Proposed changes to the Canada Business Corporations Act (CBCA) could have a significant impact on the responsibilities of many corporations across the country.
In its budget announcement on March 19, 2019, the federal government proposed the following changes to the CBCA:
The current CBCA imposes a "fiduciary duty" on directors and officers that requires they "act honestly and in good faith with a view to the best interests of the corporation." The proposed changes would amend the Act to add that in exercising their fiduciary duties, directors and officers may also consider the interests of shareholders, employees, retirees and pensioners, creditors, consumers, governments, the environment, and the long-term interests of the corporation.
Compensation Disclosure and "Say-on-Pay"
Under the amended Act, certain corporations would be required to:
- disclose, on an annual basis, their approach towards executive and director compensation
- implement a "say-on-pay" vote on the corporation's approach to compensation at each annual shareholder meeting
While the "say-on-pay" vote would be non-binding, it would be mandatory for results of the vote to be disclosed to shareholders. In recent years, a growing number of public companies have begun voluntarily implementing "say-on-pay" votes.
In addition, the compensation disclosure would include recovery of incentive benefits or other benefits paid to directors and senior management (i.e., clawbacks).
Other New Disclosure Requirements
In addition to expanded disclosure requirements for compensation, the federal government has proposed additional disclosure requirements for diversity among directors and senior management and the "well-being of employees, retirees and pensioners."
Although not yet in force, it was previously announced that disclosure of gender diversity among directors and senior management would be compulsory for public companies. Under proposed changes, diversity disclosure would be expanded to include Aboriginal Peoples, persons with disabilities, and members of visible minorities.
The regulations pertaining to the amendments have not yet been released. As such, the criteria that will determine which corporations are subject to these new requirements is still to come. It is anticipated that a consultation period will take place first.
We previously discussed new record-keeping and disclosure requirements coming into force on June 13, 2019 for private corporations. Please see "New Record Keeping Requirements for Private, Federally-Incorporated Businesses Come in Effect June 13, 2019."
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