The Toronto Stock Exchange ("TSX") recently amended
its corporate finance manual to require each issuer to adopt a
majority voting policy for its first fiscal year ended on or after
June 30, 2014.
Under corporate law, a shareholder can only vote for a director
or withhold their vote; they cannot vote against a director. As
such, the directors with the most votes get elected, even if a
majority of shareholders withheld their vote with respect to that
director. A majority voting policy requires any director that is
not elected by at least a majority of the votes cast with respect
to his or her election to tender their resignation to the company.
The company must decide within 90 days whether to accept the
resignation, which it should do absent exceptional circumstances.
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.
The new rules provide that:
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.
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 which provides
that directors must be elected by a majority of the votes cast at a
There are some exemptions to the policy. Listed issuers that are
majority controlled are exempt from the majority voting requirement
of the new rules, but must disclose annually their reliance on the
exemption and reasons for not adopting a majority voting policy. In
addition, 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
The new rules spells out 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.
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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