On September 28, 2016, the federal government announced the tabling of a bill entitled An Act to amend the Canada Business Corporations Act, the Canada Cooperatives Act, the Canada Not-for-profit Corporations Act and the Competition Act. The bill introduces amendments that will increase shareholder democracy and participation, support the push to increase women's participation on corporate boards and in senior management, and improve corporate transparency and business certainty while reducing regulatory burden (the "proposed amendments").
The proposed amendments are largely modeled on the prevailing rules at the TSX, and are greatly dependent on the adoption of future amendments to the CBCA's regulations. While most of these proposals do not affect private issuers, those who have somewhat elaborate standard by-laws can expect to require some adjustment to the following provisions: definitions, electronic communications and shares in registered forms (amongst others).
If the proposed amendments are adopted, distributing corporations and corporations prescribed under the CBCA's regulations may find themselves subject to new obligations reflective of current best practices in corporate governance, including:
True majority standard: the requirement for shareholders to vote "for" or "against" each and every proposed candidate to be elected at the board of directors (thus eliminating the possibility of voting en bloc for a list of proposed candidates - also known as a "slate"). There is also a prohibition on candidates who were not elected by a majority vote to hold a position of director – even as an appointment to fill a vacancy on the board. Furthermore, the board will not be permitted to appoint new directors - up to a third of the directors in office - between annual meetings, except in "prescribed circumstances";
Annual elections of directors: shareholders of a distributing corporation shall, at each annual meeting at which an election of directors is required, elect directors to hold office for a term ending no later than the close of the next annual meeting of shareholders following the election;
Information respecting diversity: the requirement for corporations to provide shareholders with information related to diversity, particularly female representation on the board of directors and within senior management at each annual meeting through a "comply or explain" model. This proposal is also largely inspired by Regulation 58-101 on Disclosure of Corporate Governance Practices;
Electronic communications: the CBCA's requirements for paper-based communications will be replaced by a "notice and access" system, allowing corporations to use electronic communications to provide notice of meetings to shareholders and accompanying online access to relevant documents. The deadline for shareholders to submit proposals will also be simplified; and
Shares in registered form: finally, amendments would clarify that all shares and share warrants must be in registered form, prohibiting the issuance and use of bearer shares. Corresponding amendments will be made as necessary to the Coops Act and the NFP Act.
At Cyberbahn we understand the importance of BILL C-25 and will keep you notified with respect to any further updates on this situation.
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