TSX announces new requirements for director elections and majority voting

18 February 2014

The Majority Rules

If you are proposed as a director of a TSX-listed issuer, you will need a majority of the votes in order to be elected. TSX-listed issuers will be required to adopt a majority voting policy or amend their constating documents in order to give effect to these new requirements.

There are two main exceptions to the majority voting requirement:

  • issuers that are majority controlled; or
  • the election of directors at contested shareholders’ meetings, being meetings where the number of directors nominated for election is greater than the number of seats available on the board. 

These requirements come into force for issuers with fiscal years ending on or after June 30, 2014 effective their first annual shareholder meeting after that date.

Impact on Directors

The requirement under corporate statutes is that directors can be elected with less than a majority of the votes, simply because they were nominated. There is no requirement under corporate statutes for a director to be elected by a majority of the votes. Shareholders either vote “for” a director or “withhold” their vote. The TSX will require directors to resign if they are not elected by a majority (50% +1) of votes cast at the meeting. The board must then determine whether or not to accept the resignation within 90 days of the shareholders’ meeting, which the TSX says should be accepted unless there are exceptional circumstances. 

Majority Voting Policy

In order to give effect to these requirements, each issuer will be required to adopt a majority voting policy. Alternatively, an issuer can include the majority voting requirement and related procedures in its articles, bylaws or other similar instruments in a manner acceptable to the TSX.

New Disclosure Requirements

Issuers will need to describe their majority voting policy in their proxy materials sent out in connection with their annual meeting of shareholders. Issuers that are majority controlled and which are relying on the exemption from the majority voting requirement must disclose their reliance on the exemption in their proxy materials and provide an explanation for why they did not adopt the policy. After an uncontested meeting at which directors are elected, each issuer must disseminate a press release disclosing the voting results for the election of each director.

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