On June 21, 2012, the Canadian Securities Administrators
(otherwise known as the "CSA") published Consultation Paper 25-401 – Potential
Regulation of Proxy Advisory Firms, the purpose of which
is to obtain feedback regarding some of the concerns raised by
market participants in order to assist the CSA with determining
whether there is a need to regulate proxy advisory firms and to
outline and solicit feedback on potential regulatory responses and
frameworks that may be used to regulate proxy advisory firms.
Proxy advisory firms are businesses that review and analyze
matters that are put before shareholders of public companies for a
vote. A proxy advisory firm will make a recommendation in respect
of a shareholder vote related to a variety of matters involving a
voting decision by shareholders, including M&A transactions.
Some proxy advisory firms provide additional services to clients,
including consulting services on corporate governance matters,
automatic vote execution (which can be overridden by a client) and
back-office support. Currently, proxy advisory firms are not
regulated in Canada.
The Consultation Paper notes that there is a growing demand for
proxy advisors who play an important role by facilitating investor
participation, providing research and aggregating information,
among other things. However, the CSA discusses a number of concerns
raised by market participants regarding proxy advisors,
potential conflicts of interest;
a perceived lack of transparency;
potential inaccuracies and limited engagement with
potential corporate governance implications; and
the extent of reliance of institutional investors on the
recommendations provided by proxy advisory firms.
A number of potential regulatory responses are outlined by the
enhanced disclosure requirements to mitigate conflicts of
interest and increase transparency;
regulation of proxy advisory firms;
a certification framework;
requiring proxy advisory firms to comply with best practices or
explain why it has not done so; and
the provision of best practices guidelines.
In the Consultation Paper, the CSA notes that based on its
analysis to date, enhanced disclosure requirements are the
preferred alternative for any potential regulation of proxy
In the Consultation Paper, the CSA poses a number of questions
to market participants, issuers, institutional investors and proxy
advisory firms, perhaps the most interesting of which include
questions related to:
potential amendments to National Instrument 51-102
– Continuous Disclosure Obligations that would
require reporting issuers to disclose consulting services from
proxy advisors in their circulars;
a question posed to institutional investors regarding how they
view their duty to vote and how the vote recommendations of proxy
advisory firms play a part in the decision making process; and
a question posed to issuers regarding the extent to which such
issuers adopt the corporate governance standards proposed by proxy
advisors even if the standards are not appropriate for the
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.
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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.
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