Industry Canada has published a consultation paper seeking input on a wide array of possible changes to the Canada Business Corporations Act (CBCA) including a number of issues currently under consideration or recently addressed (or considered and intentionally not addressed) by Canadian securities regulators and/or the Toronto Stock Exchange (TSX).
The paper addresses a number of governance topics including say-on-pay, majority voting for director elections, diversity on corporate boards, residency requirements for directors, socially responsible enterprises, and combating bribery and corruption, as well as technical issues such as the use of plans of arrangement by insolvent corporations, limitations on the exercise of dissent rights, and dealing with property of dissolved corporations.
The paper deals with topics recommended for consultation by a House of Commons Committee that reviewed the CBCA in 2009-2010. At this time, Industry Canada has not put forward alternatives to existing provisions, but instead is seeking public comments and input.
Any changes to the CBCA would affect nearly 235,000 federally incorporated corporations, including almost half of Canada's largest publicly traded companies. The issues identified for discussion include the following.
- Shareholder advisory votes on compensation packages (i.e., "say-on-pay")
SHAREHOLDER VOTING RIGHTS
- Prohibition on slate elections for directors
- Maximum one-year terms for directors
- Majority voting for director elections
- Mandatory voting by ballot at shareholder meetings
- Disclosure of voting results by public companies
COMPOSITION OF CORPORATE BOARDS AND MANAGEMENT
- Reducing or eliminating Canadian residency requirements for directors
- Promoting diversity within corporate boards (see our priorBlakes Bulletin: OSC Consultation Paper on Women on Boards and in Senior Management)
- Separation of the role of the CEO from the Chair of the board of directors
SHAREHOLDER VOTING INFRASTRUCTURE
- (See our prior Blakes Bulletin: Regulators Consult on Concerns about Canada's Proxy Voting Infrastructure)
- "Over-voting" and "empty voting"
- Equal treatment of shareholders in proxy process, irrespective of privacy concerns
- Facilitating notice-and-access (see our prior Blakes Bulletin: Notice-and-Access Comes to Canada for 2013 Proxy Season)
- Electronic shareholder meetings for public companies
- Shareholder approval of significantly dilutive transactions (see our priorBlakes Bulletin: TSX Announces Security Holder Approval Requirement for Issuance of Securities in Payment for an Acquisition)
- Shareholder nomination of alternative directors in management information circulars
- Permitting persons to solicit proxies from greater than 15 shareholders without sending a dissident proxy circular
- Facilitating shareholder access to the oppression remedy
CORPORATE SOCIAL RESPONSIBILITY
- Incorporation under the CBCA of entities with profit-making and non-profit goals
- Disclosure of board of directors' understanding of social and environmental matters
- Provisions to promote corporate social responsibility objectives
Industry Canada is seeking comments from the public until March 11, 2014.
Many questions arise from the consultation paper, including whether corporate governance should be dealt with in the CBCA or by the Canadian securities regulators (and the TSX), whether the CBCA should be more rigorous regarding publicly traded corporations, and how changes to the CBCA would be coordinated with separate federal agreements concluded on material regulation of securities law.