the statute grants discretion to permit (or otherwise empowers permitting) an unelected director to continue in office as a holdover: “[the unelected incumbent] director may continue in office until the earlier of (a) the 90th day after the day of the election and (b) the day on which their successor is appointed or elected” (emphasis added). What the rule does not do, however, is make clear to whom such power or discretion has been granted – is it to the unelected director or is it to the board or the corporation? Moreover, if discretion must be exercised (whether by the corporation or otherwise), then the director’s uninterrupted continuation in office may in fact be disrupted by the period created between the close of the meeting and the decision for the holdover director to continue. It remains to be seen how issuers and their counsel will address this seemingly unintended legislative ambiguity. One solution may be for issuers to amend their bylaws to prospectively provide that any unelected incumbent director “shall” continue in office until the earlier of the expiry of the grace period permitted by the CBCA and the director’s resignation. However, if issuers automate the process for holdover directors in such a fashion, they will also need to preserve flexibility to remove holdover directors prior to the expiry of the grace period. For that reason, we may see issuers establishing appropriate resignation arrangements with their directors. A potential example of such an arrangement may be found in the issuer-adopted majority voting policies currently mandated by the Toronto Stock Exchange (TSX) (discussed below), which require an unelected incumbent director to tender their resignation to the
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Governance Insights 2022
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