With the 2024 proxy season now in full swing, companies face a number of important questions. Among them is the timely question of meeting format: whether to hold the company’s annual general meeting (AGM) in person, virtually, or through some combination of both.

The option to conduct AGMs exclusively by virtual means has been appealing for, among other reasons, its convenience and flexibility. The allure of the virtual-only meeting has survived its necessity during the COVID-19 pandemic. Last year, the Canadian Coalition for Good Governance (CCGG) reported that more than 60% of the companies involved in its board engagement program held virtual-only meetings.

At the same time, the Canadian Securities Administrators (CSA) has noted that some shareholders have expressed concerns that virtual-only meetings have presented challenges to their ability to participate in shareholder meetings. The CSA’s updated guidance on virtual-only shareholder meetings, published in February 2024, provides reporting issuers with important considerations to inform their use of virtual-only shareholder meetings.

The corporate law framework for virtual-only meetings

The CSA’s update builds on the initial guidance it provided in 2022, after the virtual-only shareholder meeting came into vogue during the pandemic. Many of the CSA’s key concerns revolve around the legislative objectives of the applicable legal framework.

Although there are slight differences between them, the Canada Business Corporations Act (CBCA) and Ontario Business Corporations Act (OBCA) both permit boards of directors to hold, and shareholders to participate and vote in, virtual-only shareholder meetings. Both regimes address, among other matters, shareholders’ ability to effectively participate at the meeting.

Subsection 132(4) of the CBCA states, in part, that unless the company’s by-laws otherwise provide, “any person entitled to attend a meeting of shareholders may participate in the meeting […] by means of a telephonic, electronic or other communication facility that permits all participants to communicate adequately with each other during the meeting, if the corporation makes available such a communication facility”.

Similarly, subsection 94(2) of the OBCA provides that, subject to the company’s articles or by-laws and subsection 94(4), a meeting may be held virtually or in hybrid format. Subsection 94(4) of the OBCA provides that meetings held in such manner must “enable all persons entitled to attend the meeting to reasonably participate”.

Under subsection 94(3) of the OBCA, Ontario companies may, through their articles or by-laws: (a) “limit the manner or manners by which a meeting of shareholders may be held” in accordance with subsection 94(2); and (b) “specify the requirements that apply with respect to the holding of a meeting of shareholders” in a manner described in subsection 94(2) or in such manner as described by a company’s articles or by-laws made under clause (a).

The CSA’s guidance on virtual-only meetings

In the context of this corporate law framework, the CSA has called for a standard that focuses on the comparability of the participation to a meeting conducted in person (or, in the hybrid case, the in-person portion thereof). The CSA encourages companies to “provide for an ease, level and quality of shareholder participation at a virtual meeting that is comparable to that which a shareholder could reasonably expect if they were attending an in-person meeting”.

To achieve this goal, the CSA suggests a two-pronged approach:

  1. Adequate disclosure. The CSA recommends that companies give clear and comprehensive guidance to shareholders about how they may access virtual meetings (or the virtual portion of a hybrid meeting) and participate in them, particularly in management information circulars and other proxy-related disclosures.
  2. Facilitating participation. To this end, the CSA suggests that reporting issuers should, among other things:
  • simplify registration and authentication processes;
  • provide shareholders with opportunities to make motions or raise points of order; and
  • ensure that shareholders have the ability to raise questions and provide feedback to management in any Q&A segment of the meeting.

Voting guidelines and shareholders’ reasonable expectations

Importantly, the CSA’s comparability standard hinges on what shareholders “reasonably expect”. The prevailing views and expectations of shareholders are influenced by the voting guidelines published by large institutional investors and proxy advisory firms. Reporting issuers should consider their guidelines to form a holistic assessment of the question of how to conduct their next meeting of shareholders.

  • Glass Lewis. Glass, Lewis & Co., in its 2024 guidelines, recommends voting against the chair of the governance committee where the company plans to hold a virtual-only meeting and the company either does not provide adequate disclosure to ensure that shareholders can participate meaningfully, disclosure is provided but is ambiguous, or the company discloses that shareholders participating virtually will not be provided certain protections of their ability to participate.
  • CPP Investments. The Canada Pension Plan Investment Board (CPP Investments) expresses a similar view in its 2024 Proxy Voting Principles and Guidelines. However, rather than focusing on the chair of the governance committee, CPP Investments recommends that shareholders “consider” voting against the board chair where the meeting format “unreasonably restricts shareholder attendance, participation or communication”. CPP Investments leaves open the possibility that this could occur with meetings that are not in a virtual-only format.
  • Globe and Mail. The Globe and Mail’s 2024 Board Games marking criteria were revised, including by effectively making it a requirement that companies hold hybrid meetings to score on the meeting format criterion. The new scoring scheme awards one mark to a company that holds its AGM in a hybrid format, and zero marks where the meeting is held in either an exclusively virtual or exclusively in-person format.
  • CCGG. The CCGG’s Virtual Shareholder Meeting Policy recommends the use of hybrid meetings as a best practice, and voices strong opposition to virtual-only shareholder meetings. The CCGG notes that “absent strong governance and a commitment to transparency there is a clear and present risk that shareholder voices are increasingly being silenced and shareholder participation is being diminished”.

Key takeaways

Views on virtual shareholder meetings vary. On the one hand, a virtual option offers great flexibility and convenience. On the other hand, companies should consider whether a virtual-only meeting format will impact the ability of its shareholders to meaningfully participate in the meeting.

Hybrid meetings appear to have emerged as a best practice. However, to the extent that reporting issuers intend to hold virtual-only meetings, the relevant CSA guidance and voting guidelines discussed suggest that they should strive to make adequate disclosure with respect to it and take steps to ensure that the experience of the virtual participant is sufficiently comparable to that which an in-person participant would reasonably expect.

The author would like to thank Viktor Hohlacov and Sierah McDowall for their significant contributions to this article.