Beginning January 1, 2020, distributing corporations governed by the Canada Business Corporations Act — generally, public companies— will be required to disclose additional diversity material for their next annual meeting of shareholders.
These CBCA amendments implement parts of Bill C-25, An Act to amend the Canada Business Corporations Act, the Canada Cooperatives Act, the Canada Not-for-profit Corporations Act and the Competition Act, whose provisions were also included in the more recent Bill C-97, An Act to implement certain provisions of the budget tabled in Parliament on March 19, 2019 and other measures.
CBCA Amendments
The amendments to the CBCA and the corresponding regulations broaden the current “comply-or-explain” disclosure regime in Form 58-101F1 under the Canadian Securities Administrators’ National Instrument 58-101 – Disclosure of Corporate Governance Practices (Securities Law Regime). Now included are disclosures with respect to Aboriginal peoples, persons with disabilities, members of visible minorities, and women, being the designated groups, as defined under the Employment Equity Act (Canada). Unlike the Securities Law Regime, the requirements would also apply to CBCA corporations that are venture issuers (such as those not listed on a senior stock exchange like the Toronto Stock Exchange), and those that are either public companies or listed on a stock exchange, in each case outside of Canada.
Commencing with their 2020 annual shareholder meetings, the CBCA-governed corporations will need to inform their shareholders whether the corporation has adopted a written policy to identify and nominate members of the designated groups for election as directors. If the corporation has such a policy, it must also provide: a summary of the policy’s objectives and key provisions; a description of the measures taken to ensure the policy is effectively implemented; a description of both annual and cumulative progress in achieving the objectives, and disclosure concerning whether—and, if so, how—the corporation’s board or relevant committee measures the effectiveness of the policy. Where the corporation has not developed such a policy, it must explain why it has not done so.
Companies must also disclose whether the boards or nominating committees consider the current level of representation of the designated groups in identifying and nominating board candidates for election or re-election. In addition, corporations are required to disclose whether or not they consider the level of representation of designated groups in appointing members of senior management (executive officers under the securities law requirements) and, in each case, how such level is considered or why the level of representation is not considered, as applicable. Furthermore, disclosure will be required relating to whether the corporation has, for each designated group, adopted a target (number or percentage) of members from the designated group to hold a board seat or be a member of senior management by a specific date. For each designated group in which a target has been adopted, the corporation must disclose its progress in achieving the target, on an annual and cumulative basis. Where the company has not produced a target for individual designated groups, it must also disclose why it has not.
For each designated group, corporations must disclose the number and proportion (expressed as a percentage) who hold board positions at the corporation and are members of senior management of the corporation and all of its major subsidiaries. Finally, disclosure must also include whether or not the corporation has adopted term limits for its directors. If term limits have not been implemented, firms must give a reason.
Members of a corporation’s board and senior management will need to be familiar with the definitions of the component of the designated groups as found in the Employment Equity Act (Canada) and self-identify in order for the corporation to provide accurate disclosure. However, corporations are not required to attribute particular directors and executives to each category.
Matthew Merkley is a Partner at Blake, Cassels & Graydon LLP. David Bristow is an Associate at Blake, Cassels & Graydon LLP.