Are private Ontario corporations required to have independent directors on the board?

No. The Ontario Business Corporations Act does not require private corporations to have independent directors. Independence requirements — such as minimum numbers of independent board members, audit committee independence rules, and related party transaction oversight by independent committees — apply primarily to reporting issuers under Ontario securities law, meaning corporations whose securities are listed on a stock exchange or distributed to the public.

A private corporation incorporated under the Ontario Business Corporations Act can have a board composed entirely of individuals who are also shareholders, employees, or officers of the corporation. There is no statutory minimum standard of independence for the board as a whole.

That said, having at least one or two directors who are neither shareholders nor employees is often good practice, even in private corporations. Independent perspectives can improve decision quality, reduce the risk of groupthink, and — importantly — provide protection if the business judgment rule is ever challenged in litigation. When all directors have the same financial interest in a decision, the board's objectivity may be questioned. As a corporation grows, or as it prepares for outside investment, introducing independent board members becomes increasingly valuable. If you are structuring a board for a growing business, a corporate lawyer can advise on governance models suited to your stage.