• Board Developments - New TSX Majority Voting Rules and OSC Proposals for Gender Diversity
  • March 10, 2014 | Author: Robert N. Black
  • Law Firm: Davis LLP - Toronto Office
  • The Toronto Stock Exchange has adopted amendments to its rules relating to the election of directors. The new rules will require that, subject to certain exemptions, each director of a TSX-listed issuer will be required to be elected by a majority of the votes cast with respect to his or her election. These new rules will not apply to issuers listed on the TSX Venture Exchange.

    The majority voting rules will come into effect on June 30, 2014. Each TSX-listed issuer with a fiscal year-end falling on or after June 30, 2014 must comply with the majority voting rules at its first annual meeting following that date. This means that for TSX-listed issuers with a calendar year-end, these new rules will apply to the 2015 proxy season.

    Requirements of the New TSX Majority Voting Rules

    The rules require that each TSX-listed issuer adopt a policy which must provide for the following:

    • Any director not elected by a majority of the votes cast at his or her election must immediately tender his or her resignation.

    • The board shall determine whether or not to accept the resignation within 90 days after the date of the vote. The rules further provide that the board shall accept the resignation absent exceptional circumstances.

    • The resignation will be effective when accepted by the board.

    • The director in question may not participate in any meetings of the board or any sub-committee at which the resignation is considered.

    • The company must promptly issue a news release with the board’s decision, a copy of which must be provided to the TSX.

    • If the board does not accept the director’s resignation, then the board must state the reasons why in its news release.

    • Any policy adopted with respect to these rules must be fully described on an annual basis in the materials sent to security holders in connection with a meeting where directors are being elected.


    The majority voting rules will not apply at contested meetings (i.e. a meeting where the number of directors nominated is greater than the number of seats available on the board).

    TSX listed-issuers that are majority controlled will be exempted from the majority voting requirements. Majority controlled issuers are issuers where a security holder holds more than 50 percent of the voting rights for the election of directors. However, an issuer relying on this exemption must disclose in its annual materials sent to security holders in connection with a meeting electing directors, its reliance on the exemption and its reasons for not adopting majority voting.

    A TSX-listed issuer can also satisfy the new majority voting rules in a manner otherwise acceptable to the TSX, for example by amending its articles or by-laws.

    OSC Proposes Gender Diversity Disclosure for Boards and Executive Management

    Further to a consultation paper published last summer, the Ontario Securities Commission has proposed amendments to disclosure requirements relating to the appointment of women to boards and as executive officers. These proposed amendments would apply to issuers listed on the TSX and other non-venture issuers which are “reporting issuers” under Ontario securities law. The proposed amendments are to Form 58-101F1 Corporate Governance Disclosure of National Instrument 58-101 Disclosure of Corporate Governance Practices.

    Rather than setting quota requirements for appointing women, the proposed amendments contemplate a “comply or explain” system. Reporting issuers, other than venture issuers, will be required to disclose whether they have adopted certain policies for the appointment of women, the effectiveness of the policies and information on the numbers and percentage of women on their boards and in executive positions. Where reporting issuers have chosen not to adopt such policies, they would be required to explain why they have not.

    More specifically, the proposed amendments contemplate disclosure of the following:

    • Whether there are director term limits and, if not, why not.

    • Whether the issuer has adopted a policy for the identification and nomination of women directors and, if not, why not. If such a policy has been adopted, the disclosure must also provide a summary of the policy’s objectives and key provisions, measures taken to ensure the policy has been implemented effectively, annual and cumulative progress on achieving the objectives and whether, and if so how, the effectiveness of the policy is measured.

    • Whether and, if so how, the issuer considers the level of representation of women in the director identification and selection process and, if not, why not.

    • Whether and, if so how, the issuer considers the level of representation of women in executive officer positions when making such appointments and, if not, why not.

    • Whether the issuer has adopted targets regarding the number or percentage of women on its board or in executive officer positions. If no targets have been adopted, then the issuer must disclose why. If targets have been adopted, the issuer must disclose its annual and cumulative progress relating to those targets.

    • The number and percentage of directors and executive officers of the issuer who are women.

    The proposed amendments are open for comment until April 16, 2014. It will be interesting to see what path the OSC chooses to take on the issue of gender diversity following the comment period and what effect the proposed amendments would have if they are instituted.