Canada: TSX Adopts "Comply Or Explain" Majority-Voting Rules For The Election Of Directors (For Now)

Last Updated: November 13 2012
Article by Heenan Blaikie's Securities & Finance Group

On October 4, 2012, the Toronto Stock Exchange (TSX) adopted amendments to Part IV of the TSX Company Manual (Manual), implementing new provisions for the election of directors of TSX-listed companies. In short, companies listed on the TSX will either have to adopt a "majority-voting" policy for the election of directors, or disclose publicly why they have not done so.

For now, the TSX has not made majority voting mandatory. However, at the same time as the TSX approved these amendments, it also published, for comment by the public, proposed amendments to the Manual that would require all TSX-listed companies to adopt a majority-voting policy for the election of directors. The public has until November 4, 2012 to provide comments to the TSX on the proposed amendments. In light of the proposed amendments, it appears likely that all TSX-listed companies will be required to have a majority-voting policy for the election of directors in the near future.

A majority-voting policy for the election of directors generally takes the form of a policy adopted by the Board of Directors of the company. Under a majority-voting policy, Board nominees are elected on an individual basis, rather than as a slate. Shareholders vote on their proxy forms, as prescribed by corporate law, either "for" each Board nominee, or "withhold" their vote. However, under a majority-voting policy, "withheld" votes are considered to be "against" votes. Typically, a majority-voting policy provides that a director who receives more "withheld" votes than "for" votes must tender his/her resignation, even though the director has been duly elected under corporate law. The resignation generally will be accepted by Board of Directors, unless there are exceptional circumstances. In other words, a majority-voting policy is designed to ensure that only those directors who receive more "for" votes than "withheld" votes remain on the Board. In contrast, under the plurality-voting system of corporate law, a director or slate of directors is elected even if only one vote is cast "for" the director or slate, regardless of the number of "withheld" votes. As a result, under the plurality-voting system, virtually every nominee director or slate is elected.

The new TSX rules will require each company listed on the TSX to: (i) elect directors individually, and not as a slate; (ii) hold annual elections for all directors, which means that TSX-listed companies cannot have Boards with "staggered" terms of more than one year; (iii) disclose annually in its proxy circular whether it has adopted a majority-voting policy for the election of directors and, if it has not done so, explain its practice for electing directors and why it has not adopted a majority-voting policy; and (iv) after a shareholders' meeting, promptly issue a news release providing detailed disclosure of the voting results for the election of its directors. Further, if the listed company has not adopted a majority-voting policy, it must advise the TSX (by e-mail) if one of its directors received more "withheld" votes than "for" votes.

The goal of the new rules is to improve corporate governance and disclosure by TSX-listed companies and to uphold security-holder interests and the integrity and reputation of the Canadian capital markets. According to the TSX, majority voting provides a meaningful way for security holders to hold directors accountable and remove underperforming or unqualified directors. The TSX notes that Canada and the United States are among the few major developed jurisdictions that still have plurality voting for the election of directors.

The amendments to the Manual take effect on December 31, 2012. They will not apply retroactively. This means that a company which, prior to December 31, 2012, calls a shareholders' meeting for which proxy materials are approved by the Board of Directors, will not be affected by the new provisions until its next shareholders' meeting at which directors will be elected.

The TSX expects that, by December 31, 2013, all TSX-listed companies and applicants for listing will comply with the new rules. If they do not, they will be considered to be in breach of the Manual.

If changes to a listed company's articles or by-laws are required to implement annual elections of directors (for example, if the articles provide for three-year terms for directors) and shareholders do not approve the required resolution, the TSX will respect the shareholder vote and the listed company will not be considered to be in breach of the Manual. However, the listed company will have to present the resolution required to implement annual elections to shareholders again within a three-year period of the negative vote, and the listed company's Board will be required to support the resolution.

After December 31, 2012, all applicants for listing on the TSX and all applicants with listing applications in progress are expected to explain to the TSX if they are in compliance with the new rule, and if not, to provide the TSX with a plan and time frame for complying with the new rule.

The adoption of the amendments to the Manual was not supported by all of those who provided comments to the TSX. It was pointed out in certain comments that while the TSX used to regulate corporate governance practices (former sections 472 to 477 of the Manual adopted in 1995 following the 14 recommendations made in the 1994 Dey Report), these provisions were repealed with the adoption in 2005 by the Canadian Securities Administrators (CSA) of National Instrument 58-101 – Disclosure of Corporate Governance Practices (58-101) and Multilateral Policy 58-201 – Effective Corporate Governance (58-201). In considering whether the TSX is best placed to regulate these matters, it is interesting to note the CSA's response to a comment it received in respect of 58-101 and 58-201, suggesting that corporate governance guidelines and disclosure rules should remain with the TSX: "In [the CSA's] view, it is more appropriate that corporate governance guidelines and the related disclosure instrument remain with the CSA for two reasons. First and foremost, this regulation is inconsistent with the business model of the TSX. Second, the CSA have a broader array of sanctions at their disposal to enforce the related disclosure requirements." At the time, the CSA also noted that international practice in the area of corporate governance is mixed, pointing out that in the U.K. corporate governance was regulated by the Financial Services Authority. So we have now come full circle, and the TSX is again regulating a matter of corporate governance, namely, the election of directors.

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

Click to Login as an existing user or Register so you can print this article.

In association with
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
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).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.