Federal bill would change how corporate directors are elected
This article looks at Bill C-25, including how it changes elections for directors and its new diversity requirements.
The federal government has tabled a bill in the Senate that will make a number of important changes to the Canada Business Corporations Act (CBCA), the Canada Cooperatives Act, the Competition Act, and the Canada Not-for-profit Corporations Act. As Corporations Canada points out, Bill C-25 makes three important changes to how corporations are governed and regulated: it gives shareholders the ability to vote against directors, changes how documents for shareholder meetings are to be sent to and accessed by shareholders, and requires certain corporations to report the diversity of their directors and senior management.
Voting against directors
As Canadian Underwriter reports, the biggest change that C-25 would bring about is giving shareholders the ability to vote against directors. Currently, shareholders can either vote for a director or withhold their vote. In situations where only one person is vying to fill a vacancy on the board of directors, just a handful of “for” votes can get that person elected, regardless of how many shareholders withheld their votes. If C-25 passes in its current form, then a majority of “against” votes would result in that individual not getting elected.
Additionally, directors would have to stand for election as individuals. That is a slight change from current law that allows a slate of directors to be elected through on a single vote.
Notice and access changes
The bill will also change current CBCA requirements concerning documents required for shareholder meetings, such as financial statements, are to be both sent and accessed by shareholders. Current CBCA regulations require those documents to be sent in paper form, which is both costly and time consuming for corporations. Bill C-25 sets up a ‘notice and access’ system that allows those documents to be sent to shareholders electronically, something that many provincial securities commissions already allow.
Diversity disclosure requirements
Finally, the bill would require certain public companies to disclose how many women are on their board of directors and what diversity policies they have in place. Currently, the bill does not require corporations to actually institute policies that would increase diversity on their boards. However, if the new disclosure requirements don’t lead to an increase in diversity on boards within the next couple years then the federal government has indicated it will look into stricter measures.
Corporate and business law
These changes are important for federally incorporated businesses to be aware of. They are also a reminder of how the legal and regulatory requirements that businesses face a re constantly evolving. A business law firm can help businesses, both big and small, ensure that they are on the right side of the law, thus helping reduce their liability exposure and providing them with the security and peace of mind they need to keep operating successfully.