The Toronto Stock Exchange has approved amendments to the TSX
Company Manual relating to director elections. Under the
amendments, which come into effect on June 30, 2014:
each director of a TSX-listed entity must be elected by a
majority (50 percent plus one) of the votes cast by shareholders
other than at a contested shareholders' meeting (Majority
Voting Requirement); and
each TSX-listed entity must adopt a majority voting policy
unless it otherwise satisfies the Majority Voting Requirement to
the satisfaction of the TSX through, for example, the entity's
articles or by-laws.
Securities and corporate laws in Canada have long allowed for
the election of directors on an individual basis or by slate,
through plurality voting. Shareholders are permitted to vote
"for" or "withhold" their vote in respect of
each director nominee or the slate, but the "withholding"
of a vote does not count in the tally. As a result, a director
nominee or slate can be elected even if only one vote is cast
"for" and the majority of votes are "withheld".
In contrast, under majority voting, shareholders vote separately
for each director nominee and, even though shareholders still vote
"for" or "withhold" their vote, the
"withheld" votes are considered to be votes against such
director nominee. If a director nominee receives a majority of
votes against, he or she is required to resign despite having been
duly elected as a matter of law.
A majority voting policy must provide for the following:
a director who is not elected by a majority vote at a meeting
of shareholders must immediately tender his or her resignation to
the board of directors;
the board must decide whether or not to accept the resignation,
within 90 days after the shareholders' meeting. Absent
exceptional circumstances, the board will accept the
the resignation will be effective upon acceptance by the
a director who tenders a resignation under a majority voting
policy may not participate in any board meeting where the
resignation is considered; and
the listed entity must promptly issue a press release
disclosing the board's decision regarding the resignation and,
if the decision is to not accept the resignation, the press release
must fully state the reasons for the decision. The press release
must also be filed with the TSX.
In addition, if a TSX-listed entity adopts a majority voting
policy, it must include a full description of the policy annually
in the materials it sends to its shareholders in connection with
its annual general meeting.
The TSX has not provided any guidance on what will constitute
exceptional circumstances. When considering a resignation from a
director who has not been elected by a majority vote, boards of
directors will need to carefully consider all relevant facts and
circumstances in reaching a decision. Boards should be reminded
that their decisions whether or not to accept a resignation will
need to be disclosed in a press release, along with reasons for a
decision to not accept the resignation, if applicable.
Majority controlled companies (i.e., companies with a
shareholder holding voting securities carrying more than 50 percent
of the voting rights for the election of directors) will be exempt
from the Majority Voting Requirement. However, majority controlled
companies will be required to describe, on an annual basis in their
annual general meeting materials sent to shareholders, their
reliance on the exemption along with reasons for not adopting
These amendments follow a set of amendments to the TSX Company
Manual in 2012 that required TSX-listed issuers to:
hold annual elections for all directors;
elect directors annually;
disclose annually in their management information circulars
whether a majority voting policy has been adopted for director
elections at uncontested meetings (and if not, to explain their
current practice for electing directors and why a majority voting
policy has not been adopted);
advise the TSX if any of their directors receive a majority of
"withhold" votes (where a majority voting policy has not
been adopted); and
disclose by press release the voting results of director
The latest TSX amendments will take effect on June 30, 2014,
meaning they will be in place for the 2015 proxy season.
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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