The majority of shareholders in Canada hold their shares through a broker or other intermediary, which in turn holds their shares with the Canadian Depository for Securities Limited (CDS). Most voting at shareholder meetings therefore occurs within a layered, complex and opaque proxy system. This leads to uncertainty as to whether all of the votes of the true beneficial shareholders are properly tabulated. The Canadian Securities Administrators (CSA) have announced proposed changes to the process of vote counting and reconciliation, which will hopefully result in a more accurate, reliable and accountable voting system.
The CSA has proposed new protocols for the parties responsible for vote collection and tabulation. These parties include CDS, intermediaries such as brokers, Broadridge Investor Communication Solutions Canada (the main proxy voting agent for intermediaries) and transfer agents who act as vote tabulators at shareholder meetings. The new protocols delineate clear roles for each of these participants at each stage of the process and outline the operational processes that each should implement to ensure their roles and responsibilities are fulfilled.
The protocols include:
- moving towards a paperless proxy voting system; and
- developing end-to-end vote confirmation capability that would allow beneficial shareholders to receive confirmation that their voting instructions have been received by their broker or other intermediary and submitted as proxy votes, and that these proxy votes have been received and accepted by the transfer agent as tabulator.
In addition, the CSA intends to establish a committee to promote better communication, information sharing and problem solving among the participants responsible for vote collection and tabulation.
Although the CSA did not identify any vote reconciliation issues unique to proxy contests, the proposals, if implemented, will provide greater certainty and transparency for all parties involved in proxy contests and hopefully will provide beneficial shareholders with greater comfort that their votes were, in fact, properly received and counted.
The deadline to comment on the proposed protocols is July 15, 2016. The CSA intends to publish the final protocols by the end of 2016, in time for the 2017 proxy season. The protocols will likely be implemented on a voluntary basis initially.
A copy of the CSA amendments can be accessed here.