Business Law Blog

Amendments to the Canada Business Corporations Act (the “CBCA”) relating to the election of directors and shareholder proposals will come into force on August 31, 2022 (the “Amendments”).

Election of Directors

The Amendments require distributing corporations (which, generally speaking, are public companies governed by the CBCA) to comply with the following “majority voting” and “individual election” requirements relating to the election of directors:

1. Shareholders must be allowed to vote “for” or “against” a candidate;
2. In an uncontested election, if a candidate does not receive a majority of the votes cast “for” their election, the candidate will not be elected and the board position will remain open or, if the candidate is an incumbent director, such director may continue in office until the earlier of (i) the 90^th day after the election, or (ii) the day on which their successor is appointed or elected;
3. Subject to limited exceptions, a corporation will be prohibited, before its next meeting of shareholders where the election of directors is required, from appointing a person to the board if they were a candidate at the previous shareholder meeting and were not elected; and
4. The corporation must hold a separate vote for the election of each candidate on an annual basis.

While these changes to the CBCA generally follow the current requirements imposed by the TSX Company Manual (though they go further to implement a strict majority voting requirement), they may result in significant changes for CBCA corporations that are listed on other stock exchanges, such as the TSX Venture Exchange and the Canadian Securities Exchange, that do not currently require majority voting for the election of directors.

Shareholder Proposals

The Amendments revise the timeframe for shareholders to submit proposals to a corporation from 90 days prior to the anniversary date of the notice of meeting for the previous annual meeting of shareholders to a 60-day period commencing 150 days before the anniversary date of the last annual meeting of shareholders. This change will allow shareholders to submit proposals closer to the date of the corporation’s annual meeting of shareholders. Additionally, corporations will now be required to disclose in their management proxy circular the final date by which a shareholder proposal must be submitted for the following annual meeting of shareholders.

If you have any questions about these upcoming amendments, please contact any member of our Corporate Finance and Securities Group or Corporate Commercial Group.