Effective June 30, 2014, issuers listed on the Toronto Stock
Exchange (TSX) will be subject to new rules for director elections
at uncontested meetings, including:
New Majority Voting Rules. The new rules
introduce majority voting rules for director elections at
Mandatory Majority Voting Policy Requirements.
The new rules make a mandatory voting policy mandatory and set out
The new rules give security holders more influence in setting
board composition. Boards and management of TSX-listed issuers must
carefully consider the nominees put forth for election – or
risk losing board members in the wake of a security holder
2012 Foundation. The 2014 rule changes builds
on a 2012 set of amendments to the TSX Company Manual for director
elections at uncontested meetings. The 2012 rules included the
requirements that an issuer:
elect directors annually
elect directors individually and not by slate
publicly disclose the results of the votes for the election of
publicly disclose if it has adopted a majority voting policy
for uncontested director elections and if not, to disclose to the
TSX if a director receives a majority of "withhold"
New Majority Voting Rules. The 2014 changes
introduce a majority voting rule under which:
each director of a TSX-listed issuer must be elected by a
majority (50% + 1) of the votes cast at uncontested meetings; this
excludes meetings at which the number of directors nominated for
election exceeds the number of available board seats
each issuer must adopt a majority voting policy that complies
with the amended requirements unless it otherwise satisfies the
majority voting requirement in a manner acceptable to the TSX
the issuer must issue a news release with "detailed"
voting results that complies with the amended requirements after
each uncontested meeting at which there is a vote on the election
a majority controlled issuer is exempt if it discloses annually
in its proxy materials for meetings at which directors are to be
elected that it is relying on the exemption and its reasons for not
adopting majority voting
Mandatory Majority Voting Policy Requirements.
The rules also mandate that an issuer's majority voting policy
any director not elected by a majority of the votes cast must
immediately tender her resignation
the board determine whether to accept the resignation within 90
days after the meeting date, and must accept it absent exceptional
the resignation will be effective when the board accepts
a director who tenders her resignation will not participate in
any meeting of the board or committee where the resignation is
the issuer will promptly issue and provide to the TSX a news
release with the board's decision which, if the board decides
not to accept the resignation, must fully state the reasons for the
Model Policy. The Canadian Coalition for Good
Governance (CCGG) has published guidelines for majority voting and
a model majority voting policy to assist issuers. Click here to read the CCGG's guidelines
for majority voting and the model policy.
Key Dates. The new rules will come into effect
on June 30, 2014:
issuers with a financial year end after June 30, 2014 must
comply with these new rules at their first annual meeting following
that financial year; and
all issuers must be in compliance with the rules by June 30,
Impact on Boards. The new rules diverge from
the Canadian law on director elections: under them, a
"withheld" vote is intended to have the effect of a vote
"against" the election of a director. The effect is that
security holders have more influence in setting board composition
while boards will have the time and flexibility to either replace a
director who receives a majority of "withhold" votes or
make alternative arrangements. Boards and management of TSX-listed
issuers will need to carefully consider the nominees put forth for
election each year – or risk losing board members in the wake
of a security holder meeting.
Action. Issuers currently listed on the TSX or
planning to apply for TSX listing should consider their corporate
governance structure and:
if it has not adopted a majority voting policy, adopt one that
complies with the new rules; and
if it previously adopted a majority voting policy, review it
for compliance with the new rules and if it does not, make the
necessary changes to comply.
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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