Ontario Business Law Modernization and Burden Reduction Council Proposes Changes to the Arthur Wishart Act

To reduce the regulatory burdens on businesses, the Government of Ontario recently established a business advisory body known as the Business Law Modernization and Burden Reduction Council (the “Council”).

On October 11, 2019, the Council provided several recommendations to the Ontario Ministry of Government and Consumer Services (the “Recommendations”) relevant to franchisors and other businesses alike, including removing the requirement under the Business Corporations Act (Ontario) (the “OBCA”) that at least 25% of a corporation’s directors be Canadian residents. The Recommendations also propose amending the OBCA to lower the approval threshold necessary for a written shareholders’ resolution in lieu of a shareholders’ meeting for privately-held corporations.

Most relevant to franchisors, however, are the Council’s Recommendations relating to the Arthur Wishart Act (Franchise Disclosure), 2000 (the “AWA”). The Recommendations propose amending the AWA to prescribe the following:

• the manner of determining “Total Initial Investment” for the purposes of the minimum and large investment thresholds;
• any changes to the current minimum and large investment threshold amounts for exemptions from disclosure;
• the amount of the deposit payment under which fully refundable deposit agreements that does not bind a prospective franchisee to enter into a franchise agreement would be exempt from disclosure;
• what information must be contained in a statement of material change; and
• the accounting standards for financial statements that must be included in a disclosure document.

The Council’s Recommendations closely resemble submissions originally made (including by Sotos LLP) to the Wynne government in 2017, which were disregarded due to uncertainty prior to its defeat in the 2018 general election. Although the Recommendations do not drastically alter the AWA, implementation of these changes could alter franchisor practices when vetting and disclosing new franchisees. Moreover, such changes, if implemented, could necessitate the updating of existing disclosure documents and related items.

No timeline has been provided for when a bill containing the Recommendations may be tabled, but it is expected to happen in 2020. Public comment on the Recommendations closed on November 26, 2019. You may review the Recommendations here.