Clarity for CBCA Incorporated Reporting Issuers

Written By Geoffrey Davis, Andrew Disipio, Kristopher Hanc and John Piasta

On January 31, 2023, the Canadian Securities Administrators (CSA) published an exemption (the Exemption) for reporting issuers incorporated under the Canada Business Corporations Act (CBCA) from the form of proxy requirement outlined in subsection 9.4(6) of NI 51-102 – Continuous Disclosure Obligations (NI 51-102) for uncontested director elections. The Exemption resolves potential conflict and confusion for CBCA incorporated reporting issuers following recent amendments to the CBCA that came into effect August 31, 2022.

Background

Historically, under NI 51-102, the form of proxy requirements provided shareholders of CBCA incorporated reporting issuers with the option to vote "FOR" or to "WITHHOLD" from voting in respect of nominee directors. A director was validly elected so long as a singular vote was cast in favour of their election. On August 31, 2022, amendments to the CBCA came into effect that require CBCA incorporated reporting issuers to provide shareholders with an option to vote "FOR" or "AGAINST" each director nominee in uncontested director elections. Following these amendments, each director nominee must receive a majority of "FOR" votes in order to be elected. This change was significant as it effectively imposed a statutory majority voting standard for CBCA incorporated reporting issuers and left affected companies and their counsel with some confusion as to which voting options to provide their shareholders on the form of proxy in uncontested director elections.

The Exemption

The Exemption provides much needed clarity on the form of proxy confusion. CBCA incorporated reporting issuers are now exempt from the "FOR" and "WITHHOLD" form of proxy requirement in NI 51-102⁠—instead, issuers must give shareholders the option to vote "FOR" or "AGAINST" nominee directors in uncontested director elections. The CSA has implemented the Exemption through local blanket orders that are substantively harmonized across the country. A copy of the CSA Staff Notice can be found here.

As a practical matter, the Exemption will be more relevant to reporting issuers listed on the TSX Venture Exchange, as reporting issuers listed on the Toronto Stock Exchange were already required to have adopted a majority voting policy.

If you have any questions regarding form of proxy requirements, please contact the Bennett Jones Capital Markets group.

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