On March 26, 2020, Corporations Canada issued a notice (Notice) entitled “Annual meetings of federal corporations during the COVID-19 outbreak”. The Notice acknowledges that hosting in-person annual meetings during the COVID-19 outbreak would contradict public health advice to practice physical distancing and self-isolation to prevent the spread of COVID-19, and outlines options for federal corporations to consider in order to remain compliant with the Canada Business Corporations Act (CBCA).
By way of background, corporations governed by the CBCA are required under subsection 133(1) of the CBCA to call an annual meeting within 15 months of the corporation’s previous annual meeting and no more than six months after the end of the corporation’s preceding financial year. For example, a corporation governed by the CBCA with a December 31 financial year must call an annual meeting no later than June 30, 2020 (or earlier, if necessary to comply with the 15-month rule).
Delay the annual meeting – only with Court approval
One of the options described in the Notice is delaying the annual meeting. Unfortunately, the Notice states the following (and only the following) about delaying an annual meeting: “To delay an annual general meeting, federally incorporated businesses need court approval.” This statement is derived from subsection 133(3) of the CBCA, which states that despite subsection 133(1), as described above, “the corporation may apply to the court for an order extending the time for calling an annual meeting.” In short, the CBCA specifically directs corporations to apply to the court if they want to delay an annual meeting, although the CBCA does not set out any criteria to be considered by the court. The CBCA defines “court” in subsection 2(1) by province (e.g., in Ontario, the Superior Court of Justice; in Québec, the Superior Court). The proceeding would be ex parte, similar to an application to the court for approval of an arrangement under subsection 192(3) of the CBCA. The Director appointed under section 260 of the CBCA (“to carry out the duties and exercise the powers of the Director under this Act”) does not have the statutory power to grant a discretionary exemption or waiver from the requirement of subsection 133(1) of the CBCA regarding the deadline for calling an annual meeting.
What criteria will the court consider in determining whether to extend the time for calling an annual meeting? Jurisprudence on subsection 133(3) is limited; the provision, which was added to the CBCA in 2001, has been considered most often in cases of reorganization under the Companies’ Creditors Arrangement Act. One principle which emerges from the limited jurisprudence is that subsection 133(3) requires a balancing of the interests of the corporation against the risk of harm to shareholders from delaying an annual meeting. In the extraordinary context of the COVID-19 pandemic, the interest of a corporation in delaying an annual meeting may be precisely to avoid causing harm to shareholders.
Timely Disclosure recently reported that the Toronto Stock Exchange (TSX) and TSX Venture Exchange (TSXV) have granted temporary blanket relief to listed issuers in response to the COVID-19 pandemic, allowing them, among other things, to delay their 2020 annual meetings to as late as December 31. The general TSX requirement is that an annual meeting be held within six months of fiscal year end while the requirement of the TSXV is that a listed issuer hold an annual meeting not more than 15 months after its last annual meeting. For CBCA corporations, the TSX and TSXV blanket relief may be illusory unless they are able to obtain a court order delaying the annual meeting.
CBCA corporations interested in a court order to delay their 2020 annual meetings in light of the COVID-19 pandemic are invited to consult with Fasken professionals.
Virtual and partially-virtual annual meetings
The Notice also suggests that CBCA corporations that want to avoid an in-person annual meeting have two options, namely a virtual annual meeting in which participants attend exclusively through a digital channel that allows participants to speak with each other during the meeting, or a partially-virtual meeting (also known as a “hybrid” meeting), in which some participants attend in-person and others participate through a digital channel. Of course, the latter option does not entirely eliminate an in-person meeting, although the corporation can encourage shareholders to participate through the digital channel and limit attendance at the in-person meeting to a bare minimum in order to comply with directives from public health authorities. The Notice emphasizes that in order for a corporation to hold a virtual meeting, its by-laws must provide for virtual meetings or be amended to do so, with such amendment to be confirmed at the annual meeting.
Timely Disclosure has dealt extensively with virtual meetings, hybrid meetings and livestreamed annual meetings in the following articles: