• Changes to Director Elections in Canada
  • October 17, 2012 | Authors: Michael Brown; Alexandra Iliopoulos; H. Jane Murdoch
  • Law Firms: Cassels Brock & Blackwell LLP - Toronto Office ; Cassels Brock & Blackwell LLP - Vancouver Office
  • On October 4, 2012, the Toronto Stock Exchange (“TSX”) published notice of approval for certain amendments (“Amendments”) to its TSX Company Manual. The Amendments, when implemented, will change how future director elections for listed issuers will be conducted.


    The Amendments were published for comment on September 9, 2011. In proposing the Amendments, the TSX noted that director election practices in Canada have lagged behind those found in other major jurisdictions. Although in recent years the Canadian Securities Administrators (“the CSA”) have assumed jurisdiction over large areas of corporate governance, the TSX continues to play a role in the area and to monitor developments. The TSX also noted that plans to implement similar types of reforms by the CSA, while underway, would not be implemented in the short term.

    What You Need to Know About the Amendments

    The Amendments add sections 461.1 through 461.4 to the TSX Company Manual, and require each listed issuer to do the following:

    • Elect directors individually. The TSX will no longer permit slate voting.
    • Hold annual elections for all directors. As a result, staggered boards will no longer be permissible for TSX listed issuers.
    • Disclose annually in its management information circulars whether or not the listed issuer has adopted a majority voting policy for directors for uncontested meetings.  If the listed issuer has not adopted a majority voting policy, it must explain its practices for electing directors and why it has not adopted a majority voting policy.
    • If a majority voting policy has not been adopted, advise the TSX if a director receives a majority of “withhold” votes.
    • Promptly issue a news release providing detailed disclosure of the voting results for the election of directors.

    In adopting these rules, the TSX has not provided exemptions for foreign issuers, so those foreign issuers which have staggered boards will be required to alter their director election practices. Similarly, the Amendments do not provide an exemption for controlled companies.

    Timing - When Must You Comply With the Amendments?

    The Amendments are effective as of December 31, 2012, however security holder meetings:

            (i)  which have already been set, and

            (ii)  for which proxy materials have already been approved

    will be unaffected by the Amendments until their next security holder meeting at which directors will be elected.

    Any issuer applying for listing after December 31, 2012, as well as those with listing applications in process, will be expected to explain to the TSX how they comply with the new requirements. If they are not in compliance, they will need to explain the plan and time frame in which they will be in compliance.

    If security holder approval is required to implement the requirement to hold annual elections for all directors, for example because an amendment must be made to the issuer's articles of incorporation, the TSX will not consider the listed issuer to be in breach of that requirement if the issuer has submitted and recommended the necessary amendments for approval by security holders and security holder approval is not attained. However if those amendments are not approved by security holders, the issuer must submit and recommend the necessary amendments for approval by security holders at the annual meeting of the issuer not later than three years after the security holder meeting, until such time as the necessary amendments are approved.

    A copy of the Amendments is available on the TSX website: Amendments.

    More Changes to Come?

    With respect to the adoption of a majority voting policy, the Amendments are “comply or explain” only, so a listed issuer can still “opt-out” of majority voting for directors if it is  comfortable explaining the rationale for doing so. However, as a result of comments received, the TSX has also now published for comment proposed amendments to require majority voting for director elections. The comment period on this proposal expires on November 5, 2012.