13. Shareholder Proposals Shareholders of Canadian corporations have long had the ability to use the shareholder proposal regime to submit nominations for the election of directors. Nominees submitted by a proposal must be included in the management proxy circular for the corporation’s annual general meeting. To be eligible to submit a shareholder proposal, a shareholder must hold voting shares equal to at least 1% of the outstanding voting shares or whose fair market value is at least $2,000. Such shares must have been held for at least six months prior to the shareholder submitting the proposal. 19 In addition to these requirements, a shareholder proposal to nominate a director must be signed by one or more holders of shares representing in the aggregate not less than 5% of the shares entitled to vote at the meeting. 20 There is no limit on the number of nominees that may be submitted by proposal. The corporation can reject a proposal on a number of grounds, including that the proposal does not relate in a significant way to the business or affairs of the corporation. In addition, a corporation is not required to include a shareholder proposal in its management proxy circular if the proposal is not submitted to the corporation during the prescribed period. CBCA amendments that came into effect in 2022 require proposals to be submitted at least 90 days (and not more than 150 days) before the anniversary of the prior year’s annual meeting of shareholders 21 (other corporate statutes, such as the Ontario Business Corporations Act ( OBCA ) calculate the deadline differently). This change (from the former requirement of at least 90 days prior to the anniversary of the previous year’s notice of meeting ) effectively relaxes the deadline for submission of a proposal to three months, from four to six months, prior to a meeting. This will allow for later submissions of shareholder proposals and could lead to greater use of the proposal mechanism for director nominations. That said, these long-available Canadian shareholder proposal provisions have rarely been used for director nominations. This is likely due to several factors: – Prior to the 2022 CBCA amendments, the deadline for submitting a proposal typically occurred four to six months prior to a meeting date and would have often passed before a dissident had firmed up its plans to take action. – The statutory word limitation is not conducive to advocacy. The word count of the proposal and the supporting statement together cannot exceed 500 words. 22
19 CBCA, s. 137(1.1) and CBCA Regulations, s. 46. 20 CBCA, s. 137(4). 21 CBCA, s. 137(5)(a) and CBCA Regulations, s. 49. 22 CBCA Regulations, s. 48.
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Guide to Shareholder Activism and Proxy Contests in Canada
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