Corporations incorporated under the Canada Business Corporations Act (CBCA) now have some new disclosure requirements to comply with, since the amendments to the Canada Business Corporations Regulations, 2001, the "Regulations", were approved on July 18, 2019.
What has happened?
Under Bill C-25, An Act to amend the Canada Business Corporations Act, the Canada Cooperatives Act, the Canada Not-for-profit Corporations Act and the Competition Act, the CBCA was amended effective May 1, 2018. We have provided past updates on Bill C-25 in our Spring 2018 and Fall 2018 InSync publications.
The amendments to the CBCA included new requirements for distributing corporations, as defined in the CBCA and its regulations, to provide diversity disclosure in their annual meeting materials; however, these changes were not in force until the relevant Regulations were finalized.
Currently, Canadian securities laws require diversity disclosure for certain issuers. The rules for CBCA issuers are now expanded to:
- Include venture issuers;
- Require the definition of diversity to include "designated groups" as referenced in the federal Employment Equity Act, not just gender. The "designated groups" are:
- Women;
- Indigenous peoples (First Nations, Inuit, and Métis);
- Persons with disabilities;
- Members of visible minorities.
The disclosure must include diversity among directors and members of senior management. In the Regulations, "members of senior management" is defined to include:
- the chair and vice-chair of the board of directors;
- the president of the corporation;
- the chief executive officer and chief financial officer;
- the vice-president in charge of a principal business unit, division or function, including sales, finance or production, and;
- an individual who performs a policy-making function in respect of the corporation. The new requirements follow the comply-or-explain approach currently in place provincially.
The Regulations have also set out the information required in the disclosure, as per subsection 172.1(1) of the CBCA. If these requirements are not being complied with, the corporation must explain why. The "prescribed information" is explained in detail in Part 8.2, Section 72.2(4) of the Regulations. The requirements include details of any term limits or renewal methods adopted, written policies regarding identification of "designated groups" for director nominations and appointments to members of senior management, any policies or targets that have been adopted in this regard, and the number and proportion of members of each "designated group" who hold positions on the board and are members of senior management.
When are the changes effective?
For any meeting that is held on or after January 1, 2020, corporations need to provide a report that includes the prescribed information on the representation of the "designated groups". Corporations Canada has also indicated that additional information can be included if there are other groups that the corporation believes contribute to the diversity of their board or senior management.
How will this impact you?
In the Regulatory Impact Analysis Statement, Corporations Canada has indicated that the new disclosure requirements will impact a total of 607 distributing corporations, 372 of which are already providing gender disclosure to the provincial securities authorities. The remaining 225 corporations are venture issuers, who are currently exempt from the provincial securities authorities’ disclosure requirements, so they will therefore need to set up a system to comply with the new requirement. In all cases, companies will likely need to rely on members of the designated groups, or any other group the corporation chooses to disclose, to self-identify.
The diversity disclosure must be sent to shareholders along with the notice of meeting, as well as to Corporations Canada, as required under sections 150 and 160 of the CBCA. You can review information about filing financial statements and proxy circulars under the CBCA, and access the Corporations Canada Online Filing Centre. Corporations should consult with their legal counsel regarding their specific requirements.
The material contained herein is provided for general informational purposes only and does not constitute legal or other professional advice or opinion. Computershare does not warrant or guarantee the accuracy or completeness of the material contained herein and such material should not be relied upon. "Computershare" refers to Computershare Canada Inc. and its affiliates.
© 2019 Computershare Trust Company of Canada