The Toronto Stock Exchange (TSX) Company Manual provides in section 461.3 that an issuer listed on TSX must adopt a majority voting policy “unless it otherwise satisfies the Majority Voting Requirement in a manner acceptable to TSX, for example, by applicable statute, articles, by-laws or other similar instruments”.
Section 461.3 sets out specific requirements for a majority voting policy, including: (a) any director must immediately tender his or her resignation to the board of directors if not elected by at least a majority of the votes cast with respect to his or her election; (b) the board must determine whether or not to accept the resignation within 90 days after the date of the relevant security holders’ meeting and must accept the resignation unless there are exceptional circumstances; and (c) the listed issuer must promptly issue a news release with the board’s decision; further, if the board determines not to accept a resignation, the news release must fully state the reasons for that decision.
Effective August 31, 2022, the Canada Business Corporations Act (CBCA) was amended to provide, in effect, for majority voting for the election of directors of a “distributing corporation”, that is, a corporation that is a “reporting issuer” under provincial securities legislation. Specifically, section 106(3.4) of the CBCA, as amended, provides as a general rule that if, at a meeting of shareholders of a distributing corporation at which an election of directors is required, there is only one candidate nominated for each position available on the board, each candidate is elected only if the number of votes cast in their favour represents a majority of the votes cast for and against them by shareholders present in person or represented by proxy at the meeting.
Section 106(3.4) of the CBCA ties in to the amendment to the Canada Business Corporations Regulations which provides, in section 54.1(2)(b), that proxy forms allow shareholders to specify, for each candidate nominated for director, whether the vote is to be cast for or against the candidate, replacing the venerable “for” or “withhold”.
In light of new section 106(3.4) of the CBCA, a majority voting policy is redundant, as the CBCA now provides a comprehensive statutory regime for majority voting for the election of directors. As noted above, section 461.3 of the TSX Company Manual requires a majority voting policy unless the listed issuer “otherwise satisfies the Majority Voting Requirement in a manner acceptable to TSX, for example, by applicable statute”.
TSX has confirmed that a listed company subject to the CBCA “otherwise satisfies the Majority Voting Requirement in a manner acceptable to TSX”. Therefore, a TSX-listed company governed by the CBCA can repeal its majority voting policy without contravening section 461.3 of the TSX Company Manual. As section 461.3 of the TSX Company Manual is inconsistent with section 106(3.4) of the CBCA (e.g., under section 461.3, an incumbent director who does not obtain a majority vote must resign, subject to acceptance by the board of directors; under section 106(3.4) of the CBCA, an incumbent director who does not obtain a majority vote is not re-elected), it is advisable that TSX-listed companies subject to the CBCA repeal their majority voting policies. It will not be necessary for such listed issuers to apply to TSX regarding repeal.