In 2012 the Toronto Stock Exchange adopted rules which required
listed issuers to disclose annually whether they had adopted a
majority voting policy for the election of directors. At the time,
the TSX had published for comment proposed rules which would
mandate the adoption of a majority voting policy by each TSX listed
issuer. The TSX has now approved final rules which make majority
voting mandatory. These rules will come into effect for fiscal
years ending on or after June 30, 2014.
In its notice, the TSX commented that it "proposed the
Amendments to improve corporate governance standards in Canada by
providing a meaningful way for security holders to hold individual
directors accountable. TSX believes these Amendments enhance
transparency and improve the governance dialogue between issuers,
security holders and other stakeholders".
The new rules are in the form of amendments to Sections 461.3
and 461.4 of the TSX Company Manual.
Summary of the New Rules
The new rules applicable to issuers provide as follows:
Each director of a listed issuer must be elected by a majority
(50% plus one vote) of the votes cast with respect to his or her
election other than at a contested meeting.
A listed issuer must adopt a majority voting policy which
provides for the following:
Any director must immediately tender his or her resignation to
the board of directors if he or she is not elected by at least a
majority of the votes cast with respect to his or her
The board shall determine whether or not to accept the
resignation within 90 days after the relevant security holders
meeting. The board shall accept the resignation absent exceptional
The listed issuer must promptly issue a news release with the
board's decision, a copy of which must be provided to the TSX.
If the board determines not to accept the resignation, the news
release must fully state the reasons for that decision.
An issuer must fully describe its majority voting policy on an
annual basis in its materials sent to security holders in
connection with a meeting in which directors are being
A listed issuer may, in lieu of adopting a majority voting
policy, satisfy the requirements of the new rule by providing in
its articles or by-laws (or being subject to an equivalent
statutory requirement) a majority voting requirement (in a manner
acceptable to the TSX) which would provide that directors must be
elected by a majority of the votes cast at a meeting.
Listed issuers that are majority controlled are exempt from the
majority voting requirement of the new rules. However, such issuers
are required to disclose annually their reliance on the exemption
and reasons for not adopting a majority voting policy. Moreover,
the majority voting requirements do not apply to contested meetings
where the number of directors nominated for election is greater
than the number of seats available on the board.
The new rules clarify that the news release required to be
issued following the election of directors applies to uncontested
meetings and clarifies the nature of the information required in
such release as well as the type of disclosure expected where the
vote is conducted by a show of hands.
In light of the new rules, all TSX listed issuers that have not
previously adopted a majority voting policy will now be required to
do so prior to their next year-end following June 30, 2014. Issuers
that have already adopted a majority voting policy should review
the terms thereof to ensure compliance with the requirements of the
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