By Anthony Duggan, Professor & Honourable Frank H. Iacobucci Chair in Capital Markets Regulation / Illustration by Robert Neubecker

From the Fall/Winter 2015 issue of Nexus

Op-ed illustrationCommercial law reform doesn’t win votes and it rarely makes the headlines. As a result, it is hard to achieve political momentum for change. This inertia is perhaps inevitable, but it is unfortunate. It is inevitable given the inherently technical nature of many commercial law issues. It is unfortunate because up-to-date and efficient commercial laws are the life-blood of the economy: they enable the creation of wealth; promote entrepreneurship; facilitate market transactions; help create jobs; and improve competition.

The problem was exacerbated in Ontario between 2011 and 2014, when a minority government was in power and the politics of staying in office took precedence over the job of making laws. But after the Liberal Party regained power in its own right in the June 2014 election, the Premier moved quickly to make business law reform a government priority. She gave the Minister of Government and Consumer Services a mandate to review the corporate and commercial statutes in the ministry’s portfolio, and this mandate was included as a commitment in the 2015 budget papers. In February 2015, the minister appointed a panel of experts, comprising legal practitioners, in-house counsel and law professors, to investigate and report on the priorities for reform. The panel met on five occasions between March and May and submitted its report to the minister in June. The report is available on the ministry’s website at

The focus of the report is mainly on statutes in the Ministry of Government and Consumer Services portfolio, but a number of statutes in the Attorney-General’s portfolio were included as well. The statutes under review included the Business Corporations Act, the Limited Partnerships Act,the Partnerships Act, the Assignments and Preferences Act, the Fraudulent Conveyances Act, the Bulk Sales Act, the Personal Property Security Act, the Arthur Wishart (Franchise Disclosure) Act and the business information and registration laws. Some of these statutes are 100 or more years old and have remained on the statute books since their inception without review or modification. Others are more recent, but have failed to keep pace with developments in the marketplace and the changing needs of business and consumers. The report contains specific recommendations on all these statutes, but it also makes one general recommendation aimed at making sure that, from now on, the province’s commercial laws are kept under regular review. That recommendation is for the establishment of a formal process to advise the minister on a regular basis on the need for commercial law reform. In response to this recommendation, the government announced on Oct. 8, 2015 plans to establish a Business Law Advisory Council comprised of up to 12 members appointed for a term of up to three years. This will be a first in Canada and an important early step in Ontario’s commitment to getting its commercial laws house in order.

The first set of specific recommendations in the report relates to Ontario’s business entity laws. One of the Report’s recommendations under this heading is for a comprehensive review of the Business Corporations Act, giving priority to: enabling electronic communications between directors; providing clearer standards of responsibility and accountability for directors and officers; and revising shareholder rights and remedies to take account of the fact that many shareholders in public companies hold their shares indirectly and do not have legal title. Another recommendation is for amendment of the Limited Partnerships Act with a view to reducing the potential liability of limited partners and expanding the availability of the limited liability partnership beyond lawyers, accountants and the like. A third is to permit the incorporation of unlimited liability corporations, to bring the province into line with Alberta, British Columbia and Nova Scotia.

The second set of specific recommendations relates to transactional laws. One of the recommendations under this heading is for repeal of the Assignments and Preferences Act and the modernization of the Fraudulent Conveyances Act (the former dates from the period 1880-1919 when there was no federal bankruptcy regime in Canada and the provinces were forced to step in and fill the gap, while the latter is a translation into 19th century language of a statute enacted in the reign of Elizabeth I to prevent debtors from defrauding their creditors). Another recommendation is for a comprehensive review of the Personal Property Security Act, giving priority to (among other things): allowing statutory and contractual licences (for example a fishing licence or a patent licence) to be taken as security; and facilitating security interests in cash deposits (bank accounts and the like).

The third set of recommendations relates to what might be called ‘red tape issues’ and it includes: rationalizing the disclosure requirements imposed on franchisors by the Arthur Wishart Act; simplifying the rules for registration of business names; and improving co-operation among the provinces to simplify compliance for businesses operating across Canada.

The government called for stakeholder input on the report’s recommendations and the deadline for submissions was Oct. 15, 2015. So we can expect an announcement shortly on how the government plans to proceed. Businesses and their lawyers will be waiting with interest to see whether the political will is there to take the report’s recommendations on board.