareholder meetings and getting shareholder approvals, which has now been reduced from unanimity to a two-thirds vote.
“As someone who works with a lot of private companies, I can tell you that it gets to be an administrative burden when you’re chasing all of these small shareholders to get their signature on the waiver every year,” says Schneider. “Administratively, [the change] makes the governance of your corporation easier.”
Besides the actual changes in the act, Giborski says there are other advantages for businesses that register in Alberta, including the province’s Corporate Registry System (CORES), which allows companies to have their amended articles processed immediately via an online system.
“By comparison, a lot of other corporate registries involve processing time based on workload, and they may charge additional fees for expedited, but not instantaneous service.”
For any organization looking to set up in Alberta, some requirements need to be addressed. One is that the company’s registered and records office must be located in the province, meaning the person who administers the company’s record book must be based in Alberta.
While Alberta may be following the lead set by Delaware, the province isn’t following indiscriminately. There are some steps it hasn’t taken and likely won’t.
“Delaware completely allows for the elimination of fiduciary duties in certain circumstances,” says Blyschak. “We’re going nowhere near as far as they have, nor would we advocate for that necessarily. Alberta has been quite selective in terms of the investor-friendly provisions it’s adopting, so it’s looking at Delaware and ‘saying we're comfortable with this investor-friendly provision, but we’re not going to go quite so far.’ I think that’s evidence of how Alberta is being responsible.”
