The Toronto Stock Exchange (TSX) has adopted amendments (the Amendments) to its Company Manual which, effective December 31, 2012, will require TSX-listed issuers to:

  • provide for the election of directors individually and not by way of a slate;
  • hold annual elections for all directors;
  • make specified disclosures concerning majority voting for the election of directors; and
  • promptly release detailed disclosure of director election voting results.

The TSX has also published for comment further proposed changes to its Company Manual which would require TSX-listed issuers to have majority voting for director elections at uncontested shareholders meetings (the Majority Voting Proposal). The TSX has requested comments in writing with respect to the Majority Voting Proposal be submitted on or before November 5, 2012.


The TSX's stated purpose of initially proposing the Amendments was to improve corporate governance standards and disclosure for all listed issuers, and uphold security holder interests and the integrity and reputation of the Canadian capital markets.

The Amendments were originally published by the TSX for public comment in a request for comments on September 9, 2011 (the Initial Proposal) (see our September 2011 Blakes Bulletin: TSX Proposes Reforms for Director Elections).

The TSX received 35 comment letters in respect of the Initial Proposal and determined to implement the Amendments to address its concern that, in the absence of similar requirements under securities and corporate laws in Canada, Canadian investors may not have as effective a voice in electing directors as investors in other major international jurisdictions.


Pursuant to the Amendments, all TSX-listed issuers will be required to elect directors individually, rather than by slate.

With individual director elections, holders of voting securities are provided with the ability to vote "for" or "withhold" from voting separately for each director nominee. With slate elections, holders are able to vote "for" or "withhold" from voting only in respect of all the proposed directors as a slate, a practice which the Amendments will prohibit.

Although an estimated 88% of issuers in the S&P/TSX Composite Index already elect directors individually, the Amendments will clearly have an impact on the significant number of TSX-listed issuers that still use slate voting.

In addition, since the Amendments do not carve out contested elections (i.e., elections for which the number of proposed nominees exceeds the number of available board appointments) from the requirement for individual director elections, the common practice of management and dissident security holders putting forward competing board slates will apparently no longer be permitted for TSX-listed issuers.


The Amendments will require all TSX-listed issuers to hold annual elections for all directors.

Accordingly, the Amendments will eliminate staggered boards where only a subset of directors is elected each year and director terms are for more than one year. Use of staggered boards is not common in Canada, where an estimated 98% of issuers in the S&P/TSX Composite Index hold annual director elections for all directors.

The TSX expressed concern that staggered boards may entrench management and that, although shareholders are already able to submit proposals for change and requisition meetings to make changes pursuant to Canadian corporate statutes, such proposals and requisitions may be difficult and costly.

In response to comments received in respect of the Initial Proposal, particularly concerning foreign issuers, the TSX has provided in the Amendments that if security holder approval is required for a listed issuer to implement annual elections (e.g., changes to its articles or bylaws), the TSX will not consider the issuer to be in breach of the Company Manual if the issuer has submitted and recommended the necessary amendments for approval by security holders and security holder approval is not received. However, in such cases, the issuer would be required to present the resolution to security holders again at least every three years, until such time as security holder approval is received.


The TSX contends that majority voting policies support good governance by providing a meaningful way for security holders to hold directors accountable and requiring issuers to closely examine directors that do not have the requisite support. Despite the foregoing, in the Amendments, the TSX did not mandate majority voting or the adoption of a majority voting policy, but rather provided for a disclosure model. However, the TSX is now proposing in the Majority Voting Proposal to require the adoption of a majority voting standard by TSX-listed issuers (see "The Majority Voting Proposal" below).


Under Canadian corporate law, security holders are entitled to vote "for" or "withhold" their votes in respect of the election of directors to the board of an issuer. As a result, in non-contested elections, each nominee director is elected to the board provided at least a single vote is cast for the nominee.

Majority voting arrangements, common in some jurisdictions outside North America and increasingly adopted by Canadian issuers, typically provide that if a majority of votes are "withheld" from the election of a nominee director, the individual is still elected as a matter of law, but must tender his/her resignation for consideration by the board of directors. The board is generally expected to accept the director's resignation and publicly announce its decision. Of the approximately 250 issuers in the S&P/TSX Composite Index, an estimated 61% have adopted a majority voting policy.

Management Information Circular Disclosure

The Amendments will require that materials sent to security holders by listed issuers that are subject to National Instrument 51-102 – Continuous Disclosure Obligations, in connection with a meeting of security holders at which directors are being elected, to disclose whether the issuer has adopted a majority voting policy for the election of directors for non-contested meetings and if not, explain their practices for electing directors and why they have not adopted a majority voting policy. The TSX believes that disclosure of an issuer's adoption or non-adoption of a majority voting policy will enhance the governance dialogue between issuers, security holders and other stakeholders, provide valuable information for security holders, and ensure that boards of directors consider director election practices.

Election Results Reporting to the TSX

For TSX-listed issuers that have not adopted a majority voting policy, the Amendments will require such issuers to provide notice to the TSX if a director receives a majority of "withhold" votes at a security holder meeting. The TSX has noted that it intends to follow up with the issuer in such cases to understand its intentions and corporate governance practices in light of the voting results, and to follow up with the applicable director to understand how the vote results may affect his/her views about serving as a director of the issuer.


Under existing corporate and securities laws in Canada, the election of directors may be conducted by a show of hands and, under existing securities laws in Canada, if the security holder vote in respect of the election of directors is not conducted by ballot, disclosure of the votes received for each director is not required. While no changes to the TSX Company Manual were contemplated in this respect in the Initial Proposal, the TSX asked for comments as to whether it should consider requiring disclosure of voting results or, in the alternative, require that the election of directors be conducted by ballot to ensure public disclosure of the voting results.

Noting that disclosure of the votes received for each director is valuable information for security holders and other stakeholders, the TSX included in the Amendments a new provision requiring all TSX-listed issuers to promptly issue a news release providing detailed disclosure of the voting results for the election of directors. The TSX determined to not require votes by ballot and did not provide any guidance in respect of its expectations for "detailed disclosure" concerning votes conducted by a show of hands.


The Amendments have been approved by the Ontario Securities Commission and will be effective on December 31, 2012. As the TSX has provided that the Amendments will not have any retroactive effect, any security holder meetings that have already been set and for which a listed issuer has approved proxy materials by December 31, 2012, will be unaffected by the Amendments.


The Initial Proposal indicated that the TSX planned to continue to monitor the corporate governance landscape to determine if a rule requiring listed issuers to adopt a majority voting policy may be appropriate. In response to the Initial Proposal, the TSX received a number of submissions, largely from institutional investors and investor advocates, supporting mandating a majority voting process for all TSX-listed issuers.

As a result, in the Majority Voting Proposal, the TSX is proposing further amendments to its Company Manual to require TSX-listed issuers to adopt a majority voting standard. The TSX believes that this initiative will bolster Canada's reputation for supporting strong governance standards and bring Canada closer to the practices of other major international jurisdictions.

In the Majority Voting Proposal, the TSX acknowledges concerns expressed by some commentators that mandatory majority voting may lead to 'failed elections' in which less than a quorum of directors (or less than the three independent directors generally required for an audit committee) receive the requisite security holder support. However, the TSX notes that these concerns do not appear to have materialized at issuers that have already voluntarily adopted majority voting. The TSX also notes that if issuers adopt non-binding majority voting policies, unsupported directors (who are still elected as a matter of law) can resign at a later time, thereby giving time for the board to reconstitute and reorganize without being offside any laws or creating any governance issues.