Enhancing Business Frameworks and Promoting Inclusive Economic Growth
Backgrounder
Frequently Asked Questions
What are the objectives of the proposed amendments to Canada's corporate governance frameworks?
The objectives of these amendments are:
- increasing shareholder democracy and participation;
- increasing women's representation, as well as diversity, on corporate boards and in senior management;
- improving corporate transparency; and
- reducing regulatory burden and increasing business certainty.
How will these amendments benefit Canadians and businesses?
Good corporate governance is one of the mechanisms that help support economic efficiency and growth. The bill will act as a critical foundation upon which Canadian companies can innovate and grow to scale in the modern economy.
Why is the Government proposing Canada Business Corporations Act (CBCA) changes?
The CBCA is the federal framework that provides rules for the interaction among shareholders, directors and management for nearly 270,000 federally incorporated corporations.
Given that the last comprehensive CBCA amendments were made in 2001, the Act has not kept pace with certain international best practices and the rules governing publicly traded companies. Improving the director election process and supporting diversity on boards can bring different views to the table that can help foster innovation. Modernizing shareholder communications, improving corporate transparency and clarifying competition rules will help ensure that Canada's marketplace frameworks reflect new economic realities and support firms as they innovate.
Precisely, what amendments will be made to the CBCA?
- Shareholder democracy and participation amendments will better align with securities rules and will require distributing (publicly traded) CBCA corporations to:
- hold annual elections for directors;
- elect directors individually; and
- use a majority voting standard for uncontested director elections (i.e. when the number of candidates is the same as the number of positions to be filled).
- Improving the representation of women on boards and in senior management will be addressed through a "comply or explain" model. All distributing CBCA corporations will be required to disclose their diversity representation and policies or explain why none are in place.
- Shareholder communications will be updated to:
- permit a "notice and access" system, allowing corporations to use electronic communications to provide notice of meetings and online access to relevant documents; and
- clarify the date for shareholders to submit a proposal to the board.
- Corporate transparency amendments will clarify that all shares and share warrants must be in registered form, thus prohibiting the issuance and use of bearer shares and bearer share warrants that can be exploited for illegal purposes.
What amendments will be made to the Canada Cooperatives Act and the Canada Not-for-profit Corporations Act?
Amendments corresponding to those in the CBCA to improve shareholder democracy, shareholder communications and transparency will be made as necessary to the Canada Cooperatives Act and the Canada Not-for-profit Corporations Act.
For example, measures that improve corporate transparency and the director election process for distributing cooperatives will be included in the Canada Cooperatives Act. Technical amendments will be included in the Canada Not-for-profit Corporations Act.
What amendments will be made to the Competition Act?
The definition of affiliate under the Competition Act will be modernized such that it fully integrates a broader range of non-corporate business organizations (e.g. sole proprietorships, partnerships, trusts). This involves changing the interpretation provisions of the Act and substituting the neutral term "entity" in many provisions that previously only accounted for corporations.
Why are these changes to the Competition Act necessary?
There has been a proliferation of income trusts and other forms of non-corporate business organizations, which has led to new types of affiliations between business organizations. Ensuring that the Competition Act evolves with market conditions will ensure that its application is not unduly limited or overextended. These changes will recognize how firms operate and grow to scale in the modern marketplace.
Why are the reforms to Canada's corporate frameworks limited to these measures?
Given the rapid changes in technology and business practices since 2001, the proposed amendments will ensure that Canada keeps pace with international standards, aligns with provincial securities laws and rules, and supports accountability and business certainty.
During the public consultations on the CBCA held in 2014, stakeholders raised important and complex points on a number of corporate governance issues that require further analysis and consultation.
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