On February 13, 2014, the Toronto Stock Exchange (TSX) released amendments to the TSX Company Manual (Amendments) that require each director of a TSX-listed issuer, other than a listed issuer that is majority controlled, to be elected by a majority of the votes cast with respect to his or her election other than at contested meetings.
An issuer must adopt a majority voting policy if it does not otherwise satisfy the majority voting requirement in a manner acceptable to TSX. Pursuant to the Amendments, a TSX-listed issuer’s majority voting policy must provide for the following:
- majority voting for the election of directors at uncontested security holder meetings. In satisfaction of this requirement, a listed issuer may adopt a majority voting policy that requires any director who does not receive a majority (50% + 1 vote) 'for' vote with respect to his or her election to immediately tender his or her resignation to the board of directors, with such resignation being effective upon acceptance by the board;
- the board must consider whether or not to accept the resignation within 90 days after the date of the relevant security holders' meeting. Absent exceptional circumstances, the board must accept the resignation;
- the resignation will be effective when accepted by the board;
- a director who tenders a resignation pursuant to the majority voting policy will not participate in any meeting of the board or any sub-committee of the board at which the resignation is considered; and
- the listed issuer shall promptly issue a news release disclosing the board’s decision as to the acceptance of the resignation. If the board determines not to accept a resignation, the news release must fully state the reasons for that decision.
Following the election of directors at each uncontested security holder meeting, TSX-listed issuers must also disclose the detailed voting results for the election of each director in a news release including: (i) the percentages of votes received 'for' and 'withheld' for each director; (ii) the total votes cast by ballot with the number that each director received 'for'; or (iii) the percentages and total number of votes received 'for' each director. If no formal count has occurred that would meaningfully represent the level of support received by each director (eg. when a vote is conducted by a show of hands), the TSX expects the disclosure to at least reflect the votes represented by proxy that would have been withheld from each nominee had a ballot been called, as a percentage of votes represented at the meeting.
If an issuer adopts a policy to satisfy the majority voting requirement under the Amendments, it must fully describe the policy in its annual meeting materials sent to shareholders in connection with the meeting at which directors are being elected.
Issuers that are majority controlled are exempt from mandatory majority voting. 'Majority controlled' is defined by the TSX as a security holder or company that beneficially owns, or controls or directs, directly or indirectly, voting securities carrying 50 percent or more of the voting rights for the election of directors, as of the record date for the meeting. Under the Amendments, an issuer that is majority controlled must disclose annually (1) that it is exempt from the majority voting requirement and (2) its reasons for not adopting majority voting, in its annual meeting materials. Majority controlled issuers with more than one class of securities may only rely on this exception with respect to the class of securities that is majority controlled.
The Amendments will become effective for TSX-listed issuers on June 30, 2014. Issuers with fiscal years ending on or after June 30, 2014 must comply with the Amendments at their first annual meeting following that date. Unless exempted, all TSX-listed issuers are expected to be in compliance with the Amendments by June 30, 2015.