Beginning on January 1, 2020, directors of a distributing corporation governed by the Canada Business Corporations Act (the “CBCA”) will be required to inform shareholders at every annual meeting about diversity among the directors and members of senior management of the corporation.

This new requirement, pursuant to an amended section 172.1 of the CBCA, requires certain diversity information to be sent to shareholders along with the notice of meeting or to be made available with the proxy circular. The diversity information must also be sent to the Canadian Ministry of Industry.

The CBCA defines a distributing corporation to include a reporting issuer, as well as corporations that have (i) filed a prospectus or registration statement, (ii) listed their securities on a stock exchange in or outside of Canada, or (iii) are involved in, formed from, resulting from or continued after an amalgamation, reorganization, an arrangement or a statutory procedure, if one of the participating entities is a otherwise distributing corporation.

The information that must be provided to shareholders of the distributing corporation regarding diversity is set out in the amended Canada Business Corporations Regulations, 2001 (the “Regulation”),and includes:

  1. whether or not the corporation has adopted term limits for the directors on its board or other mechanisms of board renewal, together with a description of those term limits or mechanisms or the reasons why the corporation has not adopted them;
  2. whether or not the corporation has adopted a written policy relating to the identification and nomination of members of designated groups for directors and, if the corporation has not adopted a written policy, the reasons why it has not adopted such a policy;
  3. if the corporation has adopted a written policy relating to the identification and nomination of members of designated groups for directors, a short summary of the policy’s objectives and key provisions, a description of the measures taken to ensure that the policy is effectively implemented, a description of the annual and cumulative progress by the corporation in achieving the objectives of the policy, and whether or not the board of directors or its nominating committee measures the effectiveness of the policy (and, if so, a description of how it is measured);
  4. whether or not the board of directors or its nominating committee considers the level of the representation of designated groups on the board in identifying and nominating candidates for election or re-election to the board and, as the case may be, how that level is considered or the reasons why it is not considered;
  5. whether or not the corporation considers the level of representation of designated groups when appointing members of senior management and, as the case may be, how that level is considered or the reasons why it is not considered;
  6. whether or not the corporation has, for each designated group, adopted a target number or percentage, or a range of target numbers or percentages, for members of the group to hold positions on the board of directors by a specific date and (i) for each group for which a target has been adopted, the target and the annual and cumulative progress of the corporation in achieving that target, and (ii) for each group for which a target has not been adopted, the reasons why the corporation has not adopted that target;
  7. whether or not the corporation has, for each designated group, adopted a target number or percentage, or a range of target numbers or percentages, for members of the group to be members of senior management by a specific date and (i) for each group for which a target has been adopted, the target and the annual and cumulative progress of the corporation in achieving that target, and (ii) for each group for which a target has not been adopted, the reasons why the corporation has not adopted that target;
  8. for each designated group, the number and proportion, expressed as a percentage, of members of each group who hold positions on the board of directors; and
  9. for each designated group, the number and proportion, expressed as a percentage, of members of each group who are members of senior management of the corporation, including all of its major subsidiaries.

The Regulation defines a “designated group” to have the same meaning as in section 3 of the Employment Equity Act, which is “women, Aboriginal peoples, persons with disabilities and members of visible minorities”. The Employment Equity Act also contains the following relevant definitions:

  • Aboriginal peoples means persons who are Indians, Inuit or Metis;
  • Persons with disabilities means persons who have a long-term or recurring physical, mental, sensory, psychiatric or learning impairment and who (a) consider themselves to be disadvantaged in employment by reason of that impairment or (b) believe that an employer or potential employer is likely to consider them to be disadvantaged in employment by reason of that impairment, and includes persons whose functional limitations owing to their impairment have been accommodated in their current job or workplace; and
  • Members of visible minorities means persons, other than Aboriginal peoples, who are non-Caucasian in race or non-white in colour.

The Regulation also defines “members of senior management” to mean the following individuals:

  • The chair and vice-chair of the board of directors;
  • The president of the corporation;
  • The chief executive officer and chief financial officer;
  • The vice-president in charge of a principal business unit, division or function, including sales, finance or production; and
  • An individual who performs a policy-making function in respect of the corporation.

Finally, the Regulation defines “major subsidiary” to mean a subsidiary that (a) has assets, as included in the corporation’s most recent annual audited or interim balance sheet or most recent statement of financial position, that are 30 percent or more of the consolidated assets of the corporation reported on that balance sheet or statement of financial position, as the case may be; or (b) has revenue, as included in the corporation’s most recent annual audited or interim income statement or most recent statement of comprehensive income, that is 30 percent or more of the consolidated revenue of the corporation reported on that statement.

In order to comply with this new diversity disclosure requirement, distributing corporations governed by the CBCA will need to develop written policies relating to the identification and nomination of members of designated groups for director and senior management positions. Affected organizations will also need to collect and maintain information about directors and senior management personnel to determine whether those individuals are members of any designated group which may trigger competing obligations under applicable human rights and privacy legislation.