The TSX today announced that it has approved amendments to its Company Manual that will require that each director of a TSX listed issuer be elected by a majority of the votes cast with respect to his or her election other than at contested meetings (the Majority Voting Requirement).
The TSX defines a "contested meeting" as a meeting at which the number of directors nominated for election is greater than the number of seats available on the board. Pursuant to the amendments, issuers will be required to adopt a majority voting policy unless the issuer otherwise satisfies the Majority Voting Requirement in a manner acceptable to the TSX, such as through applicable statute or constating documents. The amendments build on amendments to the Company Manual announced in October 2012 that introduced among other things, an obligation to disclose whether an issuer had adopted a majority voting policy. As we previously discussed, as a result of these further amendments, security holders will now effectively be required to vote "for" or "against" each individual board nominee, rather than "for" or "withhold".
As part of the amendments, the TSX will now require that an issuer's majority voting policy provide that (i) a director immediately tender resignation to the board if he or she is not elected by at least a majority (50% + 1 vote) of the votes cast with regard to his or her election; (ii) the board determine whether to accept the resignation within 90 days of the shareholders' meeting, which resignation should be accepted absent exceptional circumstances; (iii) the resignation become effective when accepted by the board; (iv) a director who tenders a resignation will not participate in board or committee meetings at which the resignation is considered; and (v) the issuer promptly issue a news release with the board's decision including, in the case of a board not accepting the resignation, the reasoning behind such decision. If an issuer adopts a majority voting policy, the policy must be fully described on an annual basis in the issuer's proxy materials in connection with a meeting at which directors are elected.
As previously required, following an uncontested shareholders' meeting where directors are elected, an issuer must issue a press release disclosing the results of voting for the director election. However, in such circumstances, the TSX will now require issuers to disclose one of the following in their news release: (i) the percentages of votes received "for" and "withheld" for each director; (ii) the total votes cast by ballot with the number that each director received "for"; or (iii) the percentages and total number of votes received "for" each director. Furthermore, the amendments note that if no formal count has occurred that would meaningfully represent the level of support received by each director, for example where a vote is conducted by a show of hands, the TSX expects the disclosure in the post-meeting press release to, at a minimum, reflect the votes represented by proxy that would have been withheld from each nominee had a ballot been called, as a percentage of votes represented at the meeting.
Issuers that are majority controlled are exempt from the Majority Voting Requirement but are required to disclose such exemption annually in their proxy materials along with their reasons for non-adoption. Furthermore, majority controlled issuers with more than one class of securities may only rely on this exemption with respect to the class that is majority controlled.
The amendments will become effective for listed issuers on June 30, 2014 and issuers with fiscal years ending on or after June 30, 2014 are expected to comply with the amendments at their first annual meeting following such date. Unless exempted, all TSX listed issuers are expected to be in compliance with the amendments by June 30, 2015, after which point any issuers who have not complied will be considered in breach of the Company Manual.
Applicants for listing on the TSX following June 30, 2014 as well as those with a listing application in progress at such time will be expected to explain whether they are in compliance with the amendments, and if not, to describe their plan for compliance.
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