Does any Canadian jurisdiction, provincial or federal, hold an advantage over the others as a destination for venture capital (VC) or private equity (PE) investment? Or, put more broadly, is any one Canadian business corporations statute more attractive than the others for the incorporation of a Canadian company?
Recent amendments to the Alberta Business Corporations Act (ABCA) make a very strong case for the province, particularly as relates to nominee directors. Moreover, these changes build on several VC and PE-friendly provisions already within the ABCA.
We first review what VC and PE investors need to know regarding the amended ABCA. We then provide key practical takeaways. While doing so we also consider guidance from Delaware, from which certain of the ABCA’s amendments borrow. Finally, while we discuss these issues from the perspective of nominee directors, the business-friendly nature of the ABCA is an important consideration for anyone looking to incorporate in Canada and regardless of where in Canada the business’ operations will be.
Corporate Opportunity Waivers
The duty of loyalty has been called “a cornerstone of Anglo-American corporate law” as well as the “most demanding and litigated fiduciary obligation” imposed on directors. This being the case, the most important amendment to the ABCA is likely the new allowance for the advance “waiver of business interests”, also know as “corporate opportunity waivers” (COWs).
Under the duty of loyalty and the “corporate opportunity doctrine” that flows from it, directors are prohibited from appropriating new business opportunities for themselves (or their affiliates) without first offering them to the company. New s.16.1(1) changes this equation under the ABCA by allowing the company to pre-emptively “waive any interest or expectancy… in or to, or in being offered an opportunity to participate in… business opportunities” offered to any of its