The U.S. Securities and Exchange Commission (SEC) announced last week that it will not seek a
court rehearing on the validity of its proposed "proxy
access" rules, which were rejected by the U.S. Court of
Appeals in July. Under the rules, a company would have been
required to include on its proxy a board candidate nominated by a
shareholder who held more than 3% of a company's voting equity
for a period of at least three years. The intent was to give
long-term shareholders a greater voice in corporate governance.
Critics feared it went too far and that the increase in proxy
battles would create needless costs for companies. In striking down
the proposed rules, the U.S. Court of Appeals held that, among
other things, the SEC had failed to assess the economic effects of
The Canadian experience with proxy access suggests that concerns
over the proposed US rules were potentially overblown. Corporate
statutes in Canada have long enabled shareholders to access the
company's proxy for the purpose of nominating directors.
Typically, the shareholder must hold at least 5% of the
company's stock and meet certain other conditions. However, it
would appear, at least anecdotally, that these proxy access rules
are not typically used by dissident shareholders. A dissident that
is serious about change at the board often determines that the
value of controlling its communications with shareholders through
its own dissident proxy circular is worth the extra cost. It would
have been interesting to see whether the US experience was much
Although the SEC has made clear that it will not challenge the
court's decision, it could potentially decide to re-start the
rule-making process again. The SEC has indicated that it is
continuing to review the court's decision, as well as comments
previously received, in order to determine its next steps. In the
meantime, a separate rule will come into effect shortly in the US
that will allow shareholders to propose changes to a company's
by-laws so as to provide for proxy access for that company's
shareholders. Shareholder proposals may request that the
company's board implement proxy access, or alternatively may
directly amend the company's by-laws to provide for proxy
access. So, although proxy access will not be mandated for all
companies, shareholders will have the ability to institute proxy
access at any given company. A good overview of the new rule is
found at the Harvard Law School's Forum on Corporate
Governance and Financial Regulation.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
To print this article, all you need is to be registered on Mondaq.com.
Click to Login as an existing user or Register so you can print this article.
Under the Income Tax Act, the Employment Insurance Act, and the Excise Tax Act, a director of a corporation is jointly and severally liable for a corporation's failure to deduct and remit source deductions or GST.
Under the Income Tax Act, the Employment Insurance Act, the Canada Pension Plan Act and the Excise Tax Act, a director of a corporation is jointly and severally liable for a corporation's failure to deduct and remit source deductions.
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).