Key Areas of Focus for Proxy Season 2021

Reporting issuers in Canada are subject to continuous disclosure obligations imposed by securities laws and the rules of stock exchanges. From time to time, securities regulators, including the Canadian Securities Administrators (CSA) and the Ontario Securities Commission (OSC), and stock exchanges, revise these disclosure rules or publish guidance to clarify points that may be ambiguous in the rules. In addition, proxy advisory firms such as Institutional Shareholder Services Inc. (ISS) and Glass Lewis & Co. (Glass Lewis) publish annual voting guidelines, providing issuers with guidance on what the advisors consider best practices for disclosure. Finally, the Canadian Coalition for Good Governance (CCGG) publishes annual “best practice” guidelines for disclosure by reporting issuers and additional policies relating to specific matters.

This Update discusses the key themes that emerge from the relevant disclosure rule updates and guidance for the upcoming 2021 proxy season, including with respect to the COVID-19 pandemic, board diversity, board composition and corporate governance matters.

This Update does not provide a comprehensive description of the documents referenced below. These documents should be reviewed when preparing this year’s annual proxy materials. Copies of these materials can be provided by any member of our Corporate Finance and Securities Group upon request.

Highlights of Relevant Updates and Guidance

Following are highlights of the updates and guidance regarding disclosure and proxy rules for the 2021 proxy season, described in more detail below.


1. On October 29, 2020, the CSA published CSA Staff Notice 51-361 Continuous Disclosure Review Program Activities for the fiscal years ended March 31, 2020 and March 31, 2019 (the “CSA Continuous Disclosure Review Program Notice”), which reports on the results of a program put in place to improve the completeness, quality and timeliness of continuous disclosure provided by reporting issuers. The notice summarizes common deficiencies found in the disclosure of the reporting issuers. For further details, refer to our November 3, 2020 Update, CSA Announces Results of Continuous Disclosure Review for Fiscal Years 2019 and 2020 Emphasizing COVID-19 Related Disclosure.

2. On November 19, 2020, the OSC published Staff Notice 51-731 Corporate Finance Branch 2020 Annual Report (the “OSC Annual Report”), a resource to support issuers in meeting their disclosure obligations. The OSC Annual Report summarizes, among other things, key issues raised by the Corporate Finance Branch’s annual continuous disclosure review program.

3. On October 19, 2020, the OSC simultaneously published Amendments to National Instrument 51-102 Continuous Disclosure Obligations Related to Business Acquisition Report Requirements and Changes to Companion Policy 51-102CP Continuous Disclosure Obligations Related to Business Acquisition Report Requirements (collectively the “BAR Disclosure Amendments”). Previously, a non-venture reporting issuer was required to file a Business Acquisition Report (BAR) in respect of an acquisition if any one of three significance tests (the “asset test”, the “investment test” or the “profit or loss test”) in NI 51-102 exceeded 20%. The BAR Disclosure Amendments now require that at least two of the three significance tests be triggered to require a BAR filing and increased the significance threshold from 20% to 30%. For further details, refer to our August 25, 2020 Update, Canadian Securities Administrators Approve Amendments to Business Acquisition Report Requirements.

ISS/Glass Lewis

4. Proxy advisory firms ISS and Glass Lewis each published annual updates to their proxy voting guidelines for the upcoming 2021 proxy season: 2021 Americas Proxy Voting Guidelines Updates and 2021 Proxy Paper Guidelines Canada, respectively. For further details on the ISS and Glass Lewis updates, refer to our November 30, 2020 Update, Glass Lewis and ISS Release 2021 Canadian Proxy Voting Guidelines.


5. The CCGG released its annual guide on 2020 Best Practices for Proxy Circular Disclosure (the “CCGG Annual Guide”).

Legislative Amendments

On December 8, 2020, Bill 213 An Act to reduce burdens on people and businesses by enacting, amending and repealing various Acts and revoking a regulation (“Bill 213”) received royal assent. Bill 213 contemplates certain amendments to Ontario’s Business Corporations Act (OBCA) aimed at providing more flexibility to Ontario businesses. The amendments include elimination of the OBCA director residency requirement, lowering the threshold for written shareholder resolutions, and extensions related to virtual shareholder meetings. Bill 213 is not yet in force. For further details, refer to our October 9, 2020 Update, Removal of Director Residency Requirements Among Proposed Legislative Amendments Designed to Give Ontario Businesses More Flexibility.

2021 Proxy Season Themes


On December 30, 2020, the federal Minister of Innovation, Science and Industry announced that the order extending the deadline for calling the annual general meetings (AGM) and presenting financial statements has ended for corporations registered under the Canada Business Corporations Act (CBCA). The extension applied from March 13, 2020 to December 31, 2020. As of January 1, 2021, the rules for calling an AGM and presenting financial statements have reverted back to what they were before the order. The statement acknowledged it is unsafe to host public gatherings at this time and outlined three options for federal corporations to consider while remaining compliant under the CBCA: (i) hold a virtual meeting; (ii) replace the in-person meeting with a resolution in lieu of the annual general meeting; or (iii) delay calling the AGM (not-for-profits can apply online, while federally incorporated businesses and cooperatives need court approval).

On May 12, 2020, Ontario Bill 190 An act to enact one Act and amend various Acts in respect of COVID-19 and to make other amendments (“Bill 190”) received royal assent. The amendments extend the suspension period for certain OBCA provisions under O Reg 542/20 Extension of Temporary Suspension Period, Business Corporations. The extension means that corporations governed by the OBCA may continue to hold meetings virtually until May 31, 2021.

Board Diversity

Glass Lewis

Beginning in 2021, Glass Lewis will note a concern if boards consisting of more than six directors have fewer than two female directors. Furthermore, for shareholder meetings held after January 1, 2022, Glass Lewis will generally recommend voting against the nominating committee chair of boards of more than six directors if these boards do not include at least two female directors. For boards of six or less directors, the existing policy of at least one female director applies.


Similarly, beginning in 2022, ISS will recommend voting against the chair of the nominating committee of any S&P/TSX Composite Index company that has a board comprised of less than 30% women, and which has either (i) not disclosed a written gender diversity policy, or (ii) has a formal gender diversity policy that does not include a commitment to achieve 30% women on their board within a reasonable timeframe. In addition, where the minimum 30% threshold is not met, these issuers will be expected to provide a timeframe by which they expect to achieve the suggested level of female representation. For widely-held companies that are not S&P/TSX Composite Index constituents, the existing policy will continue to apply: ISS will recommend voting against the chair of the nominating committee where the company has not disclosed a formal written gender diversity policy and there are no women on the board.

Board Composition and Corporate Governance

Starting in 2021, Glass Lewis updated several policies related to board composition and corporate governance.

Board Tenure

Glass Lewis will now note potential concerns for companies in which the average tenure of non-executive directors is ten years or more, and that have had no new independent directors join the board in the past five years.

Financial Expertise in Audit Committees

Glass Lewis will now note concerns with TSX-listed companies that do not have at least one director with sufficient “financial expertise” as a member of their audit committee. The director with “financial expertise” must have experience as a CPA, CFO or corporate controller, or experience in any auditing or accounting field. “Financial expertise” is a stricter definition than the CSA’s “financial literacy” requirement.

Director Attendance and Committee Meeting Disclosure

Glass Lewis has implemented a stricter director attendance and committee meeting disclosure policy and will recommend voting against the governance committee chair of any company where (i) the records for board and meeting attendance are not disclosed, and (ii) the number of audit committee meetings that took place during the year is not disclosed. Further, Glass Lewis will now also recommend voting against the audit committee chair if the audit committee did not meet at least four times that year.

Board Skills

Glass Lewis updated its board skills policy to reflect that it may recommend voting against the chair of a company’s nominating committee if any major issues of board composition are not addressed. These board composition issues include a lack of diverse skills, a deficiency in certain key skill areas and the experience of non-executive directors.

Exclusive Forum By-Laws

Both ISS and Glass Lewis noted an increasing number of companies seeking to adopt exclusive forum provisions in their by-laws (“Exclusive Forum Proposals”). ISS and Glass Lewis expressed concern that these provisions are not in the best interests of shareholders as they limit shareholders’ choice of legal venue. While this type of by-law has been widely adopted by US companies, they are still relatively novel in the Canadian market.

Glass Lewis

Glass Lewis will generally recommend voting against Exclusive Forum Proposals unless the company (i) provides a compelling argument as to why the provision would directly benefit shareholders; (ii) provides evidence of abuse of legal process in other, non-favoured jurisdictions; (iii) narrowly tailors the provision to the risks involved; and (iv) maintains a strong record of good corporate governance practices.


ISS will determine voting recommendations on Exclusive Forum Proposals on a case-by-case basis, considering a specific set of factors. These factors include (i) the company’s jurisdiction of incorporation; (ii) the rationale for adopting the by-law; (iii) the scope of legal actions governed by the by-law; (iv) any evidence of past harm caused by shareholder legal actions originating outside of the company’s jurisdiction of incorporation; (v) the company’s corporate governance provisions and shareholder rights; and (vi) any other problematic provisions raising concerns regarding shareholder rights.

Environmental, Social and Governance (“ESG”) Disclosure

Glass Lewis has updated its voting policy on disclosure of ESG practices for S&P/TSX 60 Index companies. For the 2021 proxy season, Glass Lewis will note a concern with any such company that does not provide clear disclosure concerning the board-level oversight afforded to ESG issues. Further, as of January 1, 2022, Glass Lewis will recommend voting against the governance chair of any S&P/TSX 60 Index company which does not provide this explicit disclosure.

The disclosure of environmental and social factors was a key area of interest explored in the CCGG Annual Guide. The guide notes that investors now expect boards to address how ESG factors are impacting a broad range of areas, including corporate culture, corporate strategy and incentive structures. For additional guidance, CCGG’s 2018 The Directors E&S Guidebook provides recommendations for an effective approach to ESG matters.

To discuss any of these developments in more detail, please contact any member of our Capital Markets Group.