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The changes to director voting for companies incorporated under the Canada Business Corporations Act (CBCA), announced earlier this year, came into effect on August 31, 2022.
The CBCA amendment states that voting for individual director nominees in an uncontested election is changing from “for” and “withhold” to “for” or “against”. In addition, there is a majority voting requirement that a director must receive at least 50% of the vote to remain on the board, otherwise he or she must resign.
There are several articles from Canadian law firms outlining the amendment and the impact for CBCA companies, including ones from Stikeman Elliott and Dentons. As you will note, the Dentons article highlights a potential conflict between the CBCA amendment and Canadian securities legislation National Instrument 51-102 – Continuous Disclosure Obligations.
Discrepancy between corporate and securities law
The securities legislation NI 51-102 directs that director voting options must be “for” and “withhold”. Once the CBCA amendment became effective, a public company governed by the legislation is required to use “for” or “against” voting options for directors. According to the Dentons article, “This creates a potential discrepancy between corporate and securities law requirements” and it may be necessary to still include a “withhold” option for director elections following August 31, 2022. This could result in a need for issuers to have three options for director voting: “for”, “against” and “withhold”, or potentially “for” and the hybrid “against/withhold”.
According to the Dentons article: “As such, and until such time as the [Canadian Securities Administrators] CSA issues a statement to address this discrepancy, CBCA public companies should consider adopting a majority voting policy that mirrors the requirements of the CBCA but which specifies that a director is only elected if the number of ‘for’ votes exceeds the aggregate of ‘against’ and ‘withhold’ votes.”
In response to the potential conflict identified by Dentons, Computershare has contacted some of the provincial securities regulators to raise the conflict perspective and request further clarity.
Issuers to consult legal counsel
While we are in the early days for the CBCA amended legislation, the majority of annual meetings for CBCA public companies that Computershare has supported have opted to align with the CBCA legislation and use “for” and against” for director voting.
CBCA-incorporated companies will need to consult with their legal counsel and determine which option to use for election of directors.
Regardless of the voting options selected – “for” and “against” or “for” and “against/withhold” – Computershare’s shareholder meeting solution is adaptable and can accommodate all options to help ensure proxies are accurately tabulated and reported for your next annual meeting.
This article is provided for general informational purposes only and does not constitute legal or other professional advice or opinion.