On February 13, 2014, TSX announced amendments to the TSX Company Manual which mandate majority voting in uncontested elections of directors for TSX-listed issuers that are not majority controlled.  The purpose of these amendments, as stated by the TSX, is to improve corporate governance standards in Canada by providing a meaningful way for security holders to hold individual directors accountable.

What TSX-listed Issuers Need to Know

Effective Date of the Amendments

The amendments become effective beginning June 30, 2014 and issuers with fiscal years ending on or after June 30, 2014 must comply with the amendments at their next annual meeting following such date.  All issuers are expected to be in compliance with the amendments by June 30, 2015.

Majority Voting Requirement for the Election of Directors

At the next annual meeting following a fiscal year ending on or after June 30, 2014, directors of TSX‑listed issuers that are not majority controlled must be elected by a majority of votes cast at a meeting (50% plus one), other than at contested meetings (the Majority Voting Requirement).

Majority Control Exemption

A listed issuer with a majority of voting securities beneficially owned, or controlled or directed, directly or indirectly, by a single securityholder is exempt from the Majority Voting Requirement.  A listed issuer relying on the majority control exemption must disclose annually in its meeting materials its reliance on the exemption and its reasons for not adopting majority voting for the election of directors.

Requirement to Implement a Majority Voting Policy

If the existing constating documents or applicable corporate law of a listed issuer do not provide for the Majority Voting Requirement in a manner satisfactory to TSX, it must implement a policy implementing the Majority Voting Requirement (the Majority Voting Policy), if they have not already implemented one.  A Majority Voting Policy must substantially provide the following:

  1. a director elected at an uncontested meeting with less than 50% plus one of the votes cast must immediately tender his or her resignation;
  2. the board shall consider the resignation and, within 90 days of the meeting giving rise to the resignation, must accept it unless exceptional circumstances warrant otherwise, and such resignation is effective when accepted by the board;
  3. a director who has tendered his or her resignation pursuant to the Majority Voting Policy must not attend any meeting of the board or any sub-committee at which the resignation is considered; and
  4. the listed issuer must issue a news release disclosing the board’s decision (a copy of which must be provided to TSX) and, if the decision is to not accept the resignation, detailed reasons for such decision must be provided.

If a Majority Voting Policy is adopted, it must be described on an annual basis in the listed issuer’s securityholder materials sent in connection with meetings at which directors are to be elected.