19. Classified Boards Canadian corporate statutes generally provide that shareholders may, by vote of a simple majority at a special meeting, remove one or more directors from office and elect their replacements. This right, coupled with the right of shareholders to requisition meetings to remove directors, prevents Canadian corporations from implementing “classified” or “staggered” boards in which directors are elected for multiple-year terms with only a subset of the board subject to turnover at any given annual meeting. Moreover, the TSX rules prevent classified boards for TSX-listed issuers by requiring that shareholders be permitted to vote on the election of all directors at each annual meeting of shareholders. As a result, at each annual meeting, a dissident has the opportunity to take control of the board. 20. Majority Voting Majority voting is firmly entrenched in Canada for TSX-listed issuers, with the result that shareholders have a meaningful opportunity to annually express their views on individual directors in director elections. Majority voting replaces the historical practice of electing directors as a slate on a plurality basis in uncontested elections, requiring that shareholders vote “for” or “against” individual director nominees, rather than “for” or withhold.” Under the TSX rules, all TSX-listed issuers (other than majority-controlled corporations) must have a majority voting policy and disclose the results of that vote. In an uncontested election, each director nominee is required to receive at least a majority of the votes cast (50% plus 1 “for” votes). An incumbent director nominee who fails to receive the requisite vote must tender his or her resignation for acceptance by the board and the board must accept the resignation within 90 days of the date of the election, absent “exceptional circumstances.” To date, several reporting issuers have relied on the exceptional circumstances carve-out to decline the resignation of an incumbent director who failed to receive the requisite majority vote, allowing the director to remain on the board, despite the will of shareholders to the contrary. Once a board decision is made, the issuer must promptly issue a news release announcing such decision, including the reasoning if the board has decided to decline the incumbent director’s resignation. For corporations incorporated under the CBCA, majority voting for directors is now the law. Effective August 31, 2022, directors of reporting issuers governed by the CBCA must receive a majority of the votes cast (or such greater percentage as specified in the articles), failing which he or she will not be elected as a matter of law. Where such director nominee is an incumbent director, he or she will still be permitted to continue in office until the earlier of (i) 90 days following the date of the election and (ii) the date on which a successor is appointed or elected. In limited circumstances, where it is required to satisfy statutory director independence or Canadian residency requirements, the board may fill such vacancy by reappointing the incumbent director who failed to be elected. If the shareholders fail to elect the number or minimum number of directors required under the corporation’s articles, the elected directors may exercise all their powers as directors provided that they constitute a quorum.
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Davies | dwpv.com
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