Progress towards amending the Canada Business Corporations Act continues with Bill C-25 receiving Royal Assent on May 1. The amendments are aimed, in part, at greater alignment between the CBCA and Canadian securities laws, TSX rules and certain international best practices. Key reforms affecting public CBCA corporations are diversity disclosure, majority voting requirements and internet posting of meeting materials (notice-and-access).
The regulations under Bill C-25 are still in draft form and are expected to be finalized in the next 18-24 months. Market participants may provide comments on the draft regulations to Corporations Canada using the contact information in the Explanatory Note on Proposed Regulatory Amendments.1 Next steps are for the Department of Justice to consult on the regulations, possibly resulting in revisions; the regulations will then be published in the Canada Gazette, along with a Regulatory Impact Analysis Statement; market participants may then review and comment on the regulations as published in the Gazette. Only after these steps are completed will the regulations be finalized and proclaimed into force.
Depending on the ultimate timing of the process, CBCA corporations will likely be required to comply with the new diversity disclosure and majority voting requirements in the 2020 or 2021 meeting season. However, notice-and-access may, if desired, be used for delivering meeting materials in the meantime—see below for details.
Consistent with global trends, the federal government is aiming to increase diversity on boards of directors and among senior management. The draft CBCA regulations impose diversity disclosure requirements under a "comply-or-explain" model consistent with Canadian securities laws. However, while Canadian securities laws have been focused solely on the underrepresentation of women, the draft CBCA regulations require disclosure addressing enumerated categories derived from Canada's Employment Equity Act, namely women, visible minorities, aboriginal people and people with disabilities. Also in contrast to securities laws, the draft CBCA regulations do not contemplate any exemption for venture issuers.
Under the draft CBCA regulations, public CBCA corporations would be required to disclose
Many corporations' existing diversity policies already address race, religion, ethnicity, sexual orientation and other diversity categories. The CBCA regulations would not mandate that corporations amend their policies, but disclosure would have to be made specifically in respect of the enumerated categories. The required diversity disclosure would appear in a corporation's proxy circular or other document provided to shareholders in connection with its annual meeting.
Key features of the draft CBCA majority voting regulations are as follows:
The notice-and-access regime under securities laws permits meeting materials, including the information circular, financial statements and MD&A, to be posted on an issuer's website, with only the notice of meeting and voting card being delivered to shareholders. The draft CBCA regulations are consistent with this, so CBCA corporations would no longer need an exemption from the Director to adopt notice-and-access.
Until now, many CBCA corporations have not used notice-and-access because the Director's legislative power to grant an exemption covered only the information circular delivery requirement; the financial statement delivery requirement remained. With Royal Assent, the legislation has broadened the Director's powers, so corporations may seek a complete exemption from the physical delivery requirements pending finalization of the regulations. Corporations Canada has indicated that exemptions should be applied for at least 60 days in advance of the delivery deadline for meeting materials.
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1 See http://www.ic.gc.ca/eic/site/cd-dgc.nsf/eng/cs07274.html.
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