By
Pace Law

Alterations to the CBCA Director Elections

September 2, 2022

The Canadian Business corporations at CBCA have been amended on August 23rd, 2022 to:

  • Add a statutory majority voting requirement for undisputed director elections
  • Mandate directors to be elected for terms ending no later than the close of the issuer’s next annual shareholder meeting
  • Restrict slate voting
  • Modify the time period during which shareholders must submit proposals to be included in an issuer’s proxy circular

Majority voting requirement

 

In the event that a specific director nominee receives fewer than 50% of the total votes by shareholders in favour of that candidate, said candidate cannot be appointed as a director. However, if an existing director is not chosen by a majority of votes cast at the meeting, they may continue to serve as a director until the 90th day following the election; or the day on which their replacement is appointed or elected, whichever comes first.

 

In some circumstances, the elected directors may also re-appoint the current director even if they did not win the majority of votes in the most recent election. In particular, the recently passed CBCA regulations will only permit reappointment in the following two situations:

 

When the CBCA requires Canadian residency, or when the CBCA mandates that at least two directors of a distributing corporation are not also executives or members of the corporation itself and/or its affiliates.

 

The voting at annual meetings for reporting issuers with December 31 year-ends, who are typically required to convene their annual general meetings in the first half of 2022, should not be impacted by the CBCA Amendments as they won’t go into effect until August 31, 2022.

 

Additional changes to the conditions for director elections

 

The CBCA changes will mandate that directors of distributing corporations be chosen on a case by case basis for terms expiring at the issuer’s subsequent annual meeting, just as the current TSX rules. There is currently no restriction on slate voting, and directors of CBCA-incorporated issuers may also be elected to three-year terms. however, the TSX demands that directors be chosen individually.

 

Shareholder Proposals

 

The CBCA Modifications would also alter the time frame for submitting shareholder recommendations for inclusion in a company’s proxy circular. A shareholder of a CBCA-incorporated issuer must currently submit a shareholder proposal to the issuer at least 90 days prior to the anniversary date of the notice of meeting conveyed in the lender’s most recent annual meeting in order for the proposal to be included in the issuer’s proxy circular. A shareholder must present the proposal to management within 90 and 150 days prior to the anniversary date of the issuer’s last annual meeting in accordance with the CBCA Amendments. The last date by which shareholders must make a proposal to the company for the following annual meeting must be included in an issuer’s proxy circular.

 

Additional changes to the CBCA

 

The Amending Act and Bill C-97 featured changes to the CBCA that required transparency with regard to claw back practices, permit notice-and-access, and mandate say-on-pay resolutions. On a date to be determined by order of the Governor in Council, following the publication of the related regulations, an Act to implement certain elements of the budget laid before Parliament on March 19, 2019, as well as additional measures that have not yet taken effect, will come into effect.

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Phone: 1-877-236-3060
Fax: 416-236-1809

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