The Lexpert Guides to the Leading US/Canada Cross-Border Corporate and Litigation Lawyers in Canada profiles leading business lawyers and features articles for attorneys and in-house counsel in the US about business law issues in Canada.
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10 | LEXPERT • June 2015 | www.lexpert.ca/usguide-corporate/ "Mandatory retirement is more common for large companies," Phillips says. "As for smaller companies, very few of them have term limits." DIVERSITY: WOMEN ON BOARDS e 2015 proxy season also saw a new disclosure requirement pertaining to women on boards and in senior management. "Like directors' term limits, the approach is 'comply or explain' by making the disclosure in the management information circu- lar for the company's annual meeting or in its annual information form," Phillips says. Again, these requirements apply only to TSX-listed companies. Neither Alberta nor British Columbia has adopted the rule, although companies resident there are bound by it if listed on the TSX. Even so, it's important to remember that Canada, unlike some countries, such as Norway, has no mandated quotas regarding the representation of women. But that may change. "I think that eventually we'll see more pointed regulation," Page says. "But I do hope that we don't lose sight that the reason we're interested in diversity is because we want to encourage the management benefi ts that can come from having directors with diverse experience and abilities. If we stray too far into some kind of political imperative, we'll fi nd ourselves mired in endless debate." ADVANCE NOTICE POLICIES Generally speaking, advance notice bylaws and policies require those intending to nominate a director or slate of directors to give issuers advance notice of their proposals. Although such policies are relatively new in Canada, they have particular relevance because dissidents have the ability to ambush shareholder meetings by making nominations at the meeting itself without providing advance notice to the company. e validity of advance-notice policies had not been tested until the issue made its way to the BC Supreme Court a er Mundoro Capital Inc. gave notice of its AGM to be held in June 2012. Fi een days before the meeting, the company announced that it had approved an advance-notice policy setting a deadline by which shareholders had to submit their nominations for directors. Northern Minerals Investment Corp., a Mundoro shareholder, responded by asking the court to declare the advance-notice policies unenforceable. In turn, the company postponed the AGM for one month and advised that shareholders would be asked to approve the new policies on the postponed date. At the hearing, Mundoro challenged both the board's author- ity to implement the policy and its authority to postpone the date of the AGM. e court dismissed the application, ruling that the board had authority both to implement the policy and to postpone the meeting. e ruling made it clear, however, that the decision was not a general endorsement of advance-notice policies and that each case would depend on its own facts. In this case, the court concluded that there was evidence of good faith on the part of Mundoro's MAJORITY VOTING e 2015 proxy season was the fi rst in which companies listed on the TSX were required to have a majority voting process for the election of the director. "Majority voting means that each director must be elected by more than 50 per cent of the votes cast at a shareholder meeting," says David Phillips of Bennett Jones LLP in Calgary. " at is diff erent than the corporate law requirement, where votes for director election are either 'for' or 'withheld.' Under corporate law, a vote withheld is not a vote against." Phillips lauds the new rule. "Under the previous system, there was no real method for displaying dissatisfaction with a nominee when a company put forward the same number of nominees as there were director positions," he says. "It's a good development that I think should be extended to the TSX-V." Contested meetings, where the nominations exceed the seats available, are exempt from the new rules. " at exemption refl ects the fact that these types of election are true elections where the nominees who receive the most votes ought to be elected, whether or not they garner a majority of the votes cast," Phillips explains. Also exempted are majority-controlled companies where majority voting occurs by defi nition. Non-exempt companies must describe the majority voting policy in the information circulars related to meetings at which directors will be elected. e mandatory majority voting policy follows on other rule changes adopted for the 2013 proxy meeting. ese earlier rules eliminated staggered boards and slate voting, required disclosure of whether a majority voting policy was in place and an expla- nation of why it was not in place if that was so. So, many TSX companies adopted majority voting before it became mandatory. DIRECTOR TERM LIMITS Also as of the 2015 proxy season, TSX companies have had to disclose director term limits or other board renewal mechanisms. Absent any limits, companies must explain why this is the case in the management information circular for the company's annual meeting or in its annual information form. Like the majority voting rule, this rule applies only to TSX-listed companies and not to the TSX Venture Exchange or the Canadian Securities Exchange. According to Phillips, term limits are uncommon in Canada. e Canadian Spencer Stuart Board Index reports that only 21 of the 100-largest Canadian public companies by revenue had term limits, which ranged from seven to 15 years. "Under the previous system [before majority voting], there was no real method for displaying dissatisfaction with a nominee when a company put forward the same number of nominees as there were director positions. It's a good development that I think should be extended to the TSX-V." David Phillips Bennett Jones LLP « CORPORATE GOVERNANCE