New Rules for CBCA Companies

Written by Gary S.A. Solway, James T. McClary and Bradley M. Eidsness

Companies incorporated under the Canada Business Corporations Act (CBCA) will need to consider new rules regarding director elections, diversity disclosure, shareholder communications and other matters.

On May 1, 2018, Bill C-25—an Act to amend the Canada Business Corporations Act, Canada Cooperatives Act, the Canada Not-for-profit Corporations Act and the Competition Act, SC 2018, c 8 (the "Bill")—received Royal Assent. The Bill, introduced in 2016, represents the first substantive changes to the Canada Business Corporations Act since 2001. Regulations required to implement some of the changes are expected to be finalized within 18 to 24 months.

Director Election

The CBCA will now require that the election of directors of public corporations occur annually. Currently, the CBCA requires the election of directors to occur every three years. Director voting will be conducted on a candidate-by-candidate basis (as opposed to slate voting).

Board and Senior Management Diversity Disclosure

The CBCA will require public corporations to provide information to shareholders at every annual meeting with respect to diversity among the directors and senior management of the corporation. The draft regulations to the Bill contemplate that the required disclosure will broaden the existing reporting requirements for women under National Instrument 58-101 Disclosure of Corporate Governance Practices to members of "designated groups" as defined by the Employment Equity Act, SC 1995, c 44.

Shareholder Communications

The CBCA will allow public corporations to use electronic communications to distribute required documents, including management proxy circulars and financial statements, through the introduction of a "notice and access" system in accordance with the "Notice and Access" provisions of National Instrument 54-101 Communications with Beneficial Owners of Securities of a Reporting Issuer and National Instrument 51-102 Continuous Disclosure Obligations. However, non-public corporations will still be required to send out paper-based communications to each shareholder, unless a shareholder informs the corporation that they do not want to receive such communications.

The Bill contained some other minor amendments, including a prohibition on issuing "bearer form" share certificates, warrants, or similar securities.