Canadian Securities Administrators Proposes Amendments and Changes to Corporate Governance Disclosure Practices and Guidelines

The Canadian Securities Administrators (CSA) has published for comment proposed amendments and changes to: (i) Form 58-101F1 Corporate Governance Disclosure (Form 58-101F1) of National Instrument 58-101 Disclosure of Corporate Governance Practices (NI 58-101), and (ii) National Policy 58-201 Corporate Governance Guidelines (NP 58-201) for non-venture issuers (the “Proposed Amendments and Changes”). If implemented, the Proposed Amendments and Changes would increase further transparency on board nominations, board renewal, and diversity, while retaining the current disclosure requirements with respect to women.

The comment period for the Proposed Amendments and Changes is open until July 12, 2023.

Background

Form 58-101F1 currently requires non-venture issuers to provide annual disclosure on director term limits and procedures of board renewal, policies and consideration given for the representation of women on the board and in executive officer positions, along with targets and the current number of women on the board and in executive officer positions.

Additionally, certain legislative measures have been introduced to emphasize the importance of considering diversity on boards and in executive officer positions beyond women. For example, from January 1, 2020, the Canada Business Corporations Act (CBCA) required distributing corporations to expand their diversity disclosure to include Indigenous peoples, persons with disabilities and members of visible minorities. For further details, see our August 8, 2019 Update, CBCA Diversity Disclosure Requirements Effective for 2020 Proxy Season.

Following the CBCA amendments, CSA Staff consulted with stakeholders to better understand their perspectives with respect to diversity. While some stakeholders expressed support for a consistent and prescriptive framework for diversity disclosure, others emphasized the need for a flexible approach and expressed concern with the disclosure of personal characteristics. As a result, the CSA published the Proposed Amendments and Changes and is seeking further commentary from market participants.

Proposed Amendments and Changes

Form 58-101F1

The CSA provided two versions of Form 58-101F1 for comment, being Form A and Form B. Each Form substantially maintains the existing disclosure requirements with respect to women, and is designed to provide investors with information that enables them to better understand how diversity, more broadly, is addressed by non-venture issuers.

Form A requires that the issuer describe how the board identifies and evaluates new candidates for nominations and addresses renewals and reports data on the representation of specific groups on the board and in executive officer positions, if collected. The general intent is to provide issuers with flexibility to design their own practices and policies, without a mandatory requirement to collect any specific data. This less prescriptive approach differs from the approach outlined in the CBCA, which requires disclosure for specifically identified groups of people. Securities regulators in British Columbia, Alberta, Saskatchewan, and the Northwest Territories support Form A.

Form B provides for mandatory reporting on board and executive officer representation of five designated groups: (i) women, (ii) Indigenous peoples, (iii) racialized persons, (iv) persons with disabilities, and (v) LGBTQ2SI+ persons. This approach is more consistent with the CBCA requirements, except that Form B also includes LGBTQ2SI+ persons. Under Form B, disclosure data will have to be reported in a standardized tabular format to promote consistency and comparability. The Ontario Securities Commission supports Form B.

Notably, the securities regulators in Quebec, New Brunswick, Manitoba, Nova Scotia, Newfoundland and Labrador, Nunavut, the Yukon, and Prince Edward Island have yet to express a preference as between Form A and Form B.

NP 58-201

The proposed changes to NP 58-201 would complement the diversity disclosure requirements contained in Form 58-101F1 by providing enhanced guidelines (not prescriptive rules) for both non-venture issuers and venture issuers regarding: (i) the responsibilities of the nominating committee, (ii) the adoption of a written policy respecting the director nomination process, (iii) the use of a composition matrix (commonly referred to as a skills matrix), (iv) effective succession planning and the mechanisms of board renewal (which may include the use of term limits, effectiveness assessments and a composition matrix), (v) the adoption of a written diversity policy, and (vi) setting objectives for achieving diversity in the composition of its board and executive officer positions (which may include diversity targets, establishing a diversity council, implementing training and leadership programs, and expanding strategic outreach directed at developing a diverse pipeline of candidates for director and executive officer positions).

For further information on the Proposed Amendments and Changes, please contact any member of our Capital Markets Group.