Canada: CCGG Releases Governance Guidelines For Dual Class Share Companies

The Canadian Coalition for Good Governance (CCGG), an organization representing institutional shareholders and asset managers, has released its "Dual Class Share Policy" (the Policy), which sets out CCGG's new governance guidelines for companies with dual class share (DCS) structures. Although CCGG acknowledges that there was a lack of "unanimity among CCGG members", the Policy notes that CCGG's board of directors and a large majority of CCGG's members support the DCS company best practices principles (the Principles) in the Policy. The Principles are intended to be applied on a going-forward basis to newly created DCS reporting issuers, although CCGG also encourages existing DCS reporting issuers "to take these principles into account if and when appropriate".

While the Policy reflects CCGG's views, and constitutes neither legal requirements nor regulatory guidance, the Policy provides an indication of the views of CCGG members, such as institutional investors, with respect to investments in DCS companies.


DCS structures include companies with multiple voting shares (MVS) (e.g., 10 votes per share) and subordinate voting shares (SVS) (e.g., one vote per share) and companies with voting and non-voting common shares. The Policy notes that there are currently 77 DCS companies (exclusive of investment funds) listed on the Toronto Stock Exchange (TSX), although, possibly reflecting heightened regulation (for example, the Ontario Securities Commission Rule 56-501 and Part VI.H of the TSX Company Manual), there have not been recent DCS company IPOs in Canada, unlike in the U.S. with Google, Facebook and Groupon. DCS structures have, however, been a topic of interest in Canada, given some recent high-profile legal disputes (see our February 2013 Blakes Bulletin: Court Approves Telus Arrangement and our September 2010 Blakes Bulletin: Appeal of Magna's Plan of Arrangement Dismissed by Ontario Divisional Court).


In its policy entitled "Governance Differences of Equity Controlled Corporations" (the Controlled Corporations Guidelines), which was released in October 2011, CCGG indicated it would prepare a specific subset of guidelines for corporations with DCS structures, which guidelines are now established in the Policy. However, the Controlled Corporations Guidelines continue to apply to DCS companies, except to the extent they are modified by the Policy. Please see our October 2011 Blakes Bulletin: CCGG Releases Governance Guidelines for Equity Controlled Corporations for more information concerning the Controlled Corporations Guidelines.

The Policy includes a summary of certain advantages and disadvantages associated with DCS structures and an acknowledgment that there is a lack of "unanimity" among CCGG members as to the governance principles which should apply to DCS companies. While some CCGG members believe that appropriate disclosure combined with a meaningful MVS equity ownership stake is sufficient to address shareholder protection concerns associated with DCS structures, and that utilization of robust board conduct review and conflicts committees can go a long way toward alleviating any potential conflicts or related-party issues, CCGG's board of directors and a "large majority" of CCGG's members support the Principles reflected in the Policy.

The Policy's supporters also believe DCS structures should only be used in "exceptional circumstances" and that the best practice for companies going public is to adopt a capital structure with a single class of voting common shares.


The Principles are intended to be applied to any newly created DCS reporting issuer, while existing DCS reporting issuers are encouraged to take the Principles into account if and when appropriate. The Policy's supporters also expect DCS companies undertaking an IPO after the Policy date that do not comply with the Principles to annually explain to shareholders the reasons for non-compliance. The Policy does not extend this expectation as to disclosure to existing DCS reporting issuers, even as a recommended practice.


The Principles contained in the Policy are summarized below.

1. Electing Directors

The Policy provides that holders of MVS should only be entitled to nominate the number of directors equal to the least of (1) two-thirds of the board; (2) the number obtained when the board size is multiplied by the percentage of total voting rights held by the MVS holders; (3) if the holders of the MVS are "related" to management of the controlled corporation, then one-third of the board. Under the Controlled Corporations Guidelines holders of MVS (assuming they are the controlling shareholder) will generally be considered to be "related" to management where an executive of the controlled corporation is also (1) a significant shareholder, (2) employed by the controlling shareholder (or one of its controlling shareholders); or (3) an immediate family member of the controlling shareholder.

The Policy does not provide for how directors are to be designated as nominees of the holders of MVS, as opposed to nominees of the company, but indicates that a separate vote of the SVS in director elections is not required. Additionally, the Policy states that when reporting voting results, the DCS company should disclose the MVS and SVS results separately.

2. Maximum Voting Ratio of MVS to SVS

The Policy provides that a DCS structure should include a meaningful MVS equity ownership stake, which may vary depending on context. The Policy specifies that a ratio of voting rights of an MVS to an SVS of no more than four-to-one (that is, a minimum 20% equity stake is required for 50% voting control) would generally be sufficient. The Policy's supporters recognize that one factor which could justify a lower percentage is if the dollar amount of the ownership stake represents a significant economic interest in the DCS company's equity.

3. Non-Voting Common Shares

The Policy provides that reporting issuers should not have non-voting common shares.

4. Coattails

The Policy provides that all DCS reporting issuers, even if they are not TSX-listed, should have coattails (provisions requiring that a take-over bid made for the MVS be extended to the SVS on the same terms). Further, it also recommends that the TSX should create a standard form of coattail provisions to be adopted by all DCS reporting issuers.

5. Collapse of DCS Structure

The Policy provides that the DCS structure should collapse (when MVS are exchanged for SVS on a one-for-one basis) at an appropriate time, as determined by the DCS company board and, if practicable, as set out in the DCS company's articles, unless a majority of the SVS voting separately approve the continuation of the DCS structure, on the basis of five-year terms.

The Policy further provides that the DCS company should, on an ongoing basis, consider the reasons why the DCS structure was established and whether those reasons remain valid and should annually explain to shareholders the reasons why the continued existence of the DCS structure is appropriate.

6. Monetization of MVS

The Policy provides that a holder of MVS should not be allowed to monetize the holder's MVS by entering into a derivative transaction.

7. Payments to an Owner of MVS upon Collapse of the DCS Structure

The Policy provides that no premium should be paid to the owners of MVS upon collapse of the DCS structure and that MVS should convert into SVS on a one-for-one basis.

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.

Events from this Firm
13 Dec 2017, Seminar, Toronto, Canada

Class actions across Canada continue to grow in volume and complexity, triggering significant policy and financial implications for businesses in Canada. With the Law Commission of Ontario’s recent announcement that it is reactivating its comprehensive review of class actions in Ontario, we may see important law reform on the horizon to evolve with the changing landscape.

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
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 you may opt out by clicking here

    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.

    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.


    From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

    *** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .


    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.

    By clicking Register you state you have read and agree to our Terms and Conditions