Part 12 Shareholders (clauses 55-59)

The provisions applicable to shareholders' meetings would be amended to allow persons entitled to attend such meetings to participate in the meeting by electronic means, provided the corporation makes available such means of communication. An amendment would also be introduced to clarify that such meetings may also be held entirely by telephonic, electronic or other communication facility. (s. 132)

Additional amendments would clarify that a vote at a shareholders meeting may be held by electronic means and that any person participating electronically in such a meeting and that is entitled to vote, may exercise their right to vote by electronic means. (s. 141)

A number of amendments repealing the time periods specified and replacing them by time periods prescribed by the Regulations (ss. 134 and 135) are included to allow for greater flexibility to make modifications should the need arise in future.

In addition, many of the mechanisms for individual shareholders to submit proposals would be liberalized, including allowing beneficial shareholders to make proposals. Minimum share ownership and length of ownership requirements will be implemented by regulation (s. 137).

The rules regarding unanimous shareholder agreements would be clarified and updated to reflect current practices (ss. 145.1 and 146).

A number of minor technical amendments are also included, as well as certain amendments which are designed to facilitate the efficient operation and administration of the statute.

Briefing Book
An Act to amend the Canada Business Corporations Act and the Canada Cooperatives Act

Bill Clause No. 55
CBCA Section No.132(1) and new (3), (4) & (5)
Topic : Shareholders

Sources of Proposed Law 

Changes From Present Law 
A) Permit meetings of shareholders to be held outside Canada at any place specified in the articles and continue to allow meetings to be held outside Canada if all the shareholders entitled to vote at the meeting so agree. Subs. 132(2) is split into a modified subs. 132(2) and a new subs. 132(3).

(B) Allow any person entitled to attend the meeting of shareholders to participate by means of telephonic, electronic or other communication facilities that permit all participants to adequately communicate with each other during the meeting, unless the by-laws provide otherwise, and as long as the corporation makes available such means of communication. Provide that a meeting may only be held entirely by electronic means if specifically authorized by the by-laws.

Purpose of Change 
(A) The CBCA requires shareholder meetings to be held within Canada unless all the shareholders entitled to vote at that meeting agree to hold the meeting outside Canada (s. 132). A considerable number of Canadian inter-listed public companies have significant U.S. shareholder constituencies. The flexibility of being able to hold meetings from time to time outside of Canada, without requiring unanimous shareholder approval, is important from a shareholder relations point of view.

(B) New technological developments allow parties situated at different geographical locations to easily communicate with each other. These technologies encourage shareholder democracy as they permit more shareholders to participate in meetings. In recognition of the beneficial aspect of these technologies, the CBCA would permit their use subject to the by-laws specifically providing otherwise. However, if the meeting is to be held only by electronic means, shareholders should be given the opportunity to vote on this proposition through the by-law amendment process. This amendment achieves an appropriate balance between the need for shareholder consent and the need for flexibility. An amendment was introduced at the Senate Committee stage at the suggestion of the Coalition for CBCA Reform which clarified the language of these provisions.

Similar Provincial Laws 
Business Corporations Act (Ontario)

Current Wording 
132. (1) Meetings of shareholders of a corporation shall be held at the place within Canada provided in the by-laws or, in the absence of such provision, at the place within Canada that the directors determine.

(2) Notwithstanding subsection (1), a meeting of shareholders of a corporation may be held outside Canada if all the shareholders entitled to vote at that meeting so agree, and a shareholder who attends a meeting of shareholders held outside Canada is deemed to have so agreed except when he attends the meeting for the express purpose of objecting to the transaction of any business on the grounds that the meeting is not lawfully held.

Proposed Wording
132. (2) Despite subsection (1), a meeting of shareholders of a corporation may be held at a place outside Canada if the place is specified in the articles or all the shareholders entitled to vote at the meeting agree that the meeting is to be held at that place.

(3) A shareholder who attends a meeting of shareholders held outside Canada is deemed to have agreed to it being held outside Canada except when the shareholder attends the meeting for the express purpose of objecting to the transaction of any business on the grounds that the meeting is not lawfully held.

(4) Unless the by-laws otherwise provide, any person entitled to attend a meeting of shareholders may participate in the meeting, in accordance with the regulations, if any, 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. A person participating in a meeting by such means is deemed for the purposes of this Act to be present at the meeting.

(5) If the directors or the shareholders of a corporation call a meeting of shareholders pursuant to this Act, those directors or shareholders, as the case may be, may determine that the meeting shall be held, in accordance with the regulations, if any, entirely 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 by-laws so provide.

Bill Clause No. 56
CBCA Section No.133(1), (2) and new (3)
Topic : Shareholders (Shareholder Communcations)

Sources of Proposed Law 

Changes From Present Law 
Amend s. 133 in order to:

clarify that an annual shareholders meeting must be held within six months of the end of the financial year; and

provide that, notwithstanding s. 133(1), the corporation may apply to the court for an order extending the time in which the annual meeting of the corporation will be held [see Bill s. 133(3)].

Purpose of Change 
(A) This amendment is designed to ensure that corporations report to their shareholders in a timely and regular fashion.

(B) This amendment would allow increased flexibility without creating any new risk for shareholders. The amendment is permissive and will not be seen as a requirement. It is designed to provide a method whereby corporations can receive an extension if they do not meet the time provisions found in s. 133.

Shareholders remain protected by a number of provisions which enable them to require the corporation to hold a meeting. Under s. 143, the holders of not less than five per cent of the issued shares of a corporation that carry the right to vote may requisition the directors to call a meeting. Section 144 allows members to apply to the court to have a meeting called. As well, s. 247 allows "complainants" to apply to the court for an order requiring compliance with the Act (for example, to call a meeting in accordance with the Act).

Similar Provincial Laws 
Business Corporations Act (Alberta)

Current Wording 
133. The directors of a corporation

(a) shall call an annual meeting of shareholders not later than eighteen months after the corporation comes into existence and subsequently not later than fifteen months after holding the last preceding annual meeting; and

(b) may at any time call a special meeting of shareholders.

Proposed Wording 
133. (1) The directors of a corporation shall call an annual meeting of shareholders

(a) not later than eighteen months after the corporation comes into existence; and

(b) subsequently, not later than fifteen months after holding the last preceding annual meeting but no later than six months after the end of the corporation's preceding financial year.

(2) The directors of a corporation may at any time call a special meeting of shareholders.

(3) Despite subsection (1), the corporation may apply to the court for an order extending the time for calling an annual meeting.

Bill Clause No. 57
CBCA Section No.134
Topic : Shareholders (Shareholder Communications)

Sources of Proposed Law 

Changes From Present Law 
Repeal specific time periods set out in subs. 134(1), (2), and (4) and allow them to be made by regulation. Combine subsections 134(1) and (2). Renumber subsections 134(3) and (4).

Purpose of Change 
Under the CBCA and provincial corporate legislation, issuers may fix a date for determining which shareholders are entitled to receive notice of shareholder meetings. That date must fall within a period from 21 to 50 days prior to the meeting.

National Policy Statement No. 41 (NP 41), implemented by the Canadian Securities Administrators in 1987, was designed to address complaints by issuers that 21 calendar days is too short a time for proxy material to go through one or more layers of intermediaries and for proxies to be returned to the issuer. Accordingly, NP 41 required issuers to set a record date for shareholder meetings to be 35 to 50 days before the date of the meeting. Subsequently, the maximum time for a record date prior to the meeting was extended to 60 days. However, to be able to comply simultaneously with both the requirements of federal corporations law and NP 41, issuers incorporated under the CBCA have a window of between 35 days and 50 days to set a record date for determining which shareholders are eligible to attend a shareholders meeting.

Extension of the record date periods would effectively resolve any conflicting compliance issues with NP 41. Shareholders would ultimately benefit as issuers would have additional mailing time for proxy-related materials, thereby increasing the likelihood that shareholder voting instructions will be received before the voting deadline. Delegation to the regulations would allow for quicker adjustments to be made if so required.

Similar Provincial Laws 
National Policy Statement No. 41

Current Wording 
134. (1) For the purpose of determining shareholders

(a) entitled to receive payment of a dividend,

(b) entitled to participate in a liquidation distribution, or

(c) for any other purpose except the right to receive notice of or to vote at a meeting, the directors may fix in advance a date as the record date for such determination of shareholders, but such record date shall not precede by more than fifty days the particular action to be taken.

(2) For the purpose of determining shareholders entitled to receive notice of a meeting of shareholders, the directors may fix in advance a date as the record date for such determination of shareholders, but such record date shall not precede by more than fifty days or by less than twenty-one days the date on which the meeting is to be held.

(3) If no record date is fixed,

(a) the record date for the determination of shareholders entitled to receive notice of a meeting of shareholders shall be

(i) at the close of business on the day immediately preceding the day on which the notice is given, or

(ii) if no notice is given, the day on which the meeting is held; and

(b) the record date for the determination of shareholders for any purpose other than to establish a shareholder's right to receive notice of a meeting or to vote shall be at the close of business on the day on which the directors pass the resolution relating thereto.

(4) If a record date is fixed, unless notice of the record date is waived in writing by every holder of a share of the class or series affected whose name is set out in the securities register at the close of business on the day the directors fix the record date, notice thereof shall, not less than seven days before the date so fixed, be given

Proposed Wording 
134. (1) The directors may, within the prescribed period, fix in advance a date as the record date for the purpose of determining shareholders

(a) entitled to receive payment of a dividend;

(b) entitled to participate in a liquidation distribution;

(c) entitled to receive notice of a meeting of shareholders;

(d) entitled to vote at a meeting of shareholders; or

(e) for any other purpose.

(2) If no record date is fixed,

(3) If a record date is fixed, unless notice of the record date is waived in writing by every holder of a share of the class or series affected whose name is set out in the securities register at the close of business on the day the directors fix the record date, notice of the record date must be given within the prescribed period

Bill Clause No. 58
CBCA Section No.135(1), (2) and new (1.1)
Topic : Shareholders (Shareholder Communications)

Sources of Proposed Law 

Changes From Present Law 
Repeal the specific time periods set out in s. 135(1) and allow them to be made by regulation. Make technical changes to subs. 135(2) to reflect the renumbering of section 134. Add a new provision following s. 135(1) permitting non-distributing corporations to send out a notice of meeting less than twenty-one days before the meeting, if specified in the articles or by-laws.

Purpose of Change
See clause 57.

Similar Provincial Laws 
National Policy Statement No. 41

Current Wording 
135. (1)Notice of the time and place of a meeting of shareholders shall be sent not less than twenty-one days nor more than fifty days before the meeting,

(a) to each shareholder entitled to vote at the meeting;

(b) to each director; and

(c) to the auditor of the corporation.

(2) A notice of a meeting is not required to be sent to shareholders who were not registered on the records of the corporation or its transfer agent on the record date determined under subsection 134(2) or (3), but failure to receive a notice does not deprive a shareholder of the right to vote at the meeting.

Proposed Wording 
135. (1) Notice of the time and place of a meeting of shareholders shall be sent within the prescribed period to

(a) each shareholder entitled to vote at the meeting;

(b) each director; and

(c) the auditor of the corporation.

(1.1) In the case of a corporation that is not a distributing corporation, the notice may be sent within a shorter period if so specified in the articles or by-laws.

(2) A notice of a meeting is not required to be sent to shareholders who were not registered on the records of the corporation or its transfer agent on the record date determined under paragraph 134(1)(c) or subsection 134(2), but failure to receive a notice does not deprive a shareholder of the right to vote at the meeting.

Bill Clause No. 59
CBCA Section No.137(1), (3), (5), (7), (8) and new (1.1), (1.2), (1.3), (1.4) and (5.1)
Topic : Shareholders (Shareholder Communications)

Sources of Proposed Law 
Verdun v. Toronto-Dominium Bank, [1996] 3 S.C.R. 550.
U.S. Securities and Exchange Commission, Rule 14a-8

Changes From Present Law 
A. (1) Amend s. 137(1) to clarify that beneficial owners of shares are entitled to submit proposals and to add the following eligibility requirements so that at the time a shareholder submits a proposal he/she:

(i) is the legal or beneficial owner of at least the prescribed number of the outstanding shares of the corporation; or

(ii) has the support of shareholders who in the aggregate are the legal or beneficial owners of at least the prescribed number of the outstanding shares of the corporation. [see Bill, s. 137(1.1)]

(2) Require that at the time the shareholder submits a proposal he/she must provide the corporation with their name, address, number of registered or beneficial shares owned and the date acquired. Require that this information also be provided in respect of the person's supporters, if applicable. [see Bill, s. 137(1.2)]

(3) State that the information required under subs 137(1.2) shall not be considered part of the proposal and supporting statement for the purposes of the prescribed maximum word limit. [see Bill, s. 137(1.3)]

(4) Require that, where requested by the corporation within the prescribed time period the proponent of the proposal shall provide to the corporation proof that the person meets the requirements under s. 137(1.1) within the prescribed period. [See Bill, s. 137(1.4)]

B. Amend s. 137(3) to require that if requested by a shareholder who submits a proposal, the corporation must include the shareholder's proposal in its management proxy provided that the proposal and its supporting statement do not exceed the prescribed maximum number of words.

C. (1) Replace in s. 137(5)(a) the words "at least ninety days before the anniversary date of the previous annual meeting of shareholders" with "within the prescribed time before the anniversary date of the notice of meeting that was sent to shareholders in connection with the previous annual meeting of shareholders".

(2) Modify the English version of s. 137(5)(b) so that the words "the proposal is submitted by the shareholder primarily for the purpose of…" are replaced with the comparable English version of "la proposition a pour objet principal de faire.…".

(3) Amend s. 137(5) to divide subsection (b) into (b) and a new (b.1), which would replace the second half of (b). Remove the list of general causes by which a corporation can refuse to circulate a shareholder proposal. Pursuant to the revised provision, management could only refuse a proposal if it does not relate in a significant way to the business or affairs of the corporation.

(4) Remove specified time period and allow time period to be prescribed in regulations in subsection 137(5)(c).

(5) Amend s.137(5)(d) to permit the corporation to refuse a proposal where a substantially similar proposal was submitted within the prescribed period and did not receive a prescribed minimum amount of support.

(6) Add a new provision stating that if a shareholder fails to continue to hold or own the amount of shares referred to in s. 137(1.1) up to and including the date of the meeting, the corporation shall not be required to include any proposal submitted by the proponent for any meeting held within the prescribed period of time following the date of the meeting.

D. Remove from s. 137(7) the current 10 day time limit for a corporation to give notice of refusal and allow the number of days to be prescribed by regulation.

Purpose of Change 
A. These recommendations all deal with eligibility requirements with respect to a shareholder proposal. Eligibility requirements address the concern raised by corporations that individual shareholders who have not manifested a genuine interest and stake in the affairs of the corporation still have access to this mechanism. The corporations contend that often these non-serious investors use the proposal mechanism to promote a social, economic or personal agenda unrelated to the business of the corporation.

A shareholder proposal is one of two mechanisms in the CBCA that allow a shareholder to cause a corporation to take an action which ultimately imposes a cost on the corporation (and ultimately the shareholders). The second mechanism is the shareholder right to requisition a meeting. When a shareholder requisitions a meeting, the interests of other shareholders are protected by a provision that allows the shareholders to refuse to bear the cost of the requisitioned meeting if they think it was unnecessarily called. However, the current shareholder proposal mechanism does not have an equivalent safeguard.

The eligibility requirements for shareholder proposals are designed to curtail abuse by requiring that those who put the corporation and other shareholders to the expense of including a proposal in its proxy material have had a continuous minimum level of investment in the corporation for a specified period of time.

The pooling of shareholders' holdings to meet the minimum requirements maintains the right of minor shareholders to submit proposals without imposing an unnecessary economic barrier. Minor shareholders who are unable to obtain support from fellow shareholders, however, will no longer be entitled to use the shareholder proposal mechanism.

These amendments will help ensure the quality and relevance of proposals submitted.

The amendment to s. 137(1) clarifying that a beneficial owner of shares is entitled to submit proposals is intended to reverse the Supreme Court's holding in Verdun v. Toronto-Dominion Bank.

B. This amendment would allow shareholders more room to explain proposals to other shareholders than is currently available. The lack of sufficient space may be an issue where proposals deal with complex matters. The amendment provides more opportunity, within reasonable limits, for the shareholder to adequately explain his/her proposal while maintaining reasonable limits and thereby keeping the costs for printing and postage, borne by the corporation, to a minimal level.

C. (1) Under current paragraph 137(5)(a), the deadline for submission is 90 days prior to the anniversary date of the previous year's annual meeting. This limit, coupled with the NP 41 requirement that proxy materials be sent to shareholders at least 33 days before the meeting, leave the corporation with little time to respond to a shareholder proposal. It also leaves little time for the shareholder to work through the court process in the case of a refusal by the corporation to include a proposal. Moving the critical deadline back to the "anniversary date of the notice of meeting that was sent to shareholders in connection with the previous annual meeting of shareholders" allows the corporation sufficient time to deal with the proposal. Permitting the number of days prior to that anniversary date to be prescribed increases flexibility.

(2) The amendment to paragraph 137(5)(b) would harmonize the French and English versions.

(3) As paragraph 137(5)(b) currently reads, the grounds for exclusion of a shareholder proposal are broad and shareholder activists argue that virtually any proposal can be perceived to fall into one of the categories. The amendments address this concern by deleting the grounds for exclusion. A fair balance is struck between the interest of shareholders and the interests of the corporation by providing that the corporation is only obliged to undertake proposals that relate in a significant way to the business or affairs of the corporation. This standard is also used in the U.S. rules.

(4) The amendment to paragraph 137(5)(c) would have the effect of removing the time period reference in the paragraph and replacing it with a time period to be prescribed in the regulations.

(5) The amendment to paragraph 137(5)(d) would have the effect of removing the time period reference in the paragraph and replacing it with a time period to be prescribed in the regulations. Also, if the proposal is defeated, the shareholder must have obtained a prescribed minimum amount of support in order to resubmit a similar proposal in subsequent years. This proposed amendment provides greater flexibility for shareholders to resubmit a similar proposal at subsequent meetings provided a minimum level of support is obtained.

(6) This provision is intended to operate as a deterrent to shareholders who meet the requirements at the time they submit the proposal, but either sell their shares or fail to maintain their support through the date of the meeting.

D. The current 10 day time limit provided in s. 137(7) for a corporation to give notice of refusal is very restrictive. Increasing this time limit will give the corporation sufficient time to review the proposal, give reasonable consideration as to its appropriateness and perhaps also time to communicate with the shareholder who made the proposal before refusing. Allowing the number of days to be prescribed increases flexibility. An amendment was introduced at the Senate Committee stage, at the request of stakeholders, requiring that the notice of refusal include a written statement of the reasons for refusal in order to ensure that shareholders are properly informed.

Similar Provincial Laws 

Current Wording 
137. (1) A shareholder entitled to vote at an annual meeting of shareholders may

(a) submit to the corporation notice of any matter that he proposes to raise at the meeting, hereinafter referred to as a "proposal"; and

(b) discuss at the meeting any matter in respect of which he would have been entitled to submit a proposal.

(3) If so requested by the shareholder, the corporation shall include in the management proxy circular or attach thereto a statement by the shareholder of not more than two hundred words in support of the proposal, and the name and address of the shareholder.

(5) A corporation is not required to comply with subsections (2) and (3) if

(a) the proposal is not submitted to the corporation at least ninety days before the anniversary date of the previous annual meeting of shareholders;

(b) it clearly appears that the proposal is submitted by the shareholder primarily for the purpose of enforcing a personal claim or redressing a personal grievance against the corporation or its directors, officers or security holders, or primarily for the purpose of promoting general economic, political, racial, religious, social or similar causes;

(c) the corporation, at the shareholder's request, included a proposal in a management proxy circular relating to a meeting of shareholders held within two years preceding the receipt of such request, and the shareholder failed to present the proposal, in person or by proxy, at the meeting;

(d) substantially the same proposal was submitted to shareholders in a management proxy circular or a dissident's proxy circular relating to a meeting of shareholders held within two years preceding the receipt of the shareholder's request and the proposal was defeated; or

(e) the rights conferred by this section are being abused to secure publicity.

(7) If a corporation refuses to include a proposal in a management proxy circular, the corporation shall, within ten days after receiving the proposal, notify the shareholder submitting the proposal of its intention to omit the proposal from the management proxy circular and send to him a statement of the reasons for the refusal.

(8) On the application of a shareholder claiming to be aggrieved by a corporation's refusal under subsection (7), a court may restrain the holding of the meeting to which the proposal is sought to be presented and make any further order it thinks fit.

Proposed Wording 
137. (1) Subject to subsections (1.1) and (1.2), a registered holder or beneficial owner of shares that are entitled to be voted at an annual meeting of shareholders may

(a) submit to the corporation notice of any matter that the person proposes to raise at the meeting (a "proposal"); and

(b) discuss at the meeting any matter in respect of which the person would have been entitled to submit a proposal.

(1.1) To be eligible to submit a proposal, a person

(a) must be, for at least the prescribed period, the registered holder or the beneficial owner of at least the prescribed number of outstanding shares of the corporation; or

(b) must have the support of persons who, in the aggregate, and including or not including the person that submits the proposal, have been, for at least the prescribed period, the registered holders, or the beneficial owners of, at least the prescribed number of outstanding shares of the corporation.

(1.2) A proposal submitted under paragraph (1)(a) must be accompanied by the following information:

(a) the name and address of the person and of the person's supporters, if applicable; and

(b) the number of shares held or owned by the person and the person's supporters, if applicable, and the date the shares were acquired.

(1.3) The information provided under subsection (1.2) does not form part of the proposal or of the supporting statement referred to in subsection (3) and is not included for the purposes of the prescribed maximum word limit set out in subsection (3).

(1.4) If requested by the corporation within the prescribed period, a person who submits a proposal must provide proof, within the prescribed period, that the person meets the requirements of subsection (1.1).

(3) If so requested by the person who submits a proposal, the corporation shall include in the management proxy circular or attach to it a statement in support of the proposal by the person and the name and address of the person. The statement and the proposal must together not exceed the prescribed maximum number of words.

(5) A corporation is not required to comply with subsections (2) and (3) if

(a) the proposal is not submitted to the corporation at least the prescribed number of days before the anniversary date of the notice of meeting that was sent to shareholders in connection with the previous annual meeting of shareholders;

(b) it clearly appears that the primary purpose of the proposal is to enforce a personal claim or redress a personal grievance against the corporation or its directors, officers or security holders;

(b.1) it clearly appears that the proposal does not relate in a significant way to the business or affairs of the corporation;

(c) not more than the prescribed period before the receipt of a proposal, a person failed to present, in person or by proxy, at a meeting of shareholders, a proposal that at the person's request, had been included in a management proxy circular relating to the meeting;

(d) substantially the same proposal was submitted to shareholders in a management proxy circular or a dissident's proxy circular relating to a meeting of shareholders held not more than the prescribed period before the receipt of the proposal and did not receive the prescribed minimum amount of support at the meeting; or

(e) the rights conferred by this section are being abused to secure publicity.

(5.1) If a person who submits a proposal fails to continue to hold or own the number of shares referred to in subsection (1.1) up to and including the day of the meeting, the corporation is not required to set out in the management proxy circular, or attach to it, any proposal submitted by that person for any meeting held within the prescribed period following the date of the meeting.

(7) If a corporation refuses to include a proposal in a management proxy circular, the corporation shall, within the prescribed period after the day on which it receives the proposal or the day on which it receives the proof of ownership under subsection (1.4), as the case may be, notify in writing the person submitting the proposal of its intention to omit the proposal from the management proxy circular and of the reasons for the refusal.

(8) On the application of a person submitting a proposal who claims to be aggrieved by a corporation's refusal under subsection (7), a court may restrain the holding of the meeting to which the proposal is sought to be presented and make any further order it thinks fit.