New CSA Exemption Clarifies Proxy Requirements for Uncontested Director Elections of CBCA Public Companies
On January 31, 2023, the Canadian Securities Administrators (CSA) published an exemption (the “Exemption”) that exempts public companies incorporated under the Canada Business Corporations Act (CBCA) from certain requirements of Canadian securities laws that apply to the form of proxy used in uncontested director elections. The Exemption resolves a potential conflict between the requirements for the form of proxy contained in recently enacted amendments to the CBCA and those contained in Canadian securities laws.
Background
Historically, under both Canadian corporate and securities laws, shareholders have been given the option to vote “FOR” or to “WITHHOLD” from voting their shares in respect of director nominees. As a matter of corporate law, a director was validly elected so long as at least one vote was cast in favour of their election. More recently, the widespread adoption of so-called “majority voting policies”, particularly for TSX listed companies, has required directors to receive more “FOR” votes than “WITHHOLD” votes in uncontested director elections to remain on the board (subject to narrow exceptions).
On August 31, 2022, amendments to the CBCA came into effect that require CBCA public companies to provide shareholders with the option to vote “FOR” or “AGAINST” each director nominee in uncontested director elections. If a nominee receives more votes “AGAINST” than votes “FOR”, the nominee is not validly elected as a director of the corporation. Effectively, the amendments impose a statutory majority voting standard for uncontested director elections for CBCA public companies. These amendments caused some confusion among public companies and their counsel about what voting options shareholders of CBCA public companies need to be provided on the form of proxy in uncontested director elections to comply with the requirements of both the CBCA and Canadian securities laws.
The Exemption
The Exemption resolves this potential conflict by providing that, with respect to uncontested director elections, CBCA public companies are exempt from giving shareholders the option to vote “FOR” or “WITHHOLD” and must instead give shareholders the option to vote “FOR” or “AGAINST” each director nominee. The clarity that this Exemption provides to CBCA public companies is a welcome development.
For public companies (and other reporting issuers) not incorporated under the CBCA, Canadian securities laws continue to require them to provide shareholders with the option to vote “FOR” or to “WITHHOLD” from voting in respect of director nominees. It will be interesting to see if other jurisdictions in Canada follow the CBCA’s more shareholder-friendly approach to director voting.
A copy of the CSA Staff Notice can be found here. To discuss the CSA’s exemption from the director election form of proxy requirement, or for any further information, please contact any member of our Capital Markets Group.
Expertise
Authors
Insights
-
Capital Markets
Public Safety Canada Releases Updated Guidance on Modern Slavery Reporting Obligations
The Fighting Against Forced Labour and Child Labour in Supply Chains Act (the “Act”) came into force on January 1, 2024, implementing enhanced reporting requirements for certain entities to… -
Capital Markets
Ontario Court of Appeal Enforces Contractual Waiver of Statutory Dissent Rights
Ontario’s Court of Appeal concluded in a recent decision that, subject to limited exceptions, shareholders can contractually waive statutory “dissent rights”, which allow shareholders to dissent in… -
Capital Markets
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… -
Capital Markets
Access Model for prospectuses: Final amendments announced, Law360 Canada
Bill Gorman and Randy McAuley co-authored Access Model for prospectuses: Final amendments announced in Law360 Canada. Excerpt from Access Model for prospectuses: Final amendments… -
REITS and Income Securities
The Legal Industry Reviews Canada - REITs Chapter
Stephen Pincus, Brenda Gosselin, and Bill Gorman have co-authored The Benefits of Canada - Cross Border and Foreign REITs in the forth edition of The Legal Reviews Canada.To… -
Capital Markets
British Columbia Securities Commission Provides Guidance on Early Warning and Joint Actor Rules in Proxy Solicitations
Prompt, robust and wide dissemination of material information is a central tenet of Canadian securities laws. The early warning disclosure requirements contained in National Instrument…
Featured Work
-
Mergers and Acquisitions
Screaming Eagle announces merger with Lionsgate Studios
Goodmans LLP is acting for Screaming Eagle Acquisition Corp. in connection with its proposed merger with the Studio Business of Lionsgate Entertainment Corp., comprised of its Television Studio and… -
Capital Markets
StorageVault convertible debenture offering
Goodmans LLP acted for the underwriters in connection with a public offering by StorageVault Canada Inc. (“StorageVault”) of convertible senior unsecured debentures (the “Debentures”) on a bought deal… -
Capital Markets
E Automotive Inc. equity private placement
Goodmans LLP acted for E Automotive Inc. d/b/a EINC in its non-brokered private placement offering of 4,814,100 common shares ("Shares') to Intercap Equity Inc. at a price of C$4.23 per Share for… -
Capital Markets
Northwest Healthcare Properties REIT base shelf prospectus renewal and establishment of ATM program
Goodmans LLP acted for Northwest Healthcare Properties Real Estate Investment Trust (the "REIT") in connection with the renewal of its existing base shelf prospectus and filing and obtaining a receipt… -
Capital Markets
Northwest Healthcare Properties REIT convertible debentures offering
Goodmans LLP acted for Northwest Healthcare Properties Real Estate Investment Trust (the "REIT") in connection with a public offering whereby the REIT sold C$135 million aggregate principal amount of… -
Capital Markets
Brookfield Corporation $1 Billion of Medium-Term Note Offering
Goodmans LLP acted for the syndicate of agents led by CIBC World Markets Inc., in connection with a public offering of C$1 billion aggregate principal amount of medium-term notes of Brookfield…
News & Events
-
Banking and Financial Services
The Canadian Legal Lexpert Directory 2024 Continues to Recognize Goodmans
We are proud to announce Goodmans LLP has once again been recognized in the 2024 edition of The Canadian Legal Lexpert Directory.91 Goodmans lawyers have been recognized as top-tier in their… -
Banking and Financial Services
Chambers and Partners Continues to Honour Goodmans with Global Recognition
We are proud to announce Goodmans LLP has once again received top-tier recognition from Chambers and Partners in the Chambers Global 2024 Guide released today. Recognition from… -
Banking and Financial Services
Who's Who Legal Continues to Recognize Goodmans in the Canada 2023 Guide
We are pleased to share Goodmans lawyers have been recognized across Who's Who Legal's National Guide: Canada 2023. WWL National Guides identify national or regional leaders in a sector, industry…