On August 31, 2022, amendments to the Canada Business Corporations Act (CBCA) came into force (Amendments) which require public companies governed by the CBCA to provide securityholders with options to vote “for” or “against” the election of directors. Subject to certain exceptions, the Amendments require that each director in an uncontested election (where the number of nominees equals the number of positions to be filled) must receive more votes “for” than “against” to be elected.

The Amendments created a potential inconsistency with National Instrument 51-102 – Continuous Disclosure Obligations (NI 51-102), which required that proxies provide securityholders with the option to vote “for” or “withhold” for the election of each director, but did not provide a vote “against” as an option.¹

In response to the Amendments, Dentons previously commented² that in light of this potential inconsistency, CBCA companies should consider:

• Preparing proxies for the election of directors that comply with both regimes, by including either three options (“for”, “against” and “withhold”) or a hybrid approach with two options (“for” and “against/withhold”); and
• 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.

CSA clarifies inconsistency

On January 31, 2023, the Canadian Securities Administrators (CSA) published Blanket Order 51-930 – Exemption From the Director Election Form of Proxy Requirement (Order) which immediately came into effect. The Order exempts public companies governed by the CBCA from the requirement to include a “withhold” option on proxies when voting for directors if such election is conducted pursuant to the requirements of the CBCA.³

Takeaways and looking ahead

As the Order clarifies the potential inconsistency regarding voting options, public companies governed by the CBCA may now comfortably table proxies with only “for” and “against” options in an uncontested election of directors. Similarly, such companies will likely no longer require a standalone majority voting policy as the CBCA regime governs the requirements for director elections.

The Toronto Stock Exchange (TSX) mandates that TSX-listed companies adopt majority voting policies unless its majority voting requirement is otherwise satisfied by statute. The TSX has indicated that the Amendments satisfy its majority voting requirement, but has noted to the authors that a company should still include disclosure in its annual proxy circular specifying that the company abides by the requisite CBCA majority voting requirements.

The Order is only effective until the earlier of: (a) July 31, 2024, unless extended by the Canadian securities commissions; and (b) the effective date of an amendment to NI 51-102 that addresses substantially the same subject matter as the Order. We are hopeful that the CSA will amend NI 51-102 before July 31, 2024 to codify the content of the Order.

Should you have any questions about the Amendments or the Order, please do not hesitate to contact co-authors Ben Iscoe, Ora Wexler, Alex Farcas, Jason Saltzman, Kurtis Parcells, Diana Nakka or any member of Dentons Canada’s Securities and Corporate Finance group.

1. Section 9.4(6) of NI 51-102. ↩
2. Link to article: https://www.dentons.com/en/insights/articles/2022/august/24/the-cbca-amendments-offer-so-many-options ↩
3. https://www.securities-administrators.ca/news/the-csa-exempts-cbca-incorporated-reporting-issuers-from-director-election-form-of-proxy-requirement/ ↩