If you are a federally-incorporated, publicly-listed company, starting on the 1st of January 2020, you will be one the 607 distributing corporations under the Canadian Business Corporations Act (CBCA) that will be affected by the new diversity disclosure requirements.
The Canadian Business Corporations Act requires corporations to hold annual shareholder meetings. The directors of the corporation are legally obligated to notify their shareholders no more than 60 days and no less than 21 days before the annual shareholders’ meeting. The notification must include the time, date and location of the meeting.
The annual shareholders’ meeting is an occasion for shareholders to gain greater insight into the status of the corporation as well as to review its financial statements. With this information, shareholders can make informed decisions when managing their own shares and take greater advantage of their voting powers.
The meeting also grants shareholders an opportunity to vote on a number of important concerns regarding the corporation, for example, the election of directors. With the introduction of diversity disclosure requirements, the federal government is attempting to change the composition of boards of directors across Canada while also ensuring that shareholders are provided with additional information during their annual shareholders’ meetings.
The amendments being made to the CBCA derive from sections of multiple acts, such as;
- Bill C-25 An Act to amend the Canada Business Corporations Act;
- Canada Not-for-profit Corporations Act;
- Canada Cooperatives Act; and the
- Competition Act.
These amendments will require publicly-listed corporations to implement diversity policies which will serve as a means to maintain statistics on the gender and ethnicity, amongst other aspects, of the members of their board of directors. The amendment will take, from the Employment Equity Act, the definition of the term “Designated Groups” which includes:
- Aboriginal peoples;
- Person with disabilities and;
- Members of visible minorities.
The regulations supporting the amendments to the Canada Business Corporations Act (CBCA) will take the “comply or explain” approach that is used in Canadian Securities Law. Therefore, corporations will be considered to be in compliance with these requirements should they voluntarily adopt the diversity disclosure requirements. If not, they will have to explain why they are choosing an alternative method to achieve the same goal, otherwise they will be considered to be in violation of the act.
Corporations will have to prepare briefs for their shareholders that explain the purpose and objectives of their diversity policies as well as the progress they are making towards achieving them. In order to provide a comprehensive analysis of the success or lack thereof of their policies, they will have to produce statistics on the amount of people that are classified as members of designated groups that hold a seat on the board of directors.
It will be interesting to see how these new changes will influence corporate hiring policies as well as shareholders voting patterns in regards to the election of directors.
Marco Fantin, Articling Student,
Alepin Gauthier Avocats Inc.