Beginning January 1, 2020, distributing corporations (generally, public companies) governed by the Canada Business Corporations Act (CBCA) will be required to provide additional diversity disclosure in connection with their next annual meeting of shareholders held on or after such date.
These CBCA amendments implement parts of Bill C-25, An Act to amend the Canada Business Corporations Act, the Canada Cooperatives Act, the Canada Not-for-profit Corporations Act and the Competition Act (see our January 2017 Blakes Bulletin: Proposed Regulations for Revised CBCA Provide Structure to Changes Proposed in Bill C-25), which provisions were also included in the more recent Bill C-97, An Act to implement certain provisions of the budget tabled in Parliament on March 19, 2019 and other measures (see our April 2019 Blakes Bulletin: Broad Changes to CBCA Proposed: Directors’ Duties, Additional Disclosure and Annual Say-on-Pay).
CBCA AMENDMENTS
The amendments to the CBCA and the corresponding regulations broaden the current “comply-or-explain” disclosure regime in Form 58-101F1 under the Canadian Securities Administrators’ National Instrument 58-101 – Disclosure of Corporate Governance Practices (Securities Law Regime) to include such disclosure in respect of Aboriginal peoples, persons with disabilities, members of visible minorities and women, being the “designated groups,” as defined under the Employment Equity Act (Canada). Unlike the Securities Law Regime, the CBCA requirements would also apply to CBCA corporations that are “venture issuers” (e.g., those not listed on a senior stock exchange like the Toronto Stock Exchange) or that are either public companies or listed on a stock exchange, in each case outside of Canada.
Commencing with their 2020 annual shareholder meetings, the applicable CBCA corporations will need to place information before their shareholders (e.g., in their management proxy circulars) that, among other things, indicates whether or not the corporation has adopted a written policy relating to the identification and nomination of members of the designated groups for election as directors. If the corporation has such a policy, it must also provide a summary of the policy’s objectives and key provisions, a description of the measures taken to ensure the policy is effectively implemented, a description of both the annual and cumulative progress in achieving the objectives, and disclosure concerning whether or not (and, if so, how) the corporation’s board or relevant committee measures the effectiveness of the policy. Where the corporation has not developed such a policy, it must explain why not.
Disclosure is also required in respect of whether or not the board or nominating committee considers the level of representation of the designated groups currently on the board in identifying and nominating board candidates for election or re-election. In addition, corporations must disclose whether or not they consider the level of representation of designated groups in appointing members of senior management (i.e., “executive officers” under the Securities Law Requirements) and, in each case, how such level is considered or why the level of representation is not considered, as applicable. Further, disclosure will be required relating to whether or not the corporation has, for each designated group, adopted a target number or percentage, or range, for members of the specific group to hold a board seat or be a member of senior management by a specific date as well as, for each designated group for which a target has been adopted, disclosure of the corporation’s progress in achieving the target, on an annual and cumulative basis and, for each designated group for which a target has not been adopted, why the corporation has not adopted a target.
The applicable corporations must also disclose, for each designated group, the number and proportion, expressed as a percentage, of members of such group who hold board positions at the corporation and are members of senior management of the corporation and all of its major subsidiaries. Finally, disclosure must also include whether or not the corporation has adopted term limits for its directors or other mechanisms for board renewal and either a description thereof or the reasons why it has not adopted such limits or mechanisms.
Members of a corporation’s board and senior management will need to be familiar with the definitions of the component of the designated groups as found in the Employment Equity Act (Canada) and self-identify in order for the corporation to provide accurate disclosure, although corporations are not required to attribute particular directors and executives to each category.
For more information, please contact:
Matthew Merkley 416-863-3328
David Bristow 416-863-5829
or any other member of our Capital Markets or Corporate Governance groups.
