In this Governance Insights article, we review 10 developments that general counsel and directors of Canadian public companies, and their investors, should know for 2025 and beyond. 1. Board Oversight: Increased Scrutiny and Importance As issuers adapt and respond to evolving and uncertain times, boards should continue to understand and manage “mission-critical” risks to ensure effective corporate oversight. High-profile incidents in 2024 involving the alleged failure of board oversight of risk management practices, together with recent Caremark litigation in the United States, highlight growing scrutiny of boards and demand a sharper focus. Boards must also grapple with an increasingly complex mix of macro risks, including potential trade wars, geopolitical risk, the effects of climate change, artificial intelligence (AI) and the growing prevalence of cyber attacks and corporate espionage. We expect that the conversation regarding the expanding dimensions of risk oversight will continue to gather steam in 2025, making it critical for boards to revisit the adequacy of their risk management policies to plan for and meet the future. For more on this topic, refer to Board Oversight (pg. 8). 2. Supreme Court Guidance on the Meaning of Material Change Canadian public companies are required to “forthwith” announce the occurrence of a “material change.” A material change includes a “change in the business, operations or capital of the issuer that would reasonably be expected to have a significant effect on the market price or value of any of the securities of the issuer.” Although the latter half of the definition, which speaks to the expected impact of the change on an issuer’s share price, has been the subject of numerous decisions, there has been little opportunity for courts and securities regulators to consider exactly what is “a change in the business, operations or capital” of an issuer? In two decisions of the Ontario Court of Appeal in 2023 – Markowich v Lundin Mining Corporation and Peters v SNC-Lavalin Group Inc. – the Court endorsed an expansive interpretation of “change” that captures a broad range of developments, from the significant down to “minor” accidents and equipment failures. Under this framework, whether any such change should be immediately disclosed turns not on the nature or substance of the change but rather on whether it would reasonably be expected to have an impact on the share price.
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Governance Insights 2025
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