On October 19, 2017, the Toronto Stock Exchange (TSX) announced that it had adopted two sets of amendments to the TSX Company Manual after a lengthy consultative process — see our earlier posts of June 4, 2016 and May 5, 2017.  In short, the amendments relate to disclosure requirements for security-based compensation arrangements such as stock option plans and to website disclosure of certain corporate documents.  This post will deal with each in turn.

Security-Based Compensation Arrangements

The amended disclosure requirements for security-based compensation arrangements will be effective for financial years ending on or after October 31, 2017.  In other words, these changes are effective almost immediately.  Technically, the new requirements are set out in amendments to section 613(d) and in new section 613(p) of the TSX Company Manual.

Under section 613(d), as amended, for a shareholders’ meeting at which approval is sought for a security-based compensation arrangement such as a stock option plan or other similar plan, and also on an annual basis, the management information circular must set out, as applicable, (i) the maximum number of securities issuable under the plan as a fixed number together with the percentage which the fixed number represents of the number of issued and outstanding shares, or the fixed percentage of the number of issued and outstanding shares; (ii) the number of outstanding securities awarded under the plan, together with the percentage this number represents of the number of issued and outstanding shares; and (iii) the total number of securities that remain available for grant under the plan together with the percentage that this number represents of the number of issued and outstanding shares.


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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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