On September 9, 2011, the Toronto Stock Exchange (TSX) published for public comment proposed amendments to Part IV of the TSX Company Manual intended to improve corporate governance standards and disclosure for TSX listed issuers (First Proposal). The First Proposal sought to require issuers listed on the TSX to have annual elections of directors, elect directors individually, and annually disclose in their Management Information Circulars (MIC) whether a majority voting policy for uncontested meetings was adopted and, if not, (i) provide an explanation as to why the policy was not adopted and (ii) advise the TSX when a director receives a majority of “withhold” votes. Subsequent to receiving comments on the First Proposal, on October 4, 2012, the TSX published a notice of approval announcing its adoption of, and the Ontario Securities Commission’s approval of, the First Proposal together with some non-substantive amendments (collectively, the Final Amendments). Concurrently on October 4, 2012, the TSX published a new request for comments proposing mandated majority voting for director elections at uncontested meetings of TSX listed issuers (Second Proposal). This bulletin provides a short summary of the Final Amendments and the Second Proposal. Readers are also directed to our firm bulletin dated October 13, 2011 entitled TSX Returns to the Corporate Governance Playing Field - Election of Directors, which provides a summary of the First Proposal.

Summary of the Final Amendments

After reviewing the thirty-five comment letters received by the TSX in response to its request for comments on the First Proposal, the TSX adopted the following Final Amendments:

  1. Annual Director Elections: AllTSX listed issuers must hold annual elections for all directors. This amendment helps improve accountability by providing securityholders with the opportunity, on an annual basis, to hold each director answerable for his or her actions or inactions.
  2. Individual Election of Directors: Meeting materials for the election of directors of TSX listed issuers must provide for voting for each director individually rather than by slate. This amendment allows securityholders to vote “for” or “withhold” voting for each individual director nominee.
  3. Disclosure of Majority Voting Policy: All TSX listed issuers must disclose annually in their MIC whether they have adopted a majority voting policy for election of directors at uncontested meetings.

In contrast to plurality voting, where a director or slate is elected if at least one vote is cast “for” the director or the slate regardless of the number of “withhold” votes cast, majority voting calculates both the number of “for” and “withhold” votes cast for each individual board nominee. Effectively, the “withhold” votes become votes “against” the nominee. Often majority voting policies require those directors who receive a majority of “withhold” votes to tender their resignation. Such resignation is usually accepted by the board, either by practice or as required by the majority voting policy. A public announcement by news release would follow the board’s decision.

If a TSX listed issuer has not adopted a majority voting policy for election of directors at uncontested meetings, the issuer must explain in its MIC the practice it employs for such elections and explain why it has not adopted a majority voting policy. In addition, those TSX listed issuers who have not adopted a majority voting policy must advise the TSX when a director receives a majority of “withhold” votes after each meeting of securityholders.

  1. Disclosure of Voting Results: TSX listed issuers must disclose, in a news release, details of voting results promptly following an election of directors.

The Final Amendments become effective on December 31, 2012 and will have no retroactive effect. Therefore, securityholder meetings that have already been set and for which proxy materials have already been approved will not be affected. All applicants for listing on the TSX after December 31, 2012 or applicants with existing applications currently in progress must disclose to the TSX whether they are in compliance with the Final Amendments and, if not, provide a plan and time frame for when they will be in compliance. All TSX listed issuers and applicants must be in compliance with the Final Amendments by December 31, 2013, unless implementation of the annual election rule would require a change to an issuer’s articles or by-laws and the issuer’s securityholders do not approve the required resolution. However, the issuer would be required to present to securityholders again, and support the approval of, the necessary resolution no later than three years after any such non-approval.

Summary of the Second Proposal: Mandated Majority Voting

The Second Proposal suggests amending the Final Amendments, discussed above, to make majority voting mandatory at uncontested securityholder meetings. The Second Proposal would replace the “comply or explain” optional majority voting model discussed above. The Second Proposal provides that in satisfaction of the majority voting requirement, TSX listed issuers may adopt a majority voting policy that requires directors who receive a majority withhold vote to immediately tender their resignation, effective upon acceptance by the board. The proposed majority voting rule further requires that the policy adopted by the issuer must require the board to consider the resignation and disclose its decision and reasons by news release no later than 90 days after the date of the resignation. According to the Canadian Coalition for Good Governance, 61% of issuers listed on the S&P/TSX Composite Index currently have majority voting.

To prevent breaches of corporate or securities laws in circumstances where majority voting may result in too few directors being elected to achieve quorum or committee requirements, the TSX permits the adoption of a non-binding majority voting policy. A non-binding majority voting policy would allow those directors who do not receive sufficient support to remain elected and resign at a later date once the board is reconstituted.

The Second Proposal is subject to a 30-day comment period ending November 5, 2012 and is expected to become effective on December 31, 2013, following the Ontario Securities Commission’s approval of the Second Proposal and the issuance of a public notice.


The driving force behind both the TSX’s Final Amendments and its Second Proposal is to improve corporate governance standards by enhancing transparency, heightening director accountability and facilitating greater governance dialogue between issuers, securityholders and other stakeholders. The TSX contends that these amendments will help align Canada with the best practices of other major international jurisdictions and will help strengthen the integrity and reputation of the Canadian capital market.