The Shareholder Rights and Activism Review: Canada


Canadian corporate and securities laws have provided shareholders with robust rights for many decades. Yet, it has only been more recently that Canadian companies have seen a dramatic rise in shareholders availing themselves of these rights. Institutional shareholders have increasingly used their rights and influence to propose corporate governance changes, to reform executive compensation and adopt say-on-pay policies, and to push for improved environmental social and governance (ESG) practices. At the same time, and particularly since the 2008–2009 financial crisis, shareholders have increasingly resorted to proxy contests, or wielded threats to do so, to effect governance changes.

Canadian boards know that disappointed shareholders will not be patient for long, and boards have become more sophisticated in understanding how to deal with an activist attack. Indeed, it has become increasingly common for boards to have one or more directors who have lived the drama of a public shareholder activism campaign, either while serving on another board, in an executive capacity, or even as a nominee for a dissident.

More boards are accepting that part of their job is to know the shareholder base and to participate in direct shareholder engagement. Boards that leave all shareholder interaction to senior management or the investor relations team are much less likely to win the support of shareholders when problems arise and a dissident has emerged.

The Canadian market is considerably influenced by developments in the United States and trends in corporate governance often flow north across the border. However, with respect to shareholder rights, the Canadian legal regime takes a lighter regulatory approach in numerous respects, allowing shareholders to act more freely than under comparable rules in the United States.

Legal and regulatory framework

The Canadian legal landscape is an accommodating one for shareholder activists, providing significant freedom for shareholder activists to seek governance change.

The legislative and regulatory framework in Canada governing public companies primarily comprises corporate and securities laws. The key legal tools relating to shareholder rights, shareholder activism and shareholder engagement are contained in corporate law statutes, which are enacted federally and by each province and territory.2 These tools include the rights of shareholders to requisition a meeting, make a shareholder proposal, solicit proxies and pursue the oppression remedy and derivative action in courts.

Canadian securities laws govern the disclosure obligations of companies and also impose disclosure obligations on significant shareholders and dissident shareholders who engage in proxy solicitation. Securities laws are the responsibility of the provincial and territorial governments, with no central federal regulating authority; however, relevant laws are substantially uniform across Canada's provinces and territories.

In addition to setting out prescribed rules governing public companies and their shareholders, securities legislation also empowers securities regulators with a general power to make orders that are in the public interest.3 This public interest jurisdiction has been used by securities regulators in situations where actions by market participants are found to be abusive of the capital markets or inconsistent with the animating principles of securities laws, even if an actual breach of law is not established.

Rules and policies set by stock exchanges supplement the securities law obligations of public companies, and include requirements aimed at protecting shareholder interests, for example, by establishing rules governing dilutive acquisitions, private placements, timely disclosure and shareholder approval of equity compensation plans.

i Shareholder proposals

All but two provincial corporate law statutes provide for the submission of shareholder proposals to be considered at the next meeting of shareholders. Generally, the only requirement for a person to be able to submit a proposal is that the person be entitled to vote at the meeting of shareholders.4 A public corporation is obligated to include a properly submitted proposal in its management circular and to submit it for a vote at the meeting. Proposals are a less important tactic for shareholder activist campaigns, although they can be used to submit nominations for election to the board.

Shareholder proposals are frequently used to advance environmental, social and governance objectives of shareholders. With the rising expectation of shareholders that companies provide greater transparency and accountability for initiatives concerning climate change and emissions reduction, shareholders have begun using shareholder proposals to compel companies to submit 'say-on-climate' advisory votes to shareholders at annual meetings.5

ii Meeting requisitions

Canadian corporate law statutes entitle holders of at least 5 per cent6 of the issued and outstanding shares of a corporation to requisition the directors to call a meeting of shareholders for the purposes set out in the requisition. A requisition may be made by one or more shareholders and must state the business to be transacted at the meeting. Upon receiving the requisition, the directors of the corporation have 21 days to announce the date of the meeting, although they are not required to call the meeting if, for example, the purpose of the requisition does not relate in a significant way to the business or affairs of the corporation or is to address a personal claim or grievance that a shareholder has against the corporation or its directors and officers.

The power to requisition a shareholders' meeting is a powerful tool in the hands of an activist shareholder. Although requisitioned meetings are not frequently held, the ability of an activist to threaten a potential requisition is effective in commanding the attention of management and bringing boards to the table to negotiate with the activist.

iii Solicitation of proxies

To solicit proxies, shareholders are generally required to send a dissident's information circular to every shareholder whose proxy is solicited. Two exceptions to this formal solicitation requirement are the 'quiet' solicitation and the public broadcast solicitation.

Quiet solicitations permit a person to solicit up to 15 shareholders without following formal solicitation requirements under Canadian corporate and securities laws. Quiet solicitations are a powerful activist tool as a substantial proportion of votes can typically be solicited by reaching out only to the 15 largest shareholders, even in the case of some of Canada's largest companies. Historically, an activist could use the quiet solicitation to conduct a stealth campaign and ambush the incumbent board at a shareholders' meeting with the dissident nominating its own slate of directors from the floor and support from up to 15 large shareholders. However, the ambush strategy is ineffective where the corporation has adopted a by-law requiring advance notice of director nominations.

Public broadcast solicitations permit an activist to solicit proxies in certain circumstances if the solicitation is conveyed by public broadcast, speech or publication, including, for example, by way of a press release. An activist soliciting by public broadcast must file prescribed disclosure with securities regulators as well as copies of the soliciting material. However, the cost of printing and mailing materials to all shareholders can be avoided with this exemption.

Activists seeking to solicit shareholders broadly may do so by mailing a dissident proxy circular and form of proxy. Dissident proxy circulars have limited disclosure requirements, but if the solicitation relates to the election of directors, then the circular must include biographical information on the dissident's nominees as well as information regarding share ownership and prior regulatory or bankruptcy proceedings. Activists commonly wait until after the company has mailed its circular before completing their dissident circular, in order that they may respond to specific management points in their dissident circular.

iv Contacting shareholders

Any person may, on payment of a fee, require that a corporation provide within 10 business days a list setting out the names of the registered shareholders of the corporation, the number of shares owned by each shareholder and their addresses. The requester must swear in an affidavit that use of the list will be limited to matters relating to the affairs of the corporation. A similar request may be made with respect to beneficial shareholders who hold shares indirectly through brokers or other intermediaries; however such a list would contain only shareholders who have not objected to their identity being made known to the corporation.

Although shareholder lists may be readily obtained, many shareholders are difficult to reach directly because they are objecting beneficial owners, whose identities are known only to the brokerage firm or investment adviser through whom they own their shares.

v Majority voting

The Toronto Stock Exchange (TSX) requires that each director of an issuer listed on the exchange be elected by a majority of the votes cast in respect of their election. This rule does not apply to contested meetings. As such, issuers are required to adopt a majority voting policy to comply with this rule.

If a director is not elected by at least a majority of the votes cast in respect of his or her election, such director must tender his or her resignation immediately, subject to certain exceptions. Failure to resign could lead to the TSX reviewing the director's qualifications to be a director or officer of other TSX-listed issuers. An issuer is permitted to establish a committee to consider the resignation of the director in question, but such committee would be expected to accept the director's resignation absent exceptional circumstances. Such exceptional circumstances include: the resignation would cause the issuer to be non-compliant with corporate or securities laws; and the director is an important member of an active special committee and the director's resignation would negatively impact the special committee's ability to fulfil its mandate. An issuer may not reject a resignation on the basis of the director's exceptional qualifications or experience.

vi Remedies and minority protections

When a shareholder claims that a corporation or its directors or officers have committed some form of wrong, Canadian corporate law statutes provide shareholders two related remedies. The first remedy, the oppression remedy, provides broad protection to minority shareholders from conduct by a corporation and its board that is inconsistent with the reasonable expectations of shareholders. The second, the derivative action, is an extraordinary remedy that allows a shareholder to bring an action in the name and on behalf of a corporation, including against the directors for a breach of their duties to the corporation.

A shareholder may also request that securities regulators intervene where there has been a breach of securities laws or actions not in the public interest. In addition, the securities law regime in Canada establishes certain procedural protections for minority shareholders in connection with transactions where there is a potential for conflicts of interest. Such conflicts may arise because the transaction involves a party that is a 'related party' with a potential informational or other advantage or that is otherwise entitled to receive different consideration. The procedural safeguards include requirements for formal valuations, enhanced disclosure regarding the procedure followed by the board in negotiating the transaction and a requirement that a majority of shareholders who do not have an interest in the transaction vote in favour of it.

vii Structural defences

Few structural defences are available to Canadian boards against activists. Canadian public companies generally do not have classified boards, such that all directors are subject to removal at annual shareholder meetings. In addition, the right of shareholders to requisition meetings to remove directors (discussed above) leaves boards exposed to attack even between annual meetings. Majority voting policies even leave incumbent directors at risk of removal in uncontested elections.

The use of shareholder rights plans, or 'poison pills', is closely regulated by Canadian securities regulators. While poison pills can be effective at preventing shareholders from acquiring more than 20 per cent ownership without making a formal takeover offer to all shareholders, securities regulators will not allow them to prevent shareholders from acting as a group with respect to the voting of their shares.

Canadian companies may adopt by-laws requiring advance notice by shareholders of an intention to propose nominees for election. Changes to by-laws may initially be implemented by a board but must subsequently be ratified by shareholders. The adoption of advance notice by-laws has become a corporate governance best practice and Canadian courts have accepted these by-laws as being fair to shareholders by ensuring that they receive advance notice of the existence a proxy contest. Typically, these by-laws require written notice of an intention to nominate a director to be provided at least 30 days prior to the meeting.

Private placements of shares into friendly hands, while uncommon as a defensive tactic, can be effective in shoring up support for the incumbent board, particularly if coupled with voting agreements committing participating shareholders to vote in accordance with the board's recommendations. However, securities regulators in British Columbia and Ontario have rendered decisions indicating that, where there is no non-defensive purpose to a private placement or there are mixed defensive and non-defensive purposes, they will consider whether the public interest requires them to intervene and unwind the private placements in order to protect the interests of shareholders.7 The use of private placements as a defensive tactic may also be challenged by shareholders in the courts under the oppression remedy.

While not a structural defence, companies do have a significant information advantage over activists in a proxy contest. Canadian corporate law allows companies to establish cutoffs for the submission of proxies up to two business days prior to the meeting. While dissident shareholders are required to submit their proxies with the company's transfer agent prior to the cutoff, there is no requirement that the company share the results of the solicitation.

viii Influential governance organisations

Although Canada is a large country, with several regional financial centres, the corporate governance community is fairly close-knit, with the result that corporate governance best practices tend to propagate across the country fairly quickly. The Canadian Coalition of Good Governance (CCGG) and the Institute of Corporate Directors are notable governance organisations that are influential in establishing best practices and advocating for their adoption.

The CCGG is a member organisation representing the interests of Canadian institutional investors in matters of corporate governance in Canadian public companies, with the mission of improving alignment of boards and management with the interests of shareholders. In recent years, the CCGG has played an influential role in advocating for majority voting standards for board elections, the adoption of shareholder engagement policies, improved board diversity, and 'say on pay' advisory votes on executive compensation.

MEDAC (Mouvement d'éducation et de défense des actionnaires) is a shareholder rights organisation that has been prolific in submitting shareholder proposals at large Canadian companies promoting improved governance, compensation practices and shareholder accountability.

Global shareholder advisory firms, such as ISS and Glass Lewis, are also well established in Canada and play an influential role in the development of corporate governance best practices and in providing voting recommendations. Many Canadian institutional investors give significant weight to these recommendations and in proxy contests boards and activists devote considerable energy to winning favourable recommendations.

Key trends in shareholder activism

i Continued sustained levels of activism

The Canadian market saw a sharp spike in activism campaigns during the financial crisis of 2008 and 2009. Since then, the number of proxy contests in the Canadian market annually has remained above pre-crisis levels, averaging around 30–40 public contests per year.8 Market caps of companies targeted are weighted heavily towards the small- and mid-cap sector, with only a handful of companies valued above US$1 billion being targeted in any year.

Despite activism being a reality of the Canadian public markets, the level of shareholder activism in the Canadian market tends to lag levels that have been seen in the United States and Europe in recent years, particularly among large-cap Canadian companies.

As was witnessed globally, the covid-19 pandemic caused a slowdown in the rate of activism in Canada in the first and second quarters of 2020 as boards and management were given more space to respond to the challenges of the pandemic. However, as businesses found their footing and stock market performance rebounded from the initial pandemic-induced shock, activity has been returning to typical levels. In total, 36 public contests were initiated in 2020, down just slightly from the prior year.9

ii Targeted industries

The lower rate at which large Canadian companies are subjected to activist campaigns is likely attributable to the selection of companies available for investment in Canada. Large international activist funds seem to be finding their preferred targets in their home markets or in international markets other than Canada.

The mix of companies traded on Canada's senior securities exchange, the TSX, may shed some light. The TSX Composite Index comprises 31.6 per cent of financial services firms (dominated by banking and insurance).10 Another 13.1 per cent of the TSX index comprises companies in the energy sector, and the basic materials and industrial sectors represent 11.7 per cent and 11.4 per cent, respectively. Despite their large share of the Canadian market, financial firms are infrequently targeted by activists.11 Firms in the materials sector, particularly mining, are frequent targets, particularly when changes in the commodity cycle put companies under pressure.

Real estate investment trusts (REITs) have also generated a notable number of proxy contests, including contests initiated by activist Sandpiper Asset Management at several REITs (Granite REIT, Agellan Commercial REIT and Artis REIT) and the successful demand of FrontFour Capital Group for board seats at Cominar REIT in 2019. Disruption in the real estate market due to the covid-19 pandemic could prompt further activity as valuations in this sector, particularly the office and retail real estate markets, have come down significantly.

iii Activist success rates

Proxy contest outcomes in public contests, where an activist has made a public demand, are generally split between dissidents and management. In 2020, management was successful in resisting the activist in 56 per cent of public contests, compared with an average management success rate of 54 per cent in the three year period 2017–2019.12 While this suggests that management holds a slight edge, the significant level of activist success gives management a strong incentive to explore acceptable settlement terms. Settlements resulting in activists gaining board seats have become increasingly common, with 30 per cent of public contests being resolved through settlement, a steady increase from just 12 per cent in 2016.13

iv Growing prominence of Canadian activists

Historically, the Canadian market has not been home to dedicated activist investors; that is, investors who look for investments with a view to employing activism to create value. Rather, Canadian activists have generally been occasional or situational activists; investors driven to activism by circumstances of an existing investment, such as a pension fund deciding to take a more activist role with respect to a floundering portfolio position, or a former CEO seeking to take back the reins of a company.

While Canada still lacks a critical mass of dedicated activist funds of notable size, a number of Canadian headquartered managers with explicit activist strategies have emerged in the past 10 years. Smoothwater Capital Corporation based in Toronto was one of the first funds to emerge as a dedicated Canadian activist fund. It waged successful campaigns at Genesis Land Development and later at Equity Financial, eventually acquiring the latter in 2017.

Sandpiper Asset Management, a Vancouver based fund established in 2016, has run several successful campaigns in the Canadian real estate sector, including Agellan Commercial REIT and Granite REIT in 2017, Artis REIT in 2018, and Extendicare in 2019.

Waterton Global Resource Management, Inc., a Toronto based private equity firm with US$1.75 billion under management, is focused on investments in the resource sector and has pursued activism as a strategy in its successful 2019 proxy contest against HudBay Resources.

Another Canadian firm, Catalyst Capital Group, has used activism to oppose two recent M&A transactions: the privatisation of Hudson's Bay Company (discussed below) and the acquisition by Corus Entertainment of media assets from a company under common control with Corus. In these transactions, Catalyst has demonstrated its willingness to devote substantial resources to its campaigns, taking full advantage of minority shareholder protections, including through applications to securities regulators to make rulings under Canadian rules governing related party transactions.

v US activists in Canada

US hedge funds focused on activist strategies frequently target Canadian companies and many have recognised the advantage of Canada's activist-friendly legal regime. The Canadian market also makes for an attractive hunting ground for smaller hedge funds that are able to take larger stakes in Canada's typically smaller companies.

Large US activists, including Carl Icahn, Pershing Square Capital Partners and Jana Partners, have largely led the expansion of activism to Canadian large-cap companies. Pershing Square's 2012 campaign to elect a dissident slate and install a new CEO at Canadian Pacific Railway continues to stand as a landmark proxy contest. Pershing Square's success in electing its slate with overwhelming shareholder support signaled to the boards of established Canadian companies that their market caps and the unmatched pedigrees of their board members did not assure them the loyalty of their shareholder base.

Despite Pershing Square's success and Canada's shareholder friendly regime, public contests at large-cap Canadian companies have been more episodic than frequent, with the level of shareholder activism by large US activists in the Canadian market tending to lag levels that have been seen in other jurisdictions in recent years.

vi Activism in controlled companies

Several large Canadian companies are controlled by founding families or shareholders holding controlling stakes, either through majority ownership or through classes of multiple-voting shares. Strictly speaking, these companies are immune from activist attack, with their controlling shareholders holding the power to exclude dissidents from the board room and to defeat their proposals. However, in recent years, numerous controlled companies in Canada have been targeted by activists undaunted by the impossibility of winning a vote.

In the spring of 2020, Tribeca Investment Partners of Australia and Impala Asset Management of the United States launched a campaign advocating the removal of Teck Resources' CEO, alleging a decade of underperformance relative to other diversified miners, and urging the divestment of Teck's oil investments. Although the company is controlled by the family of the founding shareholder through multiple voting shares, the activists waged their campaign through public pressure. Despite this pressure, Teck has stayed its course, and its CEO received a 97 per cent shareholder approval at Teck's 2021 AGM.

Some activists are even willing to run proxy contests that they are unable to win. For example, Pentwater Capital submitted shareholder proposals seeking both the election of its portfolio manager to the board of Turquoise Hill Resources and an amendment to the company's charter that would give minority shareholders the power to elect a minority of the board in future elections. Without the support of Rio Tinto plc, Turquoise Hill's majority shareholder, these proposals inevitably failed. Yet Pentwater has carried out a formal campaign to encourage other minority shareholders to support its proposals.

Recent shareholder activism campaigns

i Detour Gold

Following a series of setbacks that negatively impacted Detour Gold Corp.'s share price, in 2018, US hedge fund Paulson & Co. succeeded in its campaign to replace the board of Detour and pursue a sale of the company.

In July 2018, months of agitation by Paulson evolved into an open proxy battle between the hedge fund and Detour. Paulson requisitioned a special meeting of shareholders and proposed a slate of eight directors. In letters to shareholders, Paulson outlined its reasons for proposing a wholesale change to the company's board, including the poor performance of Detour's shares relative to peers, operational setbacks, poor disclosure practices, insider sales of shares and discordant executive remuneration. In response, Detour warned against a 'fire sale' of the company and argued that continuity was needed to execute the company's business plan. The proxy advisory firm Glass Lewis & Co. ultimately supported three of the hedge fund's eight nominees, while Institutional Shareholder Services supported the company's proposed slate of directors.

Paulson effectively won the proxy contest at the 13 December 2018 special meeting, with five of its eight nominees elected to Detour's board. Following the proxy contest, the newly constituted board hired a new management team and, in late 2019, explored strategic alternatives, ultimately leading to a sale of the company to Kirkland Lake Gold in 2020.

ii Hudbay Minerals

In October 2018, Waterton Global Resource Management, Inc. launched a proxy contest at Hudbay Minerals Inc. that ultimately resulted in the private equity firm obtaining minority representation on the board. Waterton feared that Hudbay was on the verge of entering into a dilutive acquisition, and initially requisitioned a special meeting of shareholders of Hudbay to adopt an advisory resolution against such a transaction.

Waterton later withdrew the requisition and instead commenced a proxy contest to place eight nominees on Hudbay's 10-person board, later downsizing its slate to five nominees. Waterton's key criticisms were that Hudbay had underperformed relative to its peers and had not allocated sufficient capital to its existing projects.

In May 2019, four days before the meeting of shareholders, Hudbay and Waterton announced a settlement in which they agreed to a mutually acceptable board of eleven and to initiate a process to identify a suitable successor for the chair of the board.

iii Inter Pipeline

Brookfield Infrastructure Partners Ltd's (Brookfield Infrastructure) hostile takeover of Inter Pipeline Ltd (Inter Pipeline) is another M&A transaction having shades of shareholder activism issues. In February 2021, Brookfield Infrastructure commenced a bid for Inter Pipeline valued at C$16.50 per share. In announcing its bid, Brookfield Infrastructure disclosed that it owned 9.75 per cent of Inter Pipeline's common shares and in addition held derivatives giving it an economic interest equivalent to a further 9.9 per cent interest in Inter Pipeline. Inter Pipeline's board unanimously rejected Brookfield's bid and initiated a complaint to the Alberta Securities Commission that Brookfield should have publicly disclosed its ownership prior to commencement of its bid and is improperly using its 9.9 per cent derivative position to block other potential transactions. The case could prove to be an important precedent on the use of derivatives to avoid Canadian beneficial ownership reporting obligations and restrictions on acquisitions above 10 per cent. A decision of the regulator in the case could have repercussions for shareholder activism given the common practice of activists increasing their economic exposure to a target through the use of cash-settled derivatives.

In addition to commencing regulatory proceedings to fend off Brookfield's bid, Inter Pipeline generated an auction, announcing in June 2021 that it had entered into a friendly takeover transaction with Pembina Pipeline Corporation (Pembina) valuing Inter Pipeline at C$19.45 per share. Brookfield Infrastructure has since countered and revised its hostile takeover bid, which now values Inter Pipeline at C$19.75 per share. The board of Inter Pipeline continues to publicly support the Pembina transaction.

Regulatory developments

i Directors' duties and the interests of stakeholders

In 2019, the Canadian Parliament amended the Canada Business Corporations Act (CBCA), the leading corporate statute governing most large Canadian public companies. The amendments codify the common law principle that Boards of Directors, in discharging their duty to act with a view to the best interests of the corporation, are not beholden to the interests of shareholders, but may consider the interests of other corporate stakeholders beyond shareholders, including employees, retirees and pensioners, creditors, consumers and governments, as well as impacts on the environment and the long-term interests of the corporation.

As a codification of common law principles that had been enunciated by the Supreme Court of Canada over a decade previously in BCE v. 1976 Debentureholders, 2008 SCC 69 (BCE), the amendments do not represent a substantial change to the way in which corporations are governed. However, the move to codify stakeholder interests signals the endorsement of the federal government of the stakeholder model of corporate governance and support for dilution of shareholder primacy as a principle underlying Canadian corporate law.

While the amendments codified the board's ability to consider non-shareholder interests over the interests of shareholders, no amendments were made that would weaken the tools of control that shareholders have over the election and removal of directors, and other stakeholder groups such as employees still have no right of board representation. Accordingly, the CBCA, like other Canadian corporate legislation, continues to leave boards primarily accountable to shareholders.

ii Majority voting – CBCA requirements

Although the TSX began requiring that all TSX-listed companies implement majority voting policies prior to the 2015 proxy season, some institutional investors and the CCGG continued to see these policies as inadequate because they relied on a system of director resignations that leaves open the possibility that resignations are declined in exceptional circumstances. In response to lobbying by institutional investors and the CCGG, the Canadian parliament amended the CBCA in 2016 such that directors receiving less than majority support from shareholders in an uncontested election would not be elected as a matter of law, eliminating the need for reliance on resignations. While these amendments have been passed, their coming into force continues to be postponed.

The strict requirement for majority approval in order to gain election could prove to be a powerful tool for dissident shareholders and controlling shareholders by providing a means to target directors for removal without having to run a rival slate of directors or to rely on the target board accepting a resignation of the targeted director.

iii Diversity disclosure

In January 2020, expanded diversity disclosure requirements came into effect for companies incorporated under the CBCA. Under these new requirements, companies must disclose detailed information regarding the diversity of their boards and executive officer ranks, descriptions of the company's diversity policy or why it has not adopted one, and the measures that the company is taking to improve its diversity. Prescribed categories of diversity that companies are required to consider include women, Aboriginal people, persons with disabilities and persons who are visible minorities.

The new diversity disclosure rules do not have a direct bearing on activist campaigns or tactics. However, the legislative changes are consistent with the movement within the Canadian investment industry to encourage greater board diversity and initiatives by the Ontario Securities Commission to improve diversity (particularly gender diversity) on Canadian public company boards.

iv Recommendations of Capital Markets Modernization Taskforce

In January 2021, the government of Ontario's Capital Markets Modernization Taskforce (the Taskforce) released its final report. Among the Taskforce's 74 recommendations are several recommendations to amend Canadian securities rules relevant to shareholder rights and the conduct of proxy contests. In particular, the report recommends lowering the current beneficial ownership reporting threshold from the current 10 per cent of outstanding voting securities to 5 per cent for non-passive investors, to provide greater transparency to issuers and investors and to align Canadian requirements with those in other jurisdictions, including the United States and the UK.

Other recommendations of the taskforce include greater regulation of the role of proxy advisory firms (including the right of companies to respond to advisory firm reports and restrictions on advisory firms offering consulting services), and requiring companies to use universal proxy ballots in contested meetings so that shareholders can choose to vote for dissident nominees on the company's proxy card.

The likelihood and timing of implementation the Taskforce's recommendations are uncertain.


The global disruption caused by the covid-19 pandemic in 2020 drastically altered the plans and expectations of companies and shareholders. The transformation of the economy as a result of the pandemic and the ongoing reopening will undoubtedly result in both winners and losers with companies that have not adjusted to the changing landscape facing greater pressures.

Both the pandemic and recent anti-racism protests in the United States and around the world have also started to turn the spotlight on the social responsibilities of corporations. Viewing corporations and private enterprises independently of their relationships with government and wider society has become untenable and business leaders and boards are taking note. Boards will undoubtedly be facing increased expectations from institutional shareholders and other stakeholders that corporations should pay more than lip service to their ESG initiatives. In particular, corporations will likely face greater expectations in addressing racial diversity and the elimination of anti-black systemic racism.

Climate change and other ESG-themes are likely to become more common topics of shareholder proposals and planks in the campaigns of shareholder activists. Institutional shareholders have been encouraging Canadian companies to adopt standardised disclosure based on the final report and recommendations of the Financial Stability Board's Task Force on Climate Related Financial Disclosures and to disclose their climate transition plans. The success of Engine No. 1's proxy contest at ExxonMobil's 2021 annual meeting, which was focussed on Exxon's failure to articulate a 'credible strategy to create value in a decarbonizing world', has garnered significant attention from Canadian board rooms, particularly those of companies in Canada's large energy sector. Engine No. 1's success in winning sufficient support from proxy advisory firms and large institutional investors to elect three nominees to ExxonMobil's board confirms that shareholders are now linking climate stewardship with long-term value creation and protection and are willing to support dissident campaigns largely focused on these issues.


1 Alex Moore is a partner at Blake, Cassels & Graydon LLP in Toronto, Canada.

2 The leading corporate statute in Canada is the Canada Business Corporations Act, R.S.C. 1985, C.-44 (CBCA). Provincial and territorial corporate statutes are largely consistent with the CBCA on the issues discussed in this chapter. Unless otherwise indicated, descriptions of the rights and obligations of companies and shareholders under corporate laws in this chapter refer to rights and obligations under the CBCA.

3 For example, see Section 127 of the Securities Act (Ontario), R.S.O. 1990, c. S-5.

4 CBCA, Section 143. Some corporate statutes also impose additional requirements, including minimum ownership periods and thresholds. For example, under the CBCA a shareholder making a proposal must have been a holder of shares having a value of at least C$2,000 for at least six months. Canada Business Corporations Regulations, 2001, Section 46.

5 MEDAC, a Canadian shareholder education and rights organisation, has submitted several proposals to Canadian banks concerning divestment of investments in carbon-intensive industries and greater transparency in climate-related financial disclosures. In November 2020, TCI Fund Management Ltd submitted proposals at Canadian National Railway and Canadian Pacific Railway that the railways establish climate action plans and hold a shareholder vote at their annual general meetings where shareholders would be given an opportunity to approve or disapprove of their climate plans.

6 A notable exception is the corporate legislation in the Province of Quebec (Business Corporations Act, R.S.Q., c. S-31.1), which requires ownership of 10 per cent of voting shares to requisition a shareholders' meeting.

7 Re Eco Oro Minerals Corp, (2017), 40 OSCB 5321, 2017 ONSEC 23. See also Re Hecla Mining Company (2016), 39 OSCB 8927.

8 Kingsdale Advisors, 2020 Proxy Season Review. Kingsdale Advisors defines a contest broadly, and considers a proxy fight to have been initiated when a shareholder in opposition to management makes a public filing of its activist intent, requisitions a shareholder meeting, publicly announces an intent to nominate alternate directors, solicits alternative proxies, conducts a vote no campaign or announces an intention to launch a hostile bid.

9 ibid.

10 “S&P/TSX Composite Index” (20 June 2021), online: TMX Information Services>.

11 ibid. In the past three years, there have only been four contests involving financial firms; compared with over 40 resource firms.

12 Kinsgdale Advisors, 2019 Proxy Season Review.

13 ibid.

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