Business Law Blog

The Canadian Securities Administrators (the “CSA”) have published for comment proposed amendments to the current corporate governance disclosure requirements in Form 58-101F1 - Corporate Governance Disclosure (“Form 58-101F1”) of National Instrument 58-101 – Disclosure of Corporate Governance Practices (the “Proposed Amendments”) and National Policy 58-201 – Corporate Governance Guidelines (“NP 58-201”) (the “Proposed Changes”).

If implemented, the Proposed Amendments and Proposed Changes would mandate more comprehensive disclosure regarding board nominations, board renewal and diversity for non-venture issuers.

The public comment period ends on July 12, 2023.

Background

Form 58-101F1 was last amended in 2014 to provide for disclosure regarding, among other things, representation of women on the board and in executive officer positions (the “2014 Amendments”).  More recent developments highlight that expectations relating to corporate diversity have expanded beyond gender.

• Effective as of January 1, 2020, amendments to the Canada Business Corporations Act (“CBCA”) created diversity disclosure requirements for CBCA reporting issuers (including venture issuers) requiring them to disclose the representation of all “designated groups”, which include not only women but also Indigenous peoples, persons with disabilities and members of visible minorities, on their boards and in executive officer positions.
• On October 1, 2020, institutional investors managing more than $2.3 trillion in assets signed the Canadian Investor Statement on Diversity & Inclusion, committing to integrate diversity and inclusion into their investment processes, and indicating their expectations for public companies to adopt policies, targets and timelines to improve board and senior management diversity.
• In January 2021, after extensive stakeholder consultations, the Capital Markets Modernization Taskforce established by the Government of Ontario released its final report, which recommended requiring reporting issuers to set their own board and executive management diversity targets, and to annually provide data in relation to the representation of women, BIPOC, persons with disabilities, and individuals identifying as LGBTQ+ on boards and executive management. The final report also recommended that reporting issuers set an aggregated target of 50% for women and 30% for BIPOC, persons with disabilities and LGBTQ+.

In response to this expanded focus, the CSA undertook a variety of consultations, research and annual reviews, culminating in the Proposed Amendments and Proposed Changes.

Summary of Proposed Amendments and Proposed Changes

Two versions of Form 58-101F1 are presented for comment (“Form A” and “Form B”). Both Form A and Form B would substantively maintain the existing disclosure requirements from the 2014 Amendments, and contain similar approaches with respect to additional board nomination and board renewal disclosure requirements. The primary difference between the forms is the extent to which additional diversity disclosure is mandated. 

Two versions of NP 58-201 are also presented for comment, each providing enhanced guidelines for all issuers relating to board nominations and introducing guidelines on board renewal and board diversity. The guidelines are intended to complement the disclosure requirements in the Proposed Amendments.

Diversity Disclosure

Form A would require an issuer to disclose its approach to diversity in respect of the board and executive officers, but would not mandate disclosure in respect of any specific groups, other than women. Instead, Form A would introduce the concept of an “identified group”, whose representation on the issuer’s board or in its executive officer positions has been identified by the issuer as being part of the issuer’s strategy respecting diversity.  The CSA explains that this approach is intended to be less prescriptive, by providing each issuer with flexibility to set its own policies for addressing diversity, and not requiring it to report data on any specific group. The CSA also pointed out that this removes securities regulators from defining to whom an issuer’s approach to diversity must apply (other than women).

By contrast, Form B contemplates mandatory reporting on the representation of five designated groups on boards and in executive officer positions: women; Indigenous peoples; racialized persons; persons with disabilities and LGBTQ2SI+ persons. Issuers would be required to present the data in a tabular format. The CSA explains that this conforms with the approach adopted under the CBCA (with the addition of LGBTQ2SI+ persons), and is intended to provide comparable, statistical data with respect to historically underrepresented groups.

While all participating jurisdictions are consulting on both Form A and Form B, certain jurisdictions have already expressed their preference for one proposal over the other. The regulators in British Columbia, Alberta, Saskatchewan and the Northwest Territories support Form A, whereas the Ontario Securities Commission has expressed support for Form B. The remaining jurisdictions have not yet expressed a preference.

Board Renewal

The Proposed Amendments provide for enhanced disclosure with respect to the following matters, and are substantively similar between the two proposed forms:

• how boards identify and evaluate new candidates for nomination to the board;
• whether the board has a written policy respecting the nomination process and, if not, a description of how the board carries out the nomination process. Form B would also require disclosure of whether the written policy respecting the nomination process addresses the nomination of persons from the designated groups;
• how conflicts of interest that arise or could arise during the nomination process are managed;
• whether the board has a composition matrix setting out the mix of skills, knowledge, experience, competencies and attributes that the board currently has or is looking to achieve;
• the skills, knowledge, experience, competencies and attributes of candidates that are considered when evaluating a candidate; and
• a broader description of how the board addresses renewal and a description of how any such mechanisms, other than term limits, contribute to effective board renewal.

If you have any questions about diversity disclosure, or disclosure by reporting issuers generally, please contact any member of our Corporate Finance and Securities Group.