Canada: The International Comparative Legal Guide To: Corporate Governance 2015 Edition

Last Updated: June 18 2015
Article by Rita Andreone and Michael L Lee


1.1 What are the main corporate entities to be discussed?

This chapter discusses corporations in Canada, with a focus on public companies and with the intention that private corporations will find it useful in structuring and measuring their own governance frameworks.

1.2 What are the main legislative, regulatory and other corporate governance sources?

The principal sources of corporate governance requirements in Canada are corporate legislation, securities legislation, stock exchange rules and the common law. In addition, shareholder advocacy groups and proxy advisory services, including the Canadian Coalition for Good Governance ("CCGG"), Institutional Shareholders Services Inc. ("ISS"), Glass Lewis & Co. ("Glass Lewis") and the Institute of Corporate Directors (the "ICD"), are influential through their publication of policy statements and guidelines. These organisations have become a reference point for many Canadian companies on best practices for corporate governance. Recourse is often also had to concepts of and commentary on corporate social responsibility, general business ethics and the basic tenets of strategic planning, risk management, engagement, accountability, transparency, efficiency and effectiveness.

Corporate Legislation

Under federal and provincial corporate statutes, directors must manage, or supervise the management of, the business and affairs of the corporation, although directors may delegate certain matters to board committees or to officers. Directors have a legal duty to act honestly and in good faith with a view to the best interests of the corporation and exercise the care, diligence and skill that a reasonably prudent person would exercise in comparable circumstances.

In general, a corporation in Canada is incorporated by filing articles of incorporation (or similar charter documents) with the appropriate federal or provincial government authority. The articles of incorporation specify certain corporate governance matters, which may include the maximum and minimum number of directors, any restrictions on the business that the corporation may carry on and any rights attaching to each class of shares. Usually, corporations also enact by-laws (or similar documents) which address more procedural issues, such as quorum at meetings and authority of corporate officers.

Securities Legislation

National Policy 58-201 – Corporate Governance Guidelines ("NP 58-201") sets guidelines for most public companies in Canada in respect of governance matters, including the composition and mandate of the board of directors, director independence, development of position descriptions for directors and officers, codes of conduct, nomination and remuneration of directors, and performance assessment of the board and individual directors. Companies must disclose information about their corporate governance practices in accordance with National Instrument 58-101 – Disclosure of Corporate Governance Practices ("NI 58-101"). In general, Canadian securities regulators require that corporations comply with the guidelines in NP 58-201 or explain their lack of compliance in their public disclosure.

Stock Exchange Rules

Public companies listed on the Toronto Stock Exchange (the "TSX") are required to comply with the provisions in the TSX Company Manual (the "Manual") related to corporate governance and to seek shareholder approval for certain transactions (in particular those that represent a fundamental change to the business or will result in extraordinary dilution). Generally, the requirements of the Manual align with NP 58-101 and NI 58-201. In addition, corporations listed on the TSX Venture Exchange (the emerging company exchange of the TSX) must also comply with Corporate Finance Manual Policy 3.1 – Directors, Officers, Other Insiders & Personnel and Corporate Governance.

Common Law

Directors' and officers' duties and conduct, shareholder rights and obligations, fiduciary duties and other corporate governance matters are increasingly addressed by a sometimes "made in Canada" approach in case law.

1.3 What are the current topical issues, developments, trends and challenges in corporate governance?

Shareholder Democracy

Shareholder activism continues to be an important trend, demonstrated by more frequent shareholder proposals and an increasing level of engagement between shareholder activists and management.

In February 2014, the TSX announced the adoption and approval of amendments to the Manual, effective June 30, 2014, that now requires all TSX-listed issuers, except listed issuers that are majority controlled, to implement majority voting for director elections at uncontested meetings. In particular, the rule requires that each individual director of a TSX-listed issuer be elected by a majority of the votes cast with respect to his or her election (the "Majority Voting Requirement") and that a TSX-listed issuer must adopt a majority voting policy if it does not otherwise satisfy the Majority Voting Requirement in a manner acceptable to the TSX, for example, by articles or by-laws. In addition, if a TSX-listed issuer 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 meeting. For 2015, ISS recommended that shareholders withhold votes from all directors nominated by slate ballotand Glass Lewis recommended that shareholders withhold votes from the members of the corporate governance committee if the issuer has not adopted majority voting.

With the rise in shareholder activism, an increasing number of listed companies have implemented advance notice policies, which generally require that notice of director nominations and detailed information about nominees and dissident shareholders be provided to management in advance of a shareholder meeting. The advance notice policy has become an important mechanism to protect companies from activist shareholders who might otherwise attempt to ambush a shareholders' meeting by making a surprise motion to nominate directors. The advance notice policy device has now received endorsement from the Supreme Court of British Columbia, as well as ISS and Glass Lewis.

Take-over Bid Regime

In March 2015 Canadian securities regulators published for comment proposed amendments to Multilateral Instrument 62-104 – Take-Over Bids and Issuer Bids ("MI 62-104") and National Policy 62-203 – Take-Over Bids and Issuer Bids ("NP 62-203") two of the main policies which regulate take-over bids in Canada. The proposed amendments are intended to address the issue of shareholder coercion in the context of an unsolicited take-over bid, as well as provide a target board with additional time to respond to such a bid. The proposed amendments would require that, to be successful, take-over bids meet a minimum tender requirement of 50% of the outstanding securities of an issuer that are subject to the bid (the "Minimum Tender Requirement"), and that a bid be extended for a period of 10 additional days upon the satisfaction of the Minimum Tender Requirement and all other terms and conditions of the bid. The Minimum Tender Requirement would ensure that a bid could only succeed if it was supported by a majority of the independent shareholders, while the 10-day extension would allow shareholders to tender upon the bid becoming successful, reducing the instances of shareholders feeling pressured to tender prematurely due to a fear of missing the tendering deadline. Finally, the proposed amendments would require a bid to remain open for a minimum of 120 days, in order to provide target boards with additional time to respond to the bid. While it remains to be seen whether MI 62-104 and NP 62-203 will be implemented, such changes to the take-over bid regime would potentially provide target boards and target company shareholders with a greater opportunity to assess the merits of an unsolicited take-over bid.

Executive Compensation and "Say on Pay"

Canadian securities regulators have amended the executive compensation disclosure requirements for public companies, which restrict the circumstances in which companies may omit disclosure of performance goals and require additional disclosure with respect to the experience of compensation committee members, compensation practice risk, upcoming changes to corporate compensation policies, hedging by directors and officers, and compensation consultant fees.

The number of listed issuers who put a say on pay vote to their shareholders has grown significantly over the years to include a large majority of companies listed on the S&P/TSX 60 (an index of 60 large companies listed on the TSX). However, the adoption of say on pay practices has made much slower progress among other TSX-listed companies. Where say on pay votes have been put to issuers' shareholders, the resolutions have been strongly supported, with the vast majority of votes being in favour. ISS and Glass Lewis are strongly supportive of say on pay votes and, increasingly, both firms are scrutinising issuers' compensation practices. While say on pay has become mandatory in many jurisdictions, it remains to be seen whether Canada will align its governance practices in this regard in the future.

Proxy Voting Reconciliation

Canadian securities regulators have taken steps to respond to concerns about the integrity and reliability of Canada's proxy voting infrastructure by initiating a review of the system through CSA Consultation Paper 54-101 – Review of Proxy Voting Infrastructure, released in August 2013, the progress of which was reported in CSA Staff Notice 54-303 – Progress Report on Review of Proxy Voting Infrastructure, released in January 2015. Canada's indirect shareholding system poses a challenge for the reconciliation of proxy votes from registered shareholders, who are the only shareholders entitled to cast votes, and voting instructions from beneficial owners. The indirect shareholding system is complex, in some cases involving several layers of intermediaries between investors and the Canadian Depository for Securities Limited, the registered holder of most reporting issuer's shares. Given the nature of the indirect shareholding system, there is a risk that beneficial shareholders are not being given the opportunity to provide voting instructions in respect of their shares, as well as a risk that other shares are being voted more than once. In addition, Canadian securities regulators have identified several other issues relating to the proxy voting system, including the ability of investors to confirm that their voting instructions have been received and counted towards a shareholder vote.

Enforcement of Anti-Bribery Legislation

While Canada has had anti-corruption legislation in place since the late 1990s in the form of the Corruption of Foreign Public Officials Act (Canada) ("CFPOA"), it has been limited in scope and minimally enforced by Canadian authorities. However, in June 2013, the Canadian government enacted amendments to the CFPOA, implementing a variety of changes aimed at strengthening both the scope and application of the legislation. Among other things, such changes include the introduction of several new offences focused on falsifying books and records for the purpose of bribing a foreign public official, as well as the eventual elimination of the exception for facilitation payments made to foreign public officials in connection with non-discretionary decisions that cover acts of a routine nature. In addition, the amendments have increased the maximum sentence of imprisonment for an individual convicted of a foreign bribery offence from five years to 14 years. The CFPOA does not provide a maximum fine amount.

This legislative initiative is consistent with the increased vigour that Canadian enforcement authorities have shown in the last three years towards anti-corruption related matters, which have included two significant convictions resulting in penalties in the range of $10 million for each company as well as the first conviction of an individual under the CFPOA. Canadian authorities indicated in February 2013 that they had over 35 ongoing investigations. In February 2015 a Canadian-based multinational consulting and engineering company had CFPOA charges brought against it. As a result, Canadian companies have begun to recognise the importance of establishing their own anti-corruption compliance programmes. Such policies are typically aimed at preventing the commission of an offence at the outset and include appropriate processes if potential breaches of the applicable legislation do arise.

Risk Management

Recent highly visible domestic and international risk management failures (e.g. instances of privacy breaches, regulatory (including, environmental and health and safety) non-compliance, financial fraud and resulting litigation and exposures) have thrust "Risk Management" back into the spotlight. In January 2013, the Office of the Superintendent of Financial Institutions Canada ("OSFI") released revised Corporate Governance Guidelines (the "Revised Guideline") for federally regulated financial institutions ("FRFIs") that identify risk management as a main theme and contemplate enterprise-wide risk identification and focused management.

Corporate Social Responsibility

Today, most large companies in Canada employ personnel that are specifically dedicated to developing socially responsible corporate practices. Among other things, boards have identified the need to engage stakeholders through a variety of different means, including ongoing dialogue. In many cases, corporations have voluntarily committed to international corporate social responsibility standards, such as sustainability reporting. Various factors including economic volatility and underperformance among many listed companies has led to growing public scrutiny of corporate boards, including a renewed emphasis on the role of boards in promoting socially responsible corporate practices.

National Securities Regulator

Since the 2011 Supreme Court of Canada ("SCC") decision that the proposal to create a national securities regulator to replace the current system of provincial and territorial agencies was unconstitutional, the federal government has continued its efforts to work with the provinces toward establishing a national securities regulator under a model of cooperative federalism. In September 2013, the federal government announced that it had reached an agreement in principle with the provinces of Ontario and British Columbia that would see the creation of a Cooperative Capital Markets Regulator ("CCMR"), under which the participating provinces would no longer have provincial securities regulators. Several other provinces, and one territory, have since announced their intention to join the contemplated CCMR. Consultation drafts of uniform provincial securities legislation to be introduced in those provinces and federal systemic risk legislation, both to be overseen by the CCMR, were published in September 2014. However, other Canadian provinces have historically been adamantly opposed to the creation of a single regulator, so it remains to be seen what support the proposed CCMR will have in those other jurisdictions.

Diversity on Corporate Boards

Many academics and industry sectors are actively commenting on the significant and positive impact a diverse board can have on business outcomes, some arguing that the use of mandatory quotas is not the most effective way to improve board diversity. In April 2013, the federal government announced the creation of an advisory council of leaders from the private and public sectors to promote the participation of women on corporate boards. In January 2015, securities regulators in all of the provinces and territories (except Alberta and British Columbia) adopted amendments to the existing corporate governance disclosure rules in NI 58-101 that now requires TSX-listed issuers to provide annual disclosure regarding the representation of women on companies' boards and in executive office. These amendments require, among other things, disclosure of whether the company has a policy for identifying female candidates for executive office and board positions and, if not, disclosure regarding the reason such a policy has not been adopted.

In April 2015, the federal government announced in its 2015 federal budget that the federal government will propose amendments to the Canada Business Corporations Act ("CBCA") that will require companies incorporated under the CBCA to disclose their policies regarding gender diversity on their boards of directors. While the text of the proposed amendments has not yet been released, the federal government indicated in the 2015 federal budget that the proposed amendments will apply only to public companies, and will be substantially similar to the disclosure regarding gender diversity that is currently required by NI 58-101.


2.1 What rights and powers do shareholders have in the operation and management of the corporate entity/entities?

The operation and management of a corporation is primarily the responsibility of directors, although certain fundamental matters require shareholder approval. Corporate legislation in Canada typically requires shareholder approval of amendments to a corporation's articles or other charter documents, selling all or substantially all of the corporation's assets and the amalgamation of a corporation with one or more other corporations, among other things. For decisions that may affect the rights of holders of different classes or series of shares in different ways, separate approval of the holders of each class or series may also be required. Shareholders may also have the right to dissent in respect of certain fundamental changes and have their shares purchased for fair value, if a sufficient majority of the other shareholders have voted to approve the fundamental change.

If a director does not perform as shareholders wish, shareholders may refuse to vote to re-elect him or her. In practice, however, the power of individual shareholders to elect or remove directors in public or other widely-held companies may be limited. As noted in question 1.3, "majority voting" has recently been mandated by the TSX as a requirement for TSX-listed issuers.

If a shareholder meets the specific requirements of the corporation's governing jurisdiction, he or she may be entitled to submit a proposal for consideration and a vote of shareholders at an annual shareholder meeting, or requisition a shareholder meeting. Depending on the requirements of the jurisdiction, a shareholder is required to hold a specific percentage of the shares of the corporation or a minimum value of equity in the corporation to be entitled to submit a proposal or requisition a meeting, and would typically be required to hold voting shares in the corporation. In a number of instances, corporations may refuse to accept a proposal, such as where it is clear that the proposal does not relate in a significant way to the business or affairs of the corporation, or refuse to call a meeting, such as where notice of a shareholder meeting has already been given or the subject matter of the requisition is inappropriate.

In some Canadian jurisdictions, shareholders can enter into a unanimous shareholder agreement that restricts or transfers directors' usual powers of management and supervision. For obvious reasons, this arrangement is typically limited to private, closely-held corporations.

Securities laws or stock exchange rules also provide additional shareholder rights. Corporations listed on the TSX, for example, may be required to obtain the approval of shareholders for the issuance of shares in certain circumstances where shareholder approval would not otherwise be required under corporate law.

2.2 What responsibilities, if any, do shareholders have as regards the corporate governance of their corporate entity/entities?

As a general rule, shareholders do not have responsibilities for the corporate governance of a corporation. However, as noted in more detail in question 2.7, shareholders that hold a significant percentage of the shares of a public company, have some degree of control over the affairs of the corporation or have a significant business or other "special relationship" with the corporation, may have certain responsibilities under securities legislation. Additionally, for corporations governed by a unanimous shareholders' agreement, the shareholders would be responsible for the governance of the corporation to the extent outlined in that agreement.

2.3 What shareholder meetings are commonly held and what rights do shareholders have as regards them?

Annual meetings of shareholders, including the election of directors and the appointment of auditors, are required by law. Directors may also call a special meeting at any time and shareholders may have rights to requisition a meeting as described in question 2.1.

Directors must provide notice to shareholders of each meeting. Public companies and certain widely-held private corporations must also send a management proxy circular, and certain shareholders may be entitled to submit proposals to be included in that material. Given the notice requirements in corporate and securities laws, the ability of a corporation to deal with matters put forward at a meeting for consideration by shareholders that were not outlined in the notice of meeting is very limited.

2.4 Can shareholders be liable for acts or omissions of the corporate entity/entities?

A corporation is considered to be a separate legal entity from its shareholders. In general, shareholders have limited liability for any act, liability, obligation or default of the corporation. However, liability may be imposed on shareholders in instances of an improper decrease in the capital of the corporation, in respect of a unanimous shareholder agreement that restricts the powers of directors to manage the business and affairs of the corporation, and on the dissolution of the corporation. Moreover, courts may impose liability on shareholders in exceptional circumstances, such as fraud.

2.5 Can shareholders be disenfranchised?

Shareholders can only be disenfranchised in very limited circumstances, as any decision that would affect or remove the rights of a class or series to vote would typically require the approval of a significant majority of the holders of shares of that class or series.

2.6 Can shareholders seek enforcement action against members of the management body?

Shareholders have access to a number of mechanisms to take enforcement action against management. Shareholders may request the court to order an investigation into the corporation, and in certain circumstances, may also apply to the court for the liquidation or dissolution of a corporation. A shareholder may also apply to the court for an order requiring a corporation or its directors or officers to comply with, or refrain from breaching, the requirements of the governing corporate statute and regulations, the corporation's articles or by-laws, or a unanimous shareholder agreement.

Shareholders (both current and former) may apply to the court for an oppression remedy where there has been oppressive or unfairly prejudicial conduct, or conduct that unfairly disregards their interests. The court has broad discretion as to the terms of any order, including the discretion to award damages or order the acquisition of a shareholder's shares by the corporation.

If the directors of a corporation do not diligently pursue a cause of action of the corporation after receiving reasonable notice from the shareholder, the shareholder may be entitled to commence a derivative action against the directors on behalf of the corporation, as long as the shareholder is acting in good faith and in the best interests of the corporation.

2.7 Are there any limitations on, and disclosures required, in relation to interests in securities held by shareholders in the corporate entity/entities?

A shareholder who acquires 10 per cent or more of the issued voting or equity securities of any class of a public company must issue a press release disclosing its identity and the extent of its holding. The same requirement applies each time the shareholder acquires an additional two per cent or more.

A person or corporate entity that has ownership of, or control over, securities of an issuer carrying more than 10 per cent of the voting rights of the issuer's outstanding voting securities is considered an "insider" of the corporation under securities laws, and must file insider reports with securities regulators when that interest or control is acquired and within five days of any subsequent change.

A shareholder who holds a sufficient number of the voting rights attached to all outstanding voting securities of an issuer to affect materially the control of the issuer or holds more than 20 per cent of the voting rights attached to all outstanding voting securities of an issuer, is considered a "control person" under securities laws, and must comply with certain requirements when disposing of, or acquiring more, shares.


3.1 Who manages the corporate entity/entities and how?

A corporation is managed by a board of directors. The board of directors is generally required to manage, or supervise the management of, the business and affairs of the corporation, subject to any unanimous shareholder agreement. There are also specific duties imposed on directors, including issuing periodic shareholder reports, declaring dividends, reviewing financial statements, setting remuneration for senior management, and approving the issuance of shares.

In general, directors are not actively involved in the day-to-day business and activities of the corporation. Delegation to senior officers and other management and board committees for public companies and large corporations is common practice. All public companies are required to have at least an audit committee. Notwithstanding any delegation, except for any transfer to shareholders by unanimous shareholder agreement, where permitted, directors still remain responsible for the supervision of the management of the corporation.

A private corporation must have at least one director, while a public company must have at least three. The requirements for Canadian residency of directors vary across Canada, and although there are several jurisdictions where there are no residency requirements (including British Columbia), a number of jurisdictions require that at least 25 per cent of the directors are resident in Canada.

3.2 How are members of the management body appointed and removed?

In general, qualified directors are elected by the shareholders of the corporation at the annual general meeting, with some potential for overholding. In some instances, the governing corporate legislation or the charter documents of the corporation may provide that, between annual meetings, the current directors can appoint additional directors up to a certain percentage of the current size of the board (typically one third). Directors commonly serve for one-year terms, although the shareholders may elect directors for terms of up to three years (subject to term limit requirements in applicable securities laws). There is no statutory limit on the number of terms that a director may serve. Directors can be removed from office during their term by the corporation's shareholders. A majority of the shareholders must vote for a director's removal at a special meeting. Such a meeting may be called by the directors at any time.

3.3 What are the main legislative, regulatory and other sources impacting on contracts and remuneration of members of the management body?

Corporate statutes contain provisions relating to contracts with, and the remuneration of, directors. In general, directors of the corporation are responsible for determining the remuneration of the directors (typically an annual retainer, plus meeting fees), as well as parameters for the officers and employees, although in most public companies, remuneration is set by the compensation committee of the board of directors, in consultation with senior management. The charter documents or any unanimous shareholder agreement may limit this power.

Public companies must disclose annually the rationale for and amount of remuneration provided to their directors and senior executive officers, in accordance with the requirements of securities laws.

The TSX requires that a listed corporation receive approval from the majority of its directors and security holders before providing certain security based compensation arrangements to its directors and officers, including stock option plans and stock appreciation rights.

3.4 What are the limitations on, and what disclosure is required in relation to, interests in securities held by members of the management body in the corporate entity/entities?

Directors are permitted to own securities in the corporation on whose board they serve. However, as "insiders" of the corporation, directors are required to file insider reports related to their ownership of securities and related financial instruments and are subject to insider trading rules, which prohibit the director from trading in the securities of the corporation when in possession of undisclosed information which, if generally known, would reasonably be expected to have a significant effect on the market price or value of a security of the corporation.

3.5 What is the process for meetings of members of the management body?

A corporation has some freedom in determining the process for its meetings, subject to any applicable corporate law requiring meetings to be held in Canada. The corporation typically sets out in its by-laws the location and notice requirements for such meetings, as well as the quorum required at the meeting. For jurisdictions with Canadian residency requirements for membership on the board of directors, similar residency requirements may also apply to attendance at meetings.

Directors must attend meetings personally. Proxies or representatives are not permitted. However, attendance at meetings may be accomplished by telephone or other electronic means so long as all participants are able to communicate adequately with each other.

Minutes of directors' meetings must be taken and kept, along with any resolutions, in the corporation's records.

3.6 What are the principal general legal duties and liabilities of members of the management body?

Directors have a duty to comply with the governing corporate statute and regulations, relevant securities and stock exchange rules, industry or activity regulation, employment-related, environmental and taxation regulation, the common law, the charter documents of the corporation and any unanimous shareholder agreement.

Two overarching duties generally imposed on directors are that they act honestly and in good faith, with a view to the best interests of the corporation, and that they exercise the care, diligence and skill that a reasonably prudent person would exercise in comparable circumstances. Directors may be held personally liable for breaching these duties.

3.7 What are the main specific corporate governance responsibilities/functions of members of the management body and what are perceived to be the key, current challenges for the management body?

Directors generally formalise the corporation's approach to corporate governance. Securities legislation and best practices recommend that the directors of a public company adopt written mandates explicitly acknowledging responsibility for the stewardship of the company and setting out specific responsibilities and proper processes to facilitate oversight and promote engagement, accountability, transparency, efficiency and effectiveness. Directors must ensure that a corporation's strategic plans are being implemented, that risks and practices are being monitored, and that its business is being run effectively and responsibly.

Directors are faced with a shifting landscape of governance requirements in an era of growing regulatory oversight, public scrutiny and evolving standards of expected corporate behaviour. In many industries, best practices are becoming the baseline expectation rather than a benchmark. With the increasing stratification of companies, implementing best practices in day-to-day operations can be a significant challenge, particularly for companies that operate in multiple jurisdictions and are subject to overlapping legislative requirements. Examples may include undertaking risk management within a company or the implementation of an effective anti-bribery compliance programme across a company's overseas operations. Given that directors' roles in governance have been heightened and the demands for accountability and transparency are at an all-time high, directors must rely on up to date information and perspectives from independent and specialised sources and advisors to enable them to make informed decisions.

3.8 What public disclosures concerning management body practices are required?

Most public companies are required to include information about their audit committees in their annual information form. They are also required to disclose the review and approval process adopted by the directors and relevant committees when seeking shareholder approval for certain transactions, such as a related party transaction.

A public company, other than a venture issuer, must also disclose certain information when soliciting a proxy from a security holder for the purpose of electing directors, including: the identity and independence of the directors, including the chair; the attendance record of the directors; the nature of board meetings; the board mandate; the existence of written position descriptions for the chair, the CEO and the committee chairs and/or their roles; orientation and continuing education for directors; the existence of a code of conduct; nomination and compensation processes for directors and officers; board committees; and board and individual director assessment.

3.9 Are indemnities, or insurance, permitted in relation to members of the management body and others?

In general, within parameters that are consistent with their personal duties and the required standard of care, Canadian companies are permitted by statute and it is common practice to indemnify and insure directors and officers, former directors and officers, and individuals who act or have acted in a capacity similar to directors or officers.


4.1 Who is responsible for disclosure and transparency?

The directors of a corporation are ultimately responsible for disclosure and transparency and setting the 'tone from the top'. However, routine compliance with continuous disclosure obligations is typically overseen by the management team that is accountable to the board. Many corporations have taken steps to formalise the process of meeting their disclosure obligations. Typically, the board will adopt a disclosure policy to guide members of management on issues of disclosure. Additionally, some corporations will establish a disclosure committee in order to consider and review the corporation's disclosure and ensure that all disclosure requirements have been met fully and accurately.

4.2 What corporate governance related disclosures are required?

Canadian public companies are required to disclose their corporate governance practices in accordance with the specific guidelines issued by Canadian securities regulators in their management proxy circular and/or annual information form. The primary corporate governance disclosure requirements are outlined in detail above in question 3.8. In addition, there are also specific disclosure requirements for public companies related to the public filing of articles of incorporation or any other constating document, corporate by-laws, the code of conduct (if any) and any other documents affecting the rights of shareholders, such as a voting trust agreement or shareholders' rights plan.

4.3 What is the role of audit and auditors in such disclosures?

In Canada, there is no requirement for auditor review of a public company's corporate governance disclosure. All public companies must engage an external auditor to review their financial statements. The auditor's role is limited to conducting an audit to obtain reasonable assurance that the financial statements of the corporation are free of material misstatement and providing an opinion on the financial statements based on the audit.

4.4 What corporate governance information should be published on websites?

Canadian public companies are required to file their mandated disclosure documents on the System for Electronic Document Analysis and Retrieval ("SEDAR") website maintained by the Canadian securities regulators, at In addition, a company that uses the process of notice-and-access to post shareholder meeting materials on the internet, rather than mailing written materials to shareholders, is required to post the materials on both the SEDAR and a non-SEDAR website (typically the company's website).

Canadian law does not generally require that public companies publish information on their websites. Nevertheless, many public companies provide access on their websites to news releases and other information filed on SEDAR as a matter of good disclosure practice. Many corporations also post on their websites the text of committee charters, webcasts of annual shareholder meetings and their code of conduct and other key corporate policies.


5.1 What, if any, is the law, regulation and practice concerning corporate social responsibility?

Despite the continuing increase in public attention to corporate social responsibility (CSR) practices by corporations in Canada, Canadian corporate and securities laws do not generally regulate expectations for CSR, and attempts in recent years to pass such legislation have failed.

However, specific continuous disclosure obligations are triggered in certain circumstances where the corporation has undertaken particular initiatives. Public companies which have implemented any social or environmental sustainability policies that are fundamental to their operations, such as policies regarding the environment, those communities in which they operate, or human rights, must describe these policies, and steps taken to implement them, in their annual information form. Additionally, corporations must outline the financial and operational effects of environmental protection requirements on their current and future capital expenditures, earnings and competitive position in their annual information form and/or management discussion and analysis. Corporations that violate federal environmental legislation may be ordered by a court to disclose such violations to their shareholders.

The federal government and various Canadian industry associations promote several widely-recognised, but not mandatory, international CSR performance guidelines, such as the Global Reporting Initiative. In addition, the federal government has established the Office of the Extractive Sector Corporate Social Responsibility Counsellor to perform both an advisory role, and a dispute resolution role in managing issues related to CSR in Canada's extractive sector. In December 2013, the federal government launched consultations with civil society organisations in order to review the CSR strategy for the extractive sector. As a result of these consultations, the federal government passed legislation in December 2014 (expected to come into force in June 2015) that requires Canadian extractive companies to disclose certain categories of payments made to government entities above a certain threshold, and publicly report such information.

5.2 What, if any, is the role of employees in corporate governance?

Employees of corporations are typically expected to comply with company policies, including a code of conduct, if one has been implemented, as well as proper processes to facilitate board and management oversight and promote engagement, accountability, transparency, efficiency and effectiveness.

Audit committees of public companies are required to establish procedures for the confidential, anonymous submission by employees of concerns regarding questionable accounting or auditing matters.

This article appeared in the 2015 edition of The International Comparative Legal Guide to: Corporate Governance; published by Global Legal Group Ltd, London.

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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Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions