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The best interest standard for registrants has been on the Canadian Securities Administrators’ (CSA) radar for the past few years. On October 25, 2012, the CSA published CSA Consultation Paper 33-403 The Standard of Conduct for Advisers and Dealers: Exploring the Appropriateness of Introducing a Statutory Best Interest Duty When Advice is Provided

Retail investors in British Columbia, Alberta, Saskatchewan, Manitoba and New Brunswick (Participating Jurisdictions) now have a new option by which they can participate in private placements. The securities regulators in the Participating Jurisdictions have adopted a prospectus exemption (Exemption) that allows issuers listed on a Canadian exchange to raise money by distributing securities to retail

Institutional Shareholder Services (ISS) and Glass, Lewis & Co. (Glass Lewis) have both released updates to their Canadian proxy voting recommendation guidelines for the 2015 proxy season. The items updated include those pertaining to the definition of independence, advance notice requirements, by-law amendments, private placements, treatment of majority voting policies, shareholder rights plans and advance notice policies.

The following summary outlines the significant changes made by ISS (ISS Updates) and Glass Lewis to their respective Canadian proxy advisory guidelines.

ISS

Definition of Independence. The current guidelines recommend that votes be withheld for any “insider” or “affiliated outside director” where the board does not have a majority of independent directors or the board lacks a separate compensation or nominating committee.  The ISS Updates provide that an assessment as to independence will be made on a case-by-case basis.  ISS will deem a former CEO to be independent for the purposes of serving on the board or any key committee, including the audit committee, after a five year cooling off period unless certain factors indicate otherwise.  Specifically, the ISS Updates include a provision that deems any director nominee who has any material relationship with the issuer or with any one or more members of management of the issuer not to be independent.  A material relationship is defined as a relationship (financial, personal or otherwise) that a reasonable person might conclude could potentially influence one’s objectivity in the boardroom in a manner that would have a meaningful impact on an individual’s ability to satisfy requisite fiduciary standards on behalf of shareholders.  ISS will also recommend a withhold vote from any director who has served as the CEO of the issuer within the past five years and is a member of the audit or compensation committee.

Advance Notice Policies. With respect to Advance Notice Policies, ISS will generally recommend that investors withhold votes from individual directors, committee members, or the entire board as appropriate in situations where an Advance Notice Policy has been adopted by the board but has not been included on the voting agenda at the next shareholders’ meeting.  The rationale behind the recommendation is that certain problematic provisions included within these bylaws/policies could potentially interfere with a shareholder’s ability to nominate directors.  ISS is of the view that the ability for shareholders to put forward potential nominees is a fundamental right and should not be amended by management or the board without shareholders’ approval.  ISS considers the following features problematic:

  • for a notice of annual meeting given not less than 50 days prior to the meeting date, the notification timeframe within the advance notice requirement should allow shareholders the ability to provide notice of director nominations at any time not less than 30 days prior to the meeting.  The notification timeframe should not be subject to any maximum notice period for annual meetings.  If notice of annual meeting is given less than 50 days prior to the meeting date, a provision to require shareholder notice by close of business on the 10th day following first public announcement of the annual meeting is supportable.  In the case of a special meeting, a requirement that a nominating shareholder must provide notice by close of business on the 15th day following first public announcement of the special shareholders’ meeting is also acceptable;
  • the board’s inability to waive all sections of the advance notice policy, in its sole discretion;
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