There has been significant discussion recently in Canada and
internationally about the merits of, and methods for, "proxy
access", which potentially would increase shareholder
involvement in the director nomination process. While the Canadian
corporate statutes provide shareholders holding an interest of at
least 5% in a company the right to "proxy access" in
respect of the nomination of directors, this right has certain
limitations and has been exercised sparingly.
The Canadian Coalition for Good Governance (CCGG) this month
published a policy paper entitled Shareholder Involvement in
the Director Nomination Process: Enhanced Engagement and Proxy
Access encouraging public companies to:
seek shareholder input on director
in certain cases, permit shareholders
to nominate their own candidates to the board of directors and have
those nominees included in management's proxy materials
based on the premise, about which there is continuing debate,
that proxy access is desirable as a component of shareholder
democracy and corporate accountability and a potential means of
In this context, the CCGG is recommending that independent
directors of Canadian public companies engage in an ongoing,
informal dialogue with shareholders to seek their input on
appropriate director candidates and is advocating that public
companies adopt more formal and extensive proxy access procedures
with the following elements:
level. Shareholders who,
individually or in combination with others, hold up to the time of
the relevant meeting an economic and voting interest in the
outstanding voting shares of at least,
5% of a company with a market
capitalization of less than $1 billion, or
3% of a company with a market
capitalization of more than $1 billion,
would be permitted to present their director nominees in the
company's proxy materials.
Cap on the number of
shareholder nominees. Those
shareholders would be entitled to nominate up to the lesser of
three directors and 20% of the total number of directors. (Where
more than one shareholder or group of shareholders holding the
required minimum threshold wish to nominate directors, each
eligible shareholder, in order from the largest to the smallest,
would select one nominee until the maximum is reached.) The CCGG
has suggested that this limit, together with a restriction on the
use of proxy access to nominate additional candidates in succeeding
years in which the initial proposed candidates remained on the
board, would prevent "creeping board control".
period. Unlike in certain
jurisdictions, where only longer-term shareholders (defined by
these shareholders having held a company's shares for a minimum
period) have proxy access, the CCGG is advocating that the proxy
access mechanism not be limited to shareholders who have held their
shares for any prescribed minimum period.
Disclosure in the proxy
circular and form of proxy.Information about
shareholders' director nominees would be required to be set out
"fairly and on an equal footing" with company nominees in
the company's management proxy circular and form of proxy. CCGG
proposes that relevant legislation should be amended so that the
company's circular would function as a circular for the
nominating shareholders as well, allowing them to communicate with
other shareholders and solicit proxies in respect of their nominees
without requiring a dissident circular.
costs. Reasonable solicitation costs
on the part of nominating shareholders would be paid by the
company, unless a majority of the company's shareholders
resolve otherwise. The CCGG has not defined the scope of what would
constitute reasonable solicitation costs, in terms of either the
nature or the quantum of such costs.
The CCGG is seeking legislative amendments to introduce proxy
access requirements along the lines outlined in its policy paper.
The CCGG also is encouraging companies to adopt voluntarily its
proxy access recommendations in the interim. Whether to adopt such
recommendations is a decision that companies and their advisors
will need to consider carefully. The CCGG's perspectives are
often influential on market practice and its recommendations could
potentially effect significant changes – some of which may
ultimately be beneficial and some of which may ultimately be
The content of this article does not constitute legal advice and should not be relied on in that way. Specific 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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