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.

EXECUTIVE COMPENSATION

  • Shareholder advisory votes on compensation packages (i.e., "say-on-pay")

SHAREHOLDER VOTING RIGHTS

(See our prior Blakes Bulletin: TSX Adopts, and Proposes, New Director Election Requirements)

  • 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

SHAREHOLDER VOTING INFRASTRUCTURE

SHAREHOLDER COMMUNICATION

BOARD ACCOUNTABILITY

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.