The Toronto Stock Exchange has announced new rules for director
elections for listed issuers, which will come into effect on
December 31, 2012. These new rules will apply to any meeting of
security holders which has not been scheduled and for which proxy
materials have not been approved by that date. TSX-listed issuers
will be required to:
hold elections on an annual basis for all directors;
elect directors individually (so that slate voting for
directors will no longer be allowed);
disclose on an annual basis in its management information
circular whether a majority voting policy has been adopted for
director elections at uncontested meetings. If it has not adopted a
majority voting policy, an explanation will be required in the
circular as to the issuer's current practices for director
elections and why a majority voting policy is not in place;
notify the TSX if a director receives a majority of
"withhold" votes rather than votes "for" that
director's election (in cases where no majority voting policy
is in place); and
disclose the director voting results by promptly issuing a
Reasons For These Changes
The TSX has stated that the reasons for the changes surrounding
director elections is to improve corporate governance principles so
that security holders will be able to hold directors accountable.
The amendments are designed to improve the channels of
communication between issuers and security holders. The TSX also
hopes to improve Canada's reputation for supporting strong
governance standards at levels similar to other major international
The new TSX rules provide an exception for issuers which require
security holder approval in order to implement these changes (such
as amendments to articles or bylaws) and which seek but do not
obtain security holder approval. If the required amendments are not
approved by security holders, the issuer must re-submit and
recommend them for approval by security holders at the issuer's
annual meeting not later than three years after the security holder
meeting, until such time as the required amendments are
Additional Proposed Changes
During the comment period for these rule changes, the TSX
received a number of comments supporting mandatory majority voting
rules for uncontested director elections, rather than simply
requiring an issuer to disclose whether a majority voting policy
had been adopted for director elections and, if not, to explain
why. Due to these comments, the TSX published further proposed
amendments for comment that would require all TSX-listed issuers to
adopt a majority voting policy. It will be interesting to see how
far the TSX will go with rule changes in this area.
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