On March 30, 2020, in connection with its state of emergency declared on March 17, 2020 (Declared Emergency), the Ontario government issued an order (Order) under the Emergency Management and Civil Protection Act (Ontario) to temporarily suspend and replace, among other things, certain provisions of the Business Corporations Act (Ontario) (OBCA) in respect of shareholder meetings.
The Order provides for two types of “temporary amendments” to the OBCA relating to shareholder meetings:
- time extensions for holding annual meetings; and
- provision for virtual shareholder meetings for all OBCA corporations.
The Order permits an OBCA corporation to delay holding its annual shareholder meeting for a specified number of days following the termination of the Declared Emergency, namely:
- 90 days, when such meeting would otherwise need to be held during the Declared Emergency; or
- 120 days, when such meeting would otherwise need to be held during the 30 days following the termination of the Declared Emergency.
When reviewing the Order, we noted that while the OBCA requires a corporation to “call” an annual meeting within 15 months of the corporation’s previous annual meeting (or, with respect to the corporation’s first shareholder meeting, within 18 months of the corporation coming into existence), the Order purports to alter the last day on which an annual shareholder meeting can be “held”. The analogous requirement in the federal business corporations statute also obliges a corporation’s board to “call” the annual meeting within a certain time period, while the Alberta and British Columbia statutes require that it be “held” within a certain time period. Until further clarification is available, it may be prudent to read the Order conservatively as generally requiring the board to “hold” the annual meeting within the 15- (or 18-) month period, as applicable.
We also noted that the Order does not relieve corporations from the OBCA’s provisions regarding the preparation of financial statements. Unless the audit requirement is unanimously waived by a corporation’s shareholders, a corporation is required to place audited financial statements before its annual shareholder meeting for a period that would exceed twelve months in the event that a corporation’s financial year end is, for example, December 31 and the annual shareholder meeting is held after June 30. We have requested clarification from the Ontario government and will provide an update as appropriate.
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 to, among other things, delay their annual shareholder meetings to as late as December 31, 2020. The general TSX requirement is that an annual meeting be held within six months of financial 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. Reporting issuers listed on either the TSX, TSXV or another recognized exchange will need to ensure that they meet their obligations under stock exchange rules and policies, in addition to corporate law obligations.
Under the OBCA, meetings of shareholders may be held virtually unless the corporation’s articles or by-laws provide otherwise. Specifically, the OBCA provides that a meeting of shareholders may be held by telephonic or electronic means, and a shareholder who, through those means, either votes at the meeting or establishes a communications link to the meeting is deemed to be present. Any such “virtual” meeting is deemed to be held at the corporation’s registered office. An OBCA corporation could also host an in-person gathering where, for example, the board and senior management would attend at a conference centre and could invite others to join them, but the meeting would nonetheless be deemed to be virtually held (although such meetings may be impractical during the current pandemic). There is no formal mechanism in the OBCA for a formal “hybrid” meeting held in-person in which shareholders can participate electronically as there is under other corporate statutes.
The Order provides for a slightly different regime for the duration of the Declared Emergency. Under the Order, such virtual meetings can be held even if the corporation’s articles or by-laws would otherwise prohibit such meetings. The virtual meeting regime is otherwise the same.
While virtual-only meetings are generally frowned upon by proxy advisory firms, we have noted flexibility on this point in light of the COVID-19 pandemic. For example, Glass Lewis generally recommends voting against the members of the governance committee where the board has called a virtual-only shareholder meeting and the issuer has not provided appropriate disclosure. Due to the COVID-19 pandemic, Glass Lewis has now relaxed this policy until June 30, 2020, but will note if companies state their intention to resume holding in-person or hybrid meetings under normal circumstances. As of writing, we are not aware of any formal guidance on hybrid or virtual-only meetings from ISS stemming from the COVID-19 pandemic.
Timely Disclosure has dealt extensively with virtual meetings, hybrid meetings and livestreamed annual meetings in the following articles: