On January 11, 2023, Fasken, along with TMX Group Ltd. ("TMX Group", which includes the Toronto Stock Exchange ("TSX") and TSX Venture Exchange ("TSX-V")) and Laurel Hill Advisory Group ("Laurel Hill"), hosted a conversation on disclosure and regulatory considerations for issuers leading into the 2023 proxy season. The panel discussed five areas of recent developments that will be relevant for public companies:

  1. an update on proxy advisory firm voting guidelines;
  2. an update from the TSX and TSX-V;
  3. regulatory and continuous disclosure updates;
  4. corporate law amendments; and
  5. other topics of interest including developments from the U.S. Securities and Exchange Commission ("SEC") and virtual shareholder meetings.

For a recording of the conversation of these items, please see the Fasken Proxy Season Preview 2023 webinar.

The discussion featured Bill Zawada of Laurel Hill, Valérie Douville of TMX Group and Justine Connors of Fasken, and was moderated by Gordon Raman of Fasken.

1. An Update on Proxy Advisory Firm Voting Guidelines

Proxy advisory firms, Institutional Shareholder Services ("ISS") and Glass, Lewis & Co. ("Glass Lewis"), have updated their guidelines ahead of the 2023 proxy season.1

Gender Diversity and Racial Diversity

For all TSX-listed issuers, Glass Lewis will recommend that shareholders withhold votes from the nominating committee chair if the board is not at least 30% gender diverse. Glass Lewis continues to define "gender diverse" as any gender other than male. If the issuer does not have at least one gender diverse director, then Glass Lewis will recommend that shareholders withhold votes from all members of the nominating committee. Issuers that do not meet these targets may avoid negative recommendations by providing sufficient rationale or a plan to increase the number of gender diverse directors in the management information circular.

ISS recommends voting against the chair of the nominating committee of an S&P/TSX Composite Index (the "Index") company where the board is not comprised of at least 30% women directors. For TSX companies which are not also Index constituents, ISS recommends voting against the chair of the nominating committee if there are no women on the board. In addition, while previously accepted, ISS will remove the exception for companies that have a formal, publicly disclosed written commitment to achieve at least 30% women on the board, or in the case of non-Index companies at least one woman on the board, at or prior to the next annual general meeting, unless they are new to the Index, or in the case of non-Index companies are new or recent graduates to the TSX, or have fallen below the required threshold as a result of "extraordinary circumstances".

In 2024, ISS expects companies that are part of the Index to have at least one racially or ethnically diverse director. However, ISS will recognize an exception in the event that there was racial and/or ethnic diversity on the board at the preceding annual meeting and the board makes a firm public commitment to appoint at least one racially and/or ethnically diverse member at or prior to the next annual meeting.

Glass Lewis does not have similar racial diversity voting recommendations applicable to Canadian companies at this time.

Environmental and Social

Glass Lewis now expects Index issuers to explicitly disclose the board's role in environmental and social ("E&S") oversight. Failure to do so in the management information circular may result in Glass Lewis recommending that shareholders withhold votes from the governance committee chair. E&S oversight may be assigned to specific directors, combined with the responsibilities of a key committee, or be a responsibility of the entire board. Fasken's 2023 ESG Disclosure Study2 found that most S&P TSX 60 companies are referencing that E&S oversight responsibility has been allocated to a committee of the board or is shared between the full board and a committee of the board.

Moreover, both Glass Lewis and ISS are increasingly focused on climate risk and related disclosure. Unlike ISS, Glass Lewis not only focuses on companies listed on the Climate Action 100+ Focus Group3 list, but also considers climate risk to be a material risk for any company for which greenhouse gas emissions represent a material financial risk. Glass Lewis expects those companies to provide TCFD4-aligned climate-related disclosure, targets and to also provide disclosure of the board's oversight of climate risks, failing which Glass Lewis may recommend that shareholders withhold votes for the directors who are deemed to be responsible for climate risk oversight.

Likewise, ISS is focused on companies deemed to be significant greenhouse gas emitters, but only as per the Climate Action 100+ Focus Group list, and beginning February 1, 2023, ISS recommends voting against the chair of the responsible committee or other directors at companies that are not making efforts to understand, assess, and mitigate climate change related risks. ISS expects companies to provide disclosure in line with TCFD recommendations and make appropriate GHG emissions reduction targets.


Glass Lewis now considers cybersecurity to be a material risk for all companies and believes that shareholders would benefit from disclosure regarding the board's role in cybersecurity oversight. While Glass Lewis will not make recommendations based solely on whether the issuer has disclosed how the board oversees cybersecurity matters, Glass Lewis may recommend that shareholders withhold votes for the appropriate directors if the company's disclosure or oversight is insufficient in instances where a cyber-attack has caused significant hardship to shareholders.

ISS currently does not have a voting policy related to cybersecurity.

Director Overboarding

Glass Lewis has clarified its application of the existing director commitments voting policy. The policy remains unchanged, however, the clarification involves the case where publicly listed company executives serve on external boards. A director who serves as an executive officer of a public company while serving on more than one external board will get a negative recommendation from Glass Lewis at all companies other than the company at which they serve as an executive. This means that an executive director may sit on two boards in total, provided that one of those boards is for the company at which they serve as an executive. However, if a public company executive does not sit on the board at which they serve as an executive then the limit is only one board membership in total. Therefore, the limit is not "two boards" for public company executives, but rather one board other than the company at which they serve as an executive. The policy remains unchanged for non-executive directors who may sit on up to five boards in total.

Effective February 1, 2023, ISS will apply the same overboarding guidelines it has for TSX-listed issuers to TSX-V-listed issuers. Non-chief executive officer directors can serve on up to five boards in total, while the chief executive officers of public companies can serve as directors on a maximum of two external boards.

Multi-Class Share Structures

Glass Lewis has made clarifying amendments related to sunset clauses. Glass Lewis now expects that issuers with multi-class share structures with unequal voting rights establish a sunset period of seven years or less. In the absence of a sunset clause, Glass Lewis may recommend that shareholders withhold votes from an appropriate director or a representative on the board of the superior voting class, rather than the chair of the governance committee. An issuer may avoid this negative recommendation if it has demonstrated exemplary governance practices and responsiveness to shareholders.

ISS currently does not have a similar policy.

Executive Compensation

Glass Lewis now requires that at least 50% of long-term incentive awards be performance-based compared to the previous 33% requirement. This aligns with ISS and general market trends. Time-based vesting, such as how stock options typically vest, do not count as performance-based awards. This will count as a negative factor in executive compensation analysis and may contribute to a negative recommendation in combination with other negative factors.

In the case of multi-class share structures and say-on-pay votes, Glass Lewis will review the vote of the subordinate share class in determining the need for board responsiveness. In addition, where a compensation committee uses discretion to determine short- and long-term incentives, Glass Lewis expects issuers to provide greater disclosure on the committee's rationale.

2. An Update from the TSX and TSX-V

TSX Updates

Staff Notice on Voting Covenants

The TSX, through a staff notice, will be clarifying its current practice regarding voting covenants between or among a listed issuer and one or more of its security holders. Currently, the TSX reviews voting covenants that require a security holder to vote with management or in favor of one or more management proposals.

Request for Comments on Prospectus Offering

On December 1, 2022, the TSX published proposed amendments to Section 606 - Prospectus Offerings of the TSX Company Manual. The TSX currently reviews prospectus offerings and if it believes that a public offering is not a bona fide public offering, it will review the offering under Section 607 - Private Placements resulting in the application of additional rules on the transaction (e.g. discount and dilution restrictions). The TSX is expected to set standards to clarify what constitutes a bona fide public offering. The following factors will be considered when making this determination: (i) whether the offering has been broadly marketed; (ii) the offering price; and (iii) insider participation. The TSX is soliciting public comments on the proposed amendments until January 31, 2023.

TSX-V Updates

Policy 1.3 - Schedule of Fees

Policy 1.3 sets out the fees that the TSX-V charges issuers for all listing-related services, such as: new listings (including an initial public offering, reverse takeover, qualifying transaction, etc.), ongoing transactions (e.g. financings, acquisitions, corporate actions), and annual sustaining fees. The new fee schedule introduces the same concept currently used on the TSX of "Listing Capitalization", the value of the securities listed, for the calculation of fees in respect of new listings or financings and introduces a flat fee for most other transactions.

Modernization of the Security Based Compensation

On January 1, 2023, certain enhancements to security based compensation plan submissions were rolled out on TMX LINX. The enhancements will improve the filing experience for both internal and external users and provide some efficiencies for staff. A new security based compensation plan form was added to all new security based compensation plan submissions. This form will indicate what kind of security based compensation plan is being submitted, whether it is a new or amended plan, the date shareholder approval was obtained or will be obtained, and the anticipated print date for the circular where applicable.

Minimum Pricing Requirement

Effective June 23, 2022, the TSX-V amended the minimum pricing requirements in its Corporate Finance Manual in an effort to permanently incorporate several of the temporary relief measures it initially introduced during the COVID-19 pandemic. The new minimum pricing requirements are as follows:

  • if the market price of an issuer's listed shares is not greater than $0.05, the minimum price at which that issuer may issue its listed shares is equal to that market price, subject to a minimum price of $0.01; and
  • if the market price of an issuer's listed shares is greater than $0.05, the minimum price at which that issuer may issue its listed shares remains equal to the market price less the existing allowable maximum discounts based on closing price, subject to a minimum price of $0.05.

Venture Forward

The TSX-V is conducting a deep stakeholders engagement assessment via Venture Forward which works at: (i) reducing barriers and burdens to access public venture capital; (ii) expanding the global base of investors and capital that support and finance issuers; and (iii) growing to empower and strengthen the public venture capital ecosystem and its participants. In 2022, the TSX-V engaged with representatives from across the stakeholder community to gain a full understanding of how the markets can better support early-stage companies. The TSX-V will be continuing such efforts in 2023.

3. Regulatory and Continuous Disclosure

Continuous Disclosure - CSA updates on their review of 2021 and 2022 public disclosure

On November 3, 2022, Canadian Securities Administrators ("CSA") published Staff Notice 51-364, where it summarized the results of its Continuous Disclosure Review Program for the two years ended March 31, 2022. The CSA reviews issuers' disclosure requirements with particular emphasis on the disclosure obligations contained in National Instrument 51-102 Continuous Disclosure Obligations. The CSA found three primary areas of deficiencies in disclosure: (i) financial statements; (ii) forward looking information ("FLI") in Management's Discussion & Analysis ("MD&A"); and (iii) "other regulatory requirements", as further detailed below:

  1. Financial Statements: compliance with the recognition, measurement, presentation, classification and disclosure requirements in International Financial Reporting Standards, including revenue recognition, disclosure of expected credit losses, disclosure of business combinations and disclosure of reportable segments.
  2. MD&A: compliance with Form 51-102F1 Management's Discussion & Analysis including FLI, discussion of operations specific to development and/or early-stage issuers, and non-GAAP and other financial measures. In particular, the CSA expressed concern with issuers providing overly optimistic FLI without a reasonable basis for the FLI, and with a lack of disclosure regarding material underlying assumptions and relevant risk factors.
  3. Other Regulatory Requirements: compliance with other regulatory matters including overly promotional disclosure pertaining to environmental, social and governance matters, audit committee requirements, inconsistencies throughout continuous disclosure documents, mineral project disclosure and required disclosures in restructuring transactions. The CSA noted that some issuers filed a business acquisition report where the transaction met the definition of a restructuring transaction, for which additional disclosure is required.

Non-GAAP Financial Update

In Staff Notice 51-364, the CSA also reviewed issuer compliance with National Instrument 52-112 Non-GAAP and Other Financial Measures Disclosure. The CSA particularly noted that many issuers are failing to include the required quantitative reconciliations of non-GAAP financial measures in their earnings releases and reminded issuers that a cross-reference to an MD&A is not permitted in this circumstance. The CSA also noted deficiencies with the requirements relating to prominence, whereby a non-GAAP financial measure should not be presented with more prominence than that of the most directly comparable financial measure, forward-looking non-GAAP financial measures, identifying "total of segments" measures and labelling of supplementary financial measures. Finally, the CSA advised issuers against incorporating information by reference into investor presentations where the incorporated information is missing or incomplete or is not able to be incorporated by reference based on applicable securities laws.

In addition to the deficiencies outlined above, the CSA recognized that issuers failed to provide required comparative information, such as a quantitative reconciliation, for all comparative periods presented and failed to disclose each non-GAAP financial measure that is used as a component of the non-GAAP ratio. The purpose of the disclosure is to support informed decision-making and investors expect financial measures to be understandable and transparent. Issuers should ensure their non-GAAP financial measures disclosure is accurate and gets updated in each disclosure document.

New Prospectus Exemptions

Listed Issuer Financing Exemption

Effective November 21, 2022, non-investment fund reporting issuers listed on a recognized Canadian stock exchange can raise capital up to the greater of $5 million or 10% of their market capitalization (to a maximum of $10 million) during any 12-month period under the "Listed Issuer Financing Exemption". The Listed Issuer Financing Exemption will permit eligible issuers to raise smaller amounts of capital from the public without a requirement to prepare a prospectus. Securities issued under this exemption would be freely tradeable, notwithstanding that the securities would be issued by way of a private placement. This is an important change from most of the commonly used private placement financing exemptions, which result in the issued securities being subject to a four-month hold period.

The Listed Issuer Financing Exemption is subject to a number of conditions including restrictions on the use of proceeds and the type of security being offered. The issuer must also file an offering document in the prescribed Form 45-106F19 Listed Issuer Financing Document ("Listed Issuer Financing Document") and issue and file a news release prior to soliciting any offer to purchase securities. The Listed Issuer Financing Document is not subject to review by a securities commission prior to publication. It requires disclosure regarding various details of the offering in a "Q&A" format, but as guidance, the CSA have expressed the view that the Listed Issuer Finance Document should generally not exceed five pages.

Self-Certified Investor

On October 25, 2022, the Ontario Securities Commission ("OSC") announced an 18-month pilot project that would provide a new prospectus exemption (the "Self-Certified Investor Exemption") allowing non-investment fund issuers to raise capital from investors with qualifying education or work experience ("Self-Certified Investors"). However, unlike the Listed Issuer Financing Exemption, this exemption would be subject to the customary four month hold period. The exemption would also only be available to issuers with head offices in Ontario that are raising capital from Self-Certified Investors in Ontario. During each calendar year, a Self-Certified Investor may acquire a maximum of $30,000 worth of securities issued under the Self-Certified Investor Exemption, while there would be no limit on the issuer on how much capital can be raised under the Self-Certified Investor Exemption.

Self-Certified Investors includes holders of certain designations from professional organizations, certain lawyers practicing securities or M&A law, masters of business administration degree holders, and individuals with relevant experience at a business that operates in the same industry or sector as the issuer and who, as a result of the experience, are able to adequately assess and understand the risk of investment in the issuer. Each Self-Certified Investor would be required to represent to the issuer that they have not exceeded the $30,000 yearly limit, acknowledge they have met the educational and designation requirements, and complete a risk acknowledgement form.

Other Regulatory Developments

Access Equals Delivery

On April 7, 2022, the CSA proposed amendments to a number of national instruments and policies to allow an "access equals delivery" model which would have the effect of permitting reporting issuers, other than investment funds, to satisfy the requirement to deliver certain prospectuses, annual and interim financial statements and related MD&A by publicly filing the document on the System for Electronic Document Analysis and Retrieval ("SEDAR"), and, in most cases, issuing and filing a news release announcing that the document is publicly available on SEDAR and that a paper or electronic copy can be obtained upon request.

National Instrument 43-101 Mining Request for Comment

In 2022, the CSA published a consultation paper seeking feedback on National Instrument 43-101 Standards of Disclosure for Mineral Projects ("NI 43-101"), with an eye to providing investors with more relevant disclosure, and to continue to foster fair and efficient capital markets within an improved and modernized framework. The consultation paper seeks input from stakeholders on various topics including, improvement and modernization of NI 43-101, the qualifications and independence of qualified persons, the rights of Indigenous Peoples, and disclosure of data verification, historical estimates, and mineral resource/reserve estimations, among others. The breadth of topics and scope covered by the CSA in the consultation paper indicate any forthcoming changes could be far-reaching.

4. Corporate Law Amendments

Majority Voting and Shareholder Proposal Amendments

On August 31, 2022, an amendment to the Canadian Business Corporations Act ("CBCA") came into force, bringing significant changes to the majority voting and shareholder proposal provisions in the CBCA ("CBCA Amendments").

The CBCA Amendments now require directors to be elected annually at each annual meeting of shareholders and to hold office for a term ending no later than the close of the next annual meeting. Previously, s. 106(3) of the CBCA allowed shareholders to elect a director for a three-year term. Additionally, the CBCA Amendments provide that distributing corporations must elect directors on an individual basis for uncontested elections rather than by a slate system. Each candidate would have to obtain the number of votes in their favour that represents a majority of the votes cast for and against them by the shareholders present or represented by proxy, during the election, unless the corporation articles require a greater number of votes. The board of directors may appoint one or more new directors for a temporary term, unless explicitly prohibited by the articles. However, the CBCA Amendments prohibit the board of directors from appointing a person as a director if that person failed to be elected under the majority voting rules, except in prescribed circumstances.

The CBCA Amendments also update the timeframe for submitting shareholder proposals, allowing shareholders to submit proposals at a date closer to the annual meeting. Previously, a corporation was not required to include a shareholder proposal in its management information circular if the proposal was not submitted to the corporation at least 90 days before the anniversary date of the notice of the previous annual meeting. With the CBCA Amendments, shareholders can now submit a shareholder proposal during a 60-day period between the 150th and 90th day before the anniversary date of the last annual meeting of shareholders.

Activism Based on Majority Voting Amendments

The instances of forcing out directors may continue to rise given the recent changes to the CBCA, as majority voting as a tool for activism is now accessible among a much larger group of issuers, namely CBCA-incorporated non-TSX issuers. Shareholders of TSX-listed companies have been able to leverage TSX-mandated majority voting requirements to hold boards accountable since 2014, but now any CBCA-incorporated issuer will have the same opportunity.

One notable difference between the CBCA majority voting rule and the TSX-mandated majority voting requirements is that director resignation is mandatory under the CBCA if the director does not receive a majority vote, while the TSX-mandated requirement offers the director the option to tender their resignation and the board to accept or reject such resignation. The CBCA-mandated majority voting rule will become a more powerful tool for activist shareholders, especially amongst TSX-V-listed issuers who tend to have lower voter turnout and a weaker governance structure.

5. Other Topics of Interest

SEC Beneficial Ownership

The SEC has proposed amendments to the rules governing beneficial ownership reporting including significantly shortening filing deadlines for schedule 13D and 13G, clarifying the circumstances under which two or more persons have formed a "group" that would be subject to beneficial ownership reporting obligations and requiring that the schedules be filed using a structured, machine-readable data language. Perhaps most important is that the SEC proposes to expand the reporting requirement to include holders of certain cash-settled derivative securities. This change may prevent investors, particularly activist investors, from building hidden positions. Canadian reporting issuers that are also U.S. reporting companies, including Canadian companies relying on the multijurisdictional disclosure system, are subject to both the Canadian and U.S. regimes and would be affected by the SEC's proposed amendments, if adopted.

SEC Compensation Clawbacks

On October 26, 2022 the SEC implemented Section 10D of the Securities Exchange Act of 1934 requiring all issuers who have any class of securities listed on a U.S. stock exchange to develop, implement and disclose clawback policies that provide for the recovery of erroneously awarded incentive-based compensation to current or former executive officers. The compensation clawback rules are triggered in the issuer is required to prepare an account restatement due to material non-compliance with financial reporting requirements. While the CSA does not require companies to have a clawback policy, Canadian companies listed on a U.S. stock exchange will have to satisfy the Canadian disclosure requirements outlined in Form 51-102F6 and file a copy of the clawback policy as an exhibit to the SEC annual report on Form 10-K, Form 20-F or Form 40-F.

On the Board Series

In 2022, the TMX Group launched the 'On the Board' series, a four-part series, which provides data-driven insights and analysis based on company research of public companies listed on the TSX. The topics covered include overboarding, board diversity, diversity of executive management teams and sustainability at the board.

Virtual Shareholder Meetings

Since the onset of the pandemic, virtual shareholder meetings have become the norm, with many companies holding virtual-only meetings in each of the last three proxy seasons. Institutional shareholders, and proxy advisory firms, have traditionally favoured in-person or hybrid meetings but were supportive of virtual-only meetings throughout the pandemic, however it is uncertain as to how institutional shareholders and the proxy advisory firms will view virtual-only meetings when there are no longer material restrictions on in-person gatherings. There is still a traditional preference and advantage for in-person shareholder meetings, such as better shareholder engagement and participation. However, as a best practice, for virtual-only meetings, shareholders should be consulted, and issuers should review relevant securities law disclosure requirements to ensure compliance.


The landscape of corporate disclosure and governance continues to evolve in 2023. Updated guidance from proxy advisory firms and anticipated and actual amendments to corporate and securities laws have accelerated and changed how companies must prepare for the upcoming 2023 proxy season.


1 See the full policy changes for Glass Lewis at 2023 Policy Guidelines and ISS at Proxy Voting Guidelines Benchmark Policy Changes for 2023.

2 See Fasken's 2023 ESG Disclosure Study, January 2023.

3 The Climate Action 100+ Focus Group is a list created by investors of companies who have a major role to play in the transition to a net-zero emissions economy and have the highest combined direct and indirect greenhouse gas emissions.

4 The Task Force on Climate-related Financial Disclosures ("TCFD") is a taskforce created by the Financial Stability Board to improve and increase reporting of climate-related financial information.

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