boardroom

Shareholder meetings update: additional relief from corporate law requirements during the pandemic

Canada Publication May 1, 2020

Federal and provincial corporate statutes in Canada generally require companies to hold an annual meeting of shareholders within 15 months of their last meeting and, under certain statutes, no later than six months after the end of such companies’ preceding financial year. 

With emergency orders across the country restricting gatherings, companies have been scrambling to figure out how to hold their AGMs in a manner most consistent with government stay-at-home orders, social distancing guidelines and requirements, as well as principles of shareholder democracy. While some have opted to hold virtual AGMs this year, the small number of technology providers available to facilitate such meetings, together with certain corporate law issues, have limited the number of companies able to take advantage of such an option. Other companies have decided to continue with their in-person AGMs and have asked shareholders to vote in advance by proxy, while discouraging attendance so as to comply with government limits on gatherings and social distancing guidelines.

New measures from the governments of Quebec, Ontario, Alberta and British Columbia are providing relief related to annual shareholder meetings logistics. This follows on the heels of TSX and TSX Venture Exchange announcements permitting listed issuers to hold their 2020 AGMs on any date in 2020 up to and including December 31, 2020.

This bulletin is an update from our bulletin of April 20.

Restrictions on gatherings

In Alberta, no gathering of more than 15 people is allowed, and people gathered in groups of fewer than 15 people must maintain a distance of two metres from one another. In Ontario, gatherings of more than five people are prohibited. In British Columbia the restriction is currently 50 people. Quebec has essentially prohibited all gatherings. All provinces have exceptions for essential services and businesses that are not otherwise required to close. Nonetheless, such restrictions make it difficult (or even contrary to governmental orders) to convene an in-person shareholder meeting.

Government relief

In response to the crisis, the governments of Quebec, Ontario, Alberta and British Columbia have provided the following relief, each of which will remain in effect solely for the duration of each province’s state of public health emergency:

Quebec

  • Quebec issued a ministerial order on April 26, with additional details provided by press release, to temporarily allow certain entities, including corporations governed by the Quebec Business Corporations Act, to hold a virtual meeting of shareholders, even if their bylaws prohibit participation in meetings through technological means. In order to be valid, the technology must allow “all members to communicate with each other immediately.”


Ontario

  • Ontario issued Ontario regulation 107/20 under the Emergency Management and Civil Protection Act (the Order) on March 31, which was amended on April 24, to provide greater flexibility to certain entities, including corporations governed by the Ontario Business Corporations Act (OBCA). The effect of the Order is to temporarily:

    o allow all corporations subject to the OBCA to hold meetings of directors, shareholders, and members virtually (i.e., electronically or by telephone), and deem any person who establishes a communications link to such meeting as present for purposes of quorum, despite any provision in the articles or the bylaws of a corporation that provides otherwise;

    o extend the timeframe by which corporations subject to the OBCA must hold their AGMs to no later than the 90th day after the day the emergency is terminated; and

    o suspend the requirement for corporations subject to the OBCA to place before the AGM financial statements pertaining to a period ended not more than six months before the AGM. 
  • The emergency order is in effect province wide and retroactive to March 17, the day the declaration of emergency came into effect. 

Alberta

  • Alberta issued a ministerial order on April 9 to provide flexibility to certain entities, including corporations governed by the Alberta Business Corporations Act (ABCA). The effect of the ministerial order is to temporarily: 

    o suspend the obligation to convene in-person shareholder meetings under sections 104(1) and 132 of the ABCA;

    o permit corporations subject to the ABCA to hold a virtual meeting, even if the corporation’s bylaws do not currently permit such a meeting format; and

    o suspend the obligation to file an annual return.

  • These temporary changes will remain in effect for the duration of Alberta’s state of public health emergency.

  • We note that non-reporting issuers holding their AGMs more than six months after the end of their financial year-end are required under the ABCA to provide more recent financial statements to shareholders at the AGM, which may need to be audited. 

British Columbia

  • BC issued a ministerial order on April 21 to temporarily allow certain entities, including corporations governed by the BC Business Corporations Act (BC BCA), to conduct electronic meetings of shareholders, regardless of an entity’s articles or bylaws that might otherwise prohibit such format. In order for a corporation to hold its AGM by telephone or other communications medium:

  • notice of the meeting must provide instructions on how to attend, participate and vote;

  • all of the persons participating in the meeting must be able to communicate with each other and, if applicable, vote at the meeting; and
     
  • the person responsible for holding the meeting must facilitate the use of the communications medium at the meeting.

  • The ministerial order applies only until “the date on which the last extension of the declaration of a state of emergency made March 18, 2020, under section 9 (1) of the Emergency Program Act expires or is cancelled.” As the end date of the subject relief is uncertain, there is some risk that a corporation planning a meeting today will find that the relief under the ministerial order is not in effect by the time of the actual meeting.

  • In the press release announcing the ministerial order, the government commented that if an online meeting platform is chosen, organizers should consider providing a telephone option for people without access to a computer (which recommendation does not form part of the ministerial order.)

  • In addition to the ministerial order, pursuant to the BC Business Corporations Act (BC BCA) the BC Registrar of Companies is empowered to grant extensions of the deadline by which BC companies must hold their AGMs. BC Registries and Online Services announced on March 31 that the Registrar will be able to grant an extension of six months for corporations under the BC BCA that would like to delay their AGMs. We note that:

    o this is an increase from the customary maximum three-month extension available pre-pandemic.

    o requests for extension should be sent to: bcregistries@gov.bc.ca.

    o corporations that receive an extension must inform their shareholders that the AGM has been delayed.

Federal

  • Similar relief is not available to corporations existing under the Canada Business Corporations Act and it is doubtful at this point that other blanket relief will be granted. A notice from Corporations Canada in this regard is available here.

  • Where blanket relief has not been granted, companies can generally continue to apply to the relevant superior or supreme court for one-off orders providing substantially similar relief. A number of federal and provincial companies have already obtained such court orders, particularly for holding virtual-only AGMs this year.

Other AGM-related relief

Keeping up with the announcements from the various regulators, exchanges and advisory bodies is like trying to drink from the proverbial firehose. Here is a handy summary:

Organization Date   Overview Links 
Canadian securities regulators March 20
  • Issuers can change the date, time or location of an AGM by issuing a press release, filing it on SEDAR and taking steps to inform all the parties involved in the proxy voting infrastructure
  • Logistical details of virtual or hybrid AGMs must be provided in a timely manner in the proxy materials or, if already mailed, by press release

CSA news release

 

NRFC bulletin
Canadian securities regulators April 3 & 16 
  • CSA released Staff Notice 51-360 to answer frequently asked questions regarding the filing extension relief granted by way of blanket orders on March 23
  • Although relating primarily to continuous and timely disclosure filing requirements rather than meeting requirements, the FAQs state that the CSA is considering the interplay between the blanket orders and a delay of an AGM, including matters relating to executive compensation, management information circulars and other proxy materials, annual meeting request forms, and delivery of financial statements in conjunction with the delivery of management information circulars

CSA staff notice

 TSX March 23 
  • Despite the TSX Company Manual requirement to hold an annual meeting within six months from the end of its fiscal year, listed issuers are permitted to hold their 2020 AGMs on any date in 2020 up to and including December 31, 2020, regardless of the issuer’s fiscal year-end
  • Despite the requirement to obtain shareholder approval for all unallocated awards every three years, an issuer may continue to grant awards under its plan until the earlier of the 2020 AGM and December 31, 2020
 

Staff notice

 

NRFC bulletin
TSX Venture Exchange March 23  
  • Despite the TSXV Corporate Finance Manual requirement to hold an annual meeting within 15 months from the date of the previous AGM, listed issuers are permitted to hold their 2020 AGMs on any date in 2020 up to and including December 31, 2020
  • Despite the requirement to obtain yearly approval of its rolling stock option plan, an issuer may obtain the 2020 yearly shareholder approval at its 2020 AGM, which as indicated above may be held on any date in 2020 up to and including December 31, 2020

Bulletin

 

NRFC bulletin
Glass Lewis March 19
  • For issuers holding a virtual-only AGM between March 1 and June 30, 2020, GL will generally refrain from recommending a vote against members of the governance committee, provided that the company discloses, at a minimum, its rationale for doing so, including citing COVID-19
  • For AGMs after June 30, 2020, GL’s standard policy on virtual shareholder meetings will apply

Updated guidance

NRFC bulletin

 
Glass Lewis March 26
  • GL provided additional commentary and guidance regarding shareholder proposals, executive compensation, dividends, share repurchase programs and financings
Updated guidance

 

NRFC bulletin
ISS April 8
  • ISS published updated guidance in light of the pandemic regarding virtual-only AGMs, poison pills, board composition, executive compensation, option repricing, dividends, share repurchase programs and financings
 

Updated guidance

 

NRFC bulletin


Recent publications

Subscribe and stay up to date with the latest legal news, information and events...