Public companies incorporated under the Canada Business Corporations Act (CBCA) escaped the new “register of individuals with significant control”requirement that applies to private CBCA companies as of June 13, 2019, but they’re facing changes too. The changes reflect ongoing efforts to modernize the CBCA and increase corporate transparency, which could also have the effect of enhanced shareholder engagement. Here’s a look at three (more) key changes to the CBCA that affect public CBCA corporations.

1. Shareholders get a “Say on Pay”

Shareholders of public CBCA corporations will get a non-binding “say on pay” vote on the corporation’s approach to director and senior management remuneration. In line with the “say on pay” advisory vote some public companies already conduct annually as a best practice, certain CBCA corporations will be obligated to develop an approach to director and senior management remuneration, place it before the shareholders for a vote at each annual meeting and disclose the results of the vote. The vote isn’t binding on the corporation, but it does offer it the opportunity to gauge and react to shareholders’ views on the board’s approach to executive compensation, and possibly foresee shareholder activism.

Tucked into the federal omnibus budget bill, Bill C-97, this obligation isn’t yet in effect, and there’s no clear indication of when it will be. The corporations and senior management members to which this obligation applies also haven’t yet been defined, and this will only be clear after the federal government introduces and effects regulations following a public consultation period. However, it’s likely they will be consistent with the regulations relating to Bill C-25’s diversity disclosure requirements, which apply to distributing corporations, and define senior management members as executive officers per Canadian Securities Administrators’ National Instrument 51-102, Continuous Disclosure Obligations.

2. More sharing with Shareholders

Shareholders of public CBCA corporations will also get more information.

The mandatory and expansive director and senior management diversity reporting in Bill C-25 the federal government introduced in 2016 will finally kick in for all distributing corporations – but notably, unlike similar existing requirements under securities laws, venture issuers aren’t exempt from this new CBCA obligation. Effective January 1, 2020, all distributing corporations must provide shareholders with information about diversity among its directors and members of senior management, including disclosure relating to women, Aboriginal Peoples, persons with disabilities, and members of visible minorities.

In addition, Bill C-97 will require, effective on an as-yet undetermined future date, certain corporations (as with say-on-pay, not yet defined but likely to be those to which Bill C-25’s diversity reporting obligations apply) to place before their shareholders at each annual meeting reports concerning:

• The well-being of employees, retirees and pensioners.
• The recovery of incentive or other benefits included in directors and senior management members’ remuneration.

3. Broader stakeholder interests à la BCE

More stakeholders of both public and private CBCA corporations might have a better shot at having CBCA corporate directors and officers consider their interests with Bill C-97. The CBCA now codifies the ability of CBCA corporate directors and officers to consider the interests of a broader range of stakeholders when fulfilling their duty to act in the best interests of the corporation. Traditionally, directors and officers considered the best interests of the corporation and those of its shareholders to be synonymous. However, the Supreme Court of Canada’s 2008 decision in BCE Inc. v. 1976 Debentureholders broadened this to include the consideration of interests of other stakeholders. Bill C-97 amended the CBCA as of June 21, 2019 to reduce to writing this ability of directors and officers to consider other stakeholder interests, including those of:

• Employees, retirees and pensioners.
• Creditors, consumers and governments.
• The environment.

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Please contact your McInnes Cooper lawyer or any member of the Corporate Finance & Securities Law Team @ McInnes Cooper to discuss this topic or any other legal issue.

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