Last week, Bill C-25 was introduced which would amend the
Canada Business Corporations Act (the
"CBCA") to, among other things, make
"majority voting" mandatory for all "distributing
corporations" and would require prescribed disclosure on
diversity for "prescribed corporations". A
"distributing corporation" is defined in the CBCA and
means, in layman's terms, a public company. "Majority
voting" is a requirement that directors are only elected if
they have received a majority of the votes cast at the meeting at
which they were seeking to be elected. A "prescribed
corporation" is a new term introduced in Bill C-25 and is yet
to be defined.
Under current rules in Canada, shareholders can either vote for
directors or withhold their votes. The result is that a director
can be elected with a single vote, even if all other votes are
withheld. The proposed amendments will provide that directors
cannot be elected unless a majority of the shares that are voted,
are voted in favour of that particular director. The proposed
amendments to the CBCA will only apply to federally incorporated
companies and would not affect companies that incorporate under
provincial statutes, such as the British Columbia Business
Corporations Act. In 2014, majority voting was adopted by the
Toronto Stock Exchange (the "TSX") but
the TSX rule is only a listing standard so could be changed at any
time, while the federal proposals would become law if enacted.
The proposed amendments also include a provision that would
require "prescribed corporations" to report annually on
diversity in senior roles. The reporting rules will be defined by
further regulations, however, the details of what companies will
have to report are not known yet. The federal legislation
does not define 'diversity', and does not specify that
gender must be a factor included in reports. In 2014, certain
provincial securities regulators began requiring companies listed
on the TSX to report annually on their approach to gender diversity
on their boards and among executive officers. This requirement has
not been adopted by all provincial securities regulators. The
federal proposals would possibly extend this requirement to a
broader group of companies but until the regulations are released
the extent of the application of the requirement for disclosure on
diversity cannot be known.
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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