CSA Provides Further Updated Guidance on Virtual Shareholder Meetings

On February 22, 2024, the Canadian Securities Administrators (CSA) recently published updated guidance on virtual shareholder meetings following initial guidance provided in February 2022.  See our March 1, 2022 update, CSA Provides Updated Guidance on Virtual Shareholder Meetings.

After gaining popularity during the COVID-19 pandemic, virtual shareholder meetings have remained common for Canadian public companies despite the elimination of public safety restrictions on in-person gatherings. A virtual meeting may be conducted entirely virtually, in place of an in-person meeting, or through a “hybrid” format held in person while also allowing participation through electronic means.

The CSA’s latest guidance responds to concerns raised by some stakeholders regarding their experience in participating in virtual-only meetings, including the challenges faced by shareholders in exercising their rights and expressing themselves to management, and difficulties faced by shareholders in accessing and participating in such meetings.

In addition to the CSA, virtual meetings have attracted the focus of proxy advisory firms and shareholder advocacy groups, a trend that is expected to continue as virtual meetings remain prevalent.

Disclosure Regarding Shareholder Access and Participation

Issuers should provide clear and comprehensive disclosure in their management information circulars and associated proxy materials with respect to the logistics required to access, participate in and vote at a virtual shareholder meeting.

Issuers can do this by providing in their proxy-related materials plain language explanations of how both registered and beneficial shareholders can participate in a meeting, including information on:

• the registration, authentication and voting process for both registered and beneficial shareholders, and how shareholders can obtain assistance if difficulties arise during the registration, authentication and voting process; and
• how shareholder participation at the virtual meeting will be accommodated and managed during the meeting, including:
  • information on the procedures to allow shareholders to send or ask questions before and/or during the meeting;
  • how shareholder questions will be addressed during the meeting, or after if there is insufficient time to address all questions at the meeting; and
  • instructions for voting at the meeting.

Issuers should also provide contact information where shareholders can obtain technical support if difficulties arise during the registration process or while accessing or participating in the meeting.

Shareholder Participation

The CSA notes that, for many investors (and in particular retail investors), an issuer’s annual meeting has traditionally represented the only opportunity for meaningful engagement with management. Against this backdrop, the CSA encourages issuers to provide for an ease, level and quality of shareholder participation at a virtual meeting that is comparable to what a shareholder could reasonably expect if they were attending an in-person meeting, including by:

• simplifying registration and authentication procedures;
• providing shareholders with opportunities to make motions or raise points of order;
• ensuring shareholders have the ability to raise questions and provide direct feedback to management in any Q&A segment of the meeting;
• indicating where shareholder proposals will be presented and voted on at the meeting, coordinating with proponents of those proposals before the meeting, and ensuring proponents are given a reasonable opportunity to speak to the proposal and respond to any questions that arise from the proposal;
• ensuring any virtual platform used by an issuer has functionality permitting shareholder participation to the fullest extent possible; and
• ensuring the Chair is experienced and knowledgeable in the technological platform being used for the virtual meeting.

The CSA encourages issuers to review their governing corporate legislation and organizing documents when contemplating the format and conduct of their shareholder meetings. The CSA also recommends that issuers consult and follow accepted best practices relating to the conduct of virtual shareholder meetings, including considering holding hybrid meetings to allow both in-person and virtual participation.

Proxy Advisory Firms and Shareholder Advocacy Groups

In addition to the CSA’s guidance, issuers should be cognizant of the attention paid – and certain criticism expressed – by proxy advisory firms and Canadian shareholder advocacy groups relating to virtual meetings and, in particular, those held in virtual-only format.

Mindful that virtual-only meetings have the potential to curb shareholders’ ability to meaningfully communicate with management, proxy advisory firm Glass Lewis will look for robust disclosure in a company’s management information circular that assures shareholders will be afforded the same rights and opportunities as they would at an in-person meeting, including disclosure that:

• addresses shareholders’ ability to ask questions during the meeting, including time guidelines for shareholder questions, rules around what types of questions are allowed, and rules for how questions and comments will be recognized and disclosed to meeting participants;
• sets out procedures, if any, for posting appropriate questions received during the meeting and the company’s answers, on the investor page of their website as soon as is practical after the meeting;
• addresses technical and logistical issues related to accessing the virtual meeting platform; and
• sets out procedures for accessing technical support if difficulties accessing the virtual meeting arise.

Glass Lewis will generally recommend voting against the chair of an issuer’s governance committee where the issuer plans to hold a virtual-only meeting and does not provide such disclosure, the disclosure is ambiguous, or the issuer discloses that shareholders participating virtually will not be afforded the protections outlined above.

Meanwhile, the Canadian Coalition for Good Governance (CCGG) has also expressed concerns with virtual-only meetings, suggesting that the technology can be used to limit shareholder participation. The CCGG advocates instead for hybrid meetings that enable both virtual and in-person attendance and protect the rights of shareholders to attend in person while keeping the benefits of increased shareholder participation that can come through virtual meetings.

Considerations for Future Meetings

While we expect virtual meetings will continue to remain popular in Canada in the near term, issuers should be mindful of the CSA’s recent guidance and concerns raised by proxy advisory firms and shareholder advocacy groups for meetings scheduled to be held during the 2024 proxy season and beyond.

A hybrid meeting – coupled with proper disclosure in the issuer’s management information circular and a virtual component that provides shareholders with the same rights and opportunities as those in attendance at an in-person meeting – arguably provides the “best of both worlds” from a governance perspective by encouraging broader shareholder participation while ensuring that those who wish to attend meetings in person may do so.

As always, if a shareholder meeting is contested, it is recommended that issuers consult their legal advisors on the suitability of holding a virtual meeting. Issuers should also consider negotiating a meeting protocol agreement with the dissident before a contested meeting. Issuers should also ensure virtual shareholder meetings are held in accordance with the applicable corporate statutes, constating documents and securities law.

For further information, please contact any member of our Capital Markets Group or Mergers and Acquisitions Group.