What do a Chilean mining company, an Illinois-based pharmaceutical firm that just sold for $12.8 billion, and a gold producer from Colorado operating in Turkey have in common?
They're all registered in Yukon.
That Alacer Gold, Catamaran, or Orosur Mining don't do any work in the territory is a quirk of Canadian regulatory history that Yukon wants to make less of an oddity. So today, Yukon is changing its Business Corporations Act in a bid to convince even more far-flung companies that part of the answer to tapping Canada's capital markets can be found north of 60.
"If you want to send a message to the business community that this is a good place to come, what better way to say it than you've got really good business legislation," says Paul Lackowicz, a partner at Lackowicz & Hoffman, a Whitehorse law firm.
Today's amendments aren't the first time Yukon has brought in business-friendly regulations.
Gold in them hills
When the territory drafted its original Act in the 1980s, it attempted to tailor a set of rules that would give it an edge over other jurisdictions in the minds of corporations.
In the 1990s, foreign companies started to appreciate what Yukon was offering. In particular, a lack of residency requirements for corporate directors made it easier to meet the listing criteria for Canadian stock markets. Ontario and Alberta, in contrast, require 25 per cent of board members to be Canadian.
For a time, Yukon became a preferred destination for hundreds of foreign companies looking for a spot to register in Canada. That changed in 2004, when an overhaul to British Columbia's rules also waived director residency requirements.
Although other Canadian jurisdictions also lack such conditions, B.C. and Yukon, due in part to both simply being in a western time zone, found themselves in a quiet competition for business.
As it turns out, B.C. ended up winning. In the last decade, Lackowicz estimates more than 500 companies have left Yukon for warmer pastures. At the very least, he hopes today's amendments, in the works since 2001, will stem the bleeding.
How much of a difference can some esoteric changes to business legislation really make? For a province like Ontario or Alberta, not much at all. But for a remote locale with a population of only 36,500, even a little economic activity can move the needle.
In that regard, Yukon is in the same boat as Delaware, a tiny state that's so amenable to business that nearly half of the public companies in the United States are incorporated there. Yukon's regulatory changes don't include tax benefits, so no one should expect it to become Delaware North.
Registering for a business licence in a jurisdiction is also different than incorporating there as a legal entity. Still, in a sparsely populated territory that raised its employment rate 2.1 percentage points in 2013 by adding an extra 400 jobs, even changes at the margin can matter.
Yukon clearly wants companies to know it's open for business. In terms of corporate governance, it remains to be seen whether these amendments will raise any red flags.
Shareholders vs. directors
In the ongoing turf war between the rights of shareholders and those of directors, Stephen Erlichman, executive director at the Canadian Centre for Good Governance, says every jurisdiction ends up picking a side.
"Delaware's a jurisdiction that's very business friendly, let's call it director friendly, and perhaps less shareholder friendly," he said. "That's part of the debate, should changes be made to make things more shareholder friendly or will that discourage companies from incorporating in their jurisdiction?"
Broadly speaking, Yukon looks to be giving boards more flexibility. If a director needs to miss a meeting, for instance, one amendment lets a proxy be given for voting purposes. Another change will allow directors to pursue business opportunities declined by the corporation, a practice off-limits in most other jurisdictions due to the inherent potential for conflicts of interest.
Yukon, of course, says shareholders will remain protected under the revamped legislation. The changes, says Fred Pretorius, the Yukon's director of corporate affairs, were primarily done to modernize rules drafted in the 1980s.
"The old way of scheduling meetings, the old way of doing business, some of those would be seen as causing unnecessary and undue administrative red tape," he says.
More broadly, Anja Jeffery, director of northern and aboriginal policy at the Conference Board of Canada, says the changes are in line with some larger themes currently playing out in the Yukon. Like Alberta, the territory is looking at how to foster economic diversification, especially with its bread-and-butter mining sector on the ropes due to lower commodity prices.
"It's probably the most savvy of the [territorial] jurisdictions right now at attracting business," said Jeffery. "If you want to diversify your economy and make Yukon an attractive jurisdiction, you have to create these kinds of mechanisms that make these companies look at you."