New amendments to the Canada Business Corporations Act came into effect on August 31, 2022 (the “New CBCA Amendments”).
This blog outlines the New CBCA Amendments, and other changes to the CBCA expected in the future, that readers should be aware of.
Under the CBCA, a shareholder entitled to vote at an annual meeting of shareholders may make a proposal to make, amend or repeal a by-law. The period for an eligible shareholder to submit a shareholder proposal to a corporation governed by the CBCA has been amended from 90 days prior to the anniversary date of the notice of the last annual general meeting to between 90 to 150 days before the anniversary date of the last annual shareholder meeting.
This amendment allows an eligible shareholder to submit a shareholder proposal much closer to the date of an annual general meeting of the corporation. Corporations that include disclosure of the submission period for proposals in their information circulars should ensure to update this disclosure for the upcoming 2023 proxy season.
Election of Directors
Directors of all corporations governed by the CBCA must now be elected individually and annually and for uncontested director elections where there is only one candidate nominated for each position available, shareholders will be required to vote “for” or “against” each nominee and each nominee must receive a majority vote “for” to be elected.
An incumbent director that is not elected may continue in office until the earlier of the 90th day after the date of the annual general meeting or the day on which their successor is appointed or elected. A director that is not elected in the annual general meeting may not be then appointed by the directors before the next annual general meeting.
The board of directors may only appoint a nominee who fails to achieve a majority “for” vote if it is necessary to ensure the board of directors has a requisite number of directors that are not officers or employees of the corporation and who are resident Canadians.
Prior to the New CBCA Amendments, under the CBCA, directors were able to be elected by a vote of “for” and “withheld”, as part of a slate and for up to a three-year term.
For CBCA corporations that are listed on the Toronto Stock Exchange (“TSX”), majority voting requirements already exist in Section 461.3 of the TSX Company Manual. According to the TSX Company Manual, as a listing requirement, companies listed on the TSX must adopt a majority voting policy whereby, among other requirements, the directors must tender their resignation in the event that they are not elected by a majority of votes cast with respect to his or her election other than at contested elections. The board shall then determine whether or not to accept the resignation within 90 days after the date of annual general meeting. The board must accept the resignation absent of exceptional circumstances. The TSX has previously advised that the New CBCA Amendments otherwise satisfy the majority voting requirements in the TSX Company Manual. Accordingly, CBCA corporations that are listed on the TSX should ensure that their current majority voting policies are either repealed or amended to incorporate the New CBCA Amendments. It is not necessary to apply to the TSX in connection with either.
Private CBCA corporations and CBCA corporations that are listed on the TSX Venture Exchange and/or the Canadian Securities Exchange are no longer permitted to conduct staggered or slate voting. Accordingly, these corporations should ensure that they comply with these changes heading into the 2023 proxy season.
Other CBCA Amendments on the Horizon
In addition to the changes mentioned above, there are other previously announced amendments to the CBCA that are not yet in force, including: (i) amendments with respect to notice-and-access for meeting materials, including the delivery of financial statements; (ii) the requirement for say-on-pay votes on remuneration of directors and executive officers; (iii) disclosure with respect to clawbacks of compensation to directors and executive officers; and (iv) disclosure with respect to the well-being of employees, retirees and pensioners.
Exemption from the Director Election Form of Proxy Requirement
As a result of the New CBCA Amendments, a conflict developed between the CBCA and subsection 9.4(6) of National Instrument 51-102 – Continuous Disclosure Obligations (“NI 51-102”). Subsection 9.4(6) of NI 51-102 requires that a form of proxy sent to a securityholder of a reporting issuer must provide an option for the securityholder to specify that the securities registered in the name of the securityholder must be voted “for” or “withheld” (rather than “against”, as required in the New CBCA Amendments) from voting in respect of the election of directors.
Accordingly, the Canadian Securities Administrators (CSA) published a staff notice on January 31, 2023. The CSA implemented an exemption through local blanket orders that were substantially harmonized across Canada, exempting corporations that comply with the new majority voting requirements of the CBCA that came into effect on August 31, 2022 from subsection 9.4(6) of NI 51-102.
In the staff notice, the CSA indicated that it is considering whether future proposed amendments to subsection 9.4(6) of NI 51-102 are appropriate. Any such amendments would be adopted by the CSA through the normal rule-making procedures on a co-ordinated basis.
The MLT Aikins LLP securities and corporate governance practice group has extensive experience assisting individuals and organizations as they navigate the changing corporate and securities landscape. Please contact us to learn more about the changes brought about by the New CBCA Amendments and how they may affect your business.
Note: This article is of a general nature only and is not exhaustive of all possible legal rights or remedies. In addition, laws may change over time and should be interpreted only in the context of particular circumstances such that these materials are not intended to be relied upon or taken as legal advice or opinion. Readers should consult a legal professional for specific advice in any particular situation.