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Rush to conflict: Hurried transaction fails after British Columbia court finds conflicts of interest

A recent court decision led to the failure of an attempted acquisition of an exploration company by a listed issuer, in part due to conflicts of interest. We analyze the decision, and provide commentary on the law and practice of managing conflicts, in this Dentons Insight.

This summary was co-authored by Daniel McElroy, Knowledge Management Lawyer in Dentons’ Vancouver office.

Rush to conflict: Hurried transaction fails after British Columbia court finds conflicts of interest

Women on boards: Review and discussion of new “comply or explain” disclosure requirements

As noted in the September 1, 2015 posting below, recent rule changes have required senior Canadian public companies to disclose their policies and record on the appointment of women as directors and executive officers. Our recent Insight summarizes the initial results of and response to these new disclosure rules, and indicates what further changes may lie ahead. See our Dentons Insight.

Women on boards: Review and discussion of new “comply or explain” disclosure requirements

Canadian Coalition for Good Governance Releases 2013 Executive Compensation Principles

The Canadian Coalition for Good Governance (“CCGG”) recently released its 2013 Executive Compensation Principles (the “2013 Principles”), replacing the previous version originally published in 2009. The original principles were designed to provide enhanced guidance to boards and to promote compensation decisions aligned with long-term company and shareholder success. According to the CCGG, the 2013 Principles offer an updated take on the principles set forth in the original report to reflect the continued evolution of both compensation practices and regulatory disclosure requirements.

According to the CCGG, the 2013 Principles focus on the concept of “pay for performance” and “the integration of risk management functions into executive compensation philosophy and structure”. The 2013 Principles are organized around six key principles:

1) A significant component of executive compensation should be “at risk” and based on performance.

2) “Performance” should be based on key business metrics that are aligned with corporate strategy.

3) Executives should build equity in the company to align their interests with those of shareholders.

4) A company may choose to offer pensions, benefits and severance and change-of control entitlements. When such perquisites are offered, the company should ensure that the benefit entitlements are not excessive.

5) Compensation structure should be simple and easily understood by management, the board and shareholders.

6) Boards and shareholders should actively engage with each other and consider each other’s perspective on executive compensation matters.

The CCGG notes that while Canadian disclosure obligations regarding executive compensation are limited to the “top five” executives at a company, boards should ensure that the above principles are used in determining company-wide compensation philosophy and structure.

Canadian Coalition for Good Governance Releases 2013 Executive Compensation Principles

TSX Requests Comments on Majority Voting Policy – Proposed Amendments to Part IV of the Company Manual

On October 4, 2012, the Toronto Stock Exchange (“TSX”) released a request for comments on proposed amendments to Part IV of the TSX Company Manual (the “Proposed Amendments”). The Proposed Amendments would require issuers listed on the TSX to have majority voting when electing directors at uncontested security holder meetings. As currently proposed, issuers may adopt a majority voting policy to comply with the requirement.

Under mandatory majority voting, security holders vote “for” or “against” each individual board nominee and only those directors who receive a majority of votes in their favour remain on the board. Typically, a majority voting policy provides that a director who receives a majority of “against” votes must immediately tender his/her resignation to the board of directors. The Proposed Amendments would require the board of directors to issue a news release disclosing: (i) the detailed results of the votes received for the election of each director; and, where applicable, (ii) whether a resignation was accepted and the board’s reasons for the decision.

As indicated by the Canadian Coalition for Good Governance, 39% of the listed issuers in the S&P/TSX Composite Index do not have majority voting. The TSX asserts that the Proposed Amendments will improve corporate governance standards, strengthening Canada’s international reputation.

Comments on the Proposed Amendments are being accepted until November 5, 2012. The TSX anticipates that the Proposed Amendments could become effective as of December 31, 2013.

TSX Requests Comments on Majority Voting Policy – Proposed Amendments to Part IV of the Company Manual

OSC Focuses on Improvements to the Director Election Process in its 2012 Annual Report

Shaira Nanji, articling student, assisted in the preparation of this article.

The Ontario Securities Commission (OSC) recently released its 2012 annual report (“Report”) which provides an update on the OSC’s intentions concerning potential reforms to the regulation of director elections. The Report discusses how to strengthen “shareholder democracy” and shareholder voting rights with regards to the uncontested director-elections process. The Report supports an earlier proposal made by the Toronto Stock Exchange (TSX) in September 2011 which suggested that:

• directors of listed issuers are elected individually and not by slate voting;

• listed issuers disclose the voting results from shareholders meetings (even if the vote was done by raising hands); and

• listed issuers disclose if they have a majority-voting policy when electing directors.

The TSX proposal also focuses on majority voting for director elections and includes a “comply or explain” disclosure-based regime. Since shareholder voting rights have a “significant impact on confidence in the capital markets,” the Report notes that these proposed initiatives will result in greater transparency and accountability of boards of directors. The OSC plans to work closely with the TSX to improve the director-elections process.

OSC Focuses on Improvements to the Director Election Process in its 2012 Annual Report