Mr. Speaker, I am pleased that this chamber has the opportunity to consider 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 one final time. At this point, I think we are all aware that Bill C-25 would make a number of targeted amendments to our economic framework laws in an effort to bring them up to date for our modern economy.
The bill would modernize the director elections for publicly traded CBCA corporations, requiring individual annual elections and introducing a new majority voting mechanism for uncontested elections. It would also allow these companies to take better advantage of modern technology through the notice and access system.
The part of the bill that has received the most exposure is, of course, on the measures to promote diversity on corporate boards through new informational requirements and a comply-or-explain model for having a diversity policy put in place. The bill, moreover, would require bearer share options and warrants to be in registered form, as the shares themselves must already be, as an effort to promote transparency. It would also update the Competition Act to account for a greater variety of business structures.
The measures in Bill C-25 would allow us to embrace best practices, add clarity to the law, and minimize the regulatory burden.
This bill was sent to us by the other place after careful consideration in committee and debate in the Senate chamber. The other place made a certain number of amendments that clearly improve this bill. A small but important amendment was made in clause 13, specifically to subsections 106(6) and 106(6.1), to prevent a board of directors from being paralyzed after a vote to which the majority voting rule applies fails.
The majority voting requirement introduced by the bill would set out the rules that would apply in an uncontested election. That is, where candidates ran unopposed, they would have to receive a majority of votes cast “for” over all votes cast in order to be elected. Directors who failed to be re-elected because of the operation of this provision would cease acting as directors immediately after the election.
After hearing from stakeholders, it became clear that the strict application of the majority voting rule could lead to unintended consequences. The decision-making structure of a publicly traded corporation could be disrupted, as some or even all the directors could fail to be re-elected. While ensuring shareholders' wishes is a key principle of good corporate governance, this principle should not lead to a corporation being without a decision-making body. This would not only be contrary to good corporate governance but could endanger, albeit for a short period of time, the ability of a corporation to make important decisions affecting market and product strategies and the bottom line.
Our colleagues in the other place have carefully assessed this situation and the potential risks associated with it. Based on suggestions from stakeholders and corporate governance experts, they have adopted a simple but effective solution. It would guarantee corporate boards affected by a director's defeat through majority voting a respite of up to 90 days. The amendment is intended to mitigate the risk that the sudden loss of directors would result in unexpected disruptions in corporate decision-making. It would provide a specific grace period of up to 90 days in which directors could continue acting until replaced. The amendment would be largely consistent with provincial securities law and Canadian corporate practices, and it results from a consensus among stakeholders who have an interest in corporate governance.
Shareholders are entitled to vote out directors who are no longer proposing a vision or direction that is expected from them or who have not delivered according to shareholders' expectations. Bill C-25 would reinforce shareholder democracy through majority voting. This is a positive development. However, within the context of this policy objective, it must also be acknowledged that the immediate effect of voting out directors can pose challenges. For these reasons, this amendment, adopted by the other place, should be carried.
I would note that a similar amendment has been reflected in the provisions on elections to boards of co-operatives. For the same reasons I just explained, that amendment is also an improvement to the bill.
Clause 24 of the bill has also been amended by our hon. colleagues. That is section 171.1 of the CBCA. This amendment addresses a slight oversight and would enable the use of electronic communications in a broader range of circumstances.
Everyone agrees that in today's world, we should give people every incentive to communicate electronically. The bill makes it easier to use electronic communications with shareholders through something called notice and access. This allows shareholders to access corporate documents electronically through a link provided to them instead of having to request paper copies from the corporation. Many companies provide this service and those who invest directly in Canadian corporations are already aware of the benefits of using this service.
The use of “notice and access” is common, particularly in relation to publicly traded corporations, such as those traded on the Toronto and Montreal stock exchanges. There is no reason not to extend the availability of the notice and access system to every corporate document that is required to be shared with shareholders, with the exception, perhaps, of notices of shareholder meetings, in some circumstances.
Proposed subsection 172.1(1) would require directors of a publicly traded corporation to place before the shareholders, at every annual meeting, a policy on diversity among the directors and members of senior management. This provision, which has drawn large public attention, is a key feature of the bill.
The amendment proposed by the other place would allow corporations to choose the time at which they wished to send the diversity policy, either at the time of sending the notice of meeting or when sending the proxy circular. In the absence of the amendment, the policy would be required to be sent in paper form, in many situations, if sent with the notice of annual meeting. This amendment would be useful and consistent with the trend that has been observed in relation to rules established by Canadian securities commissions.
I have outlined some of the ways Bill C-25 would support our modern economy and the various improvements it has undergone in the other place. I thank the other place for its work in making those amendments.
The amendments made by Bill C-25 would be quite targeted, as they arose from issues with the clearest consensus during consultations. However, modest change should not be mistaken as being unimportant. This bill would help advance the laudable goals of ensuring transparency, clarity, and fairness, empowering shareholders while presenting the opportunity to address important issues such as diversity.
The process has been long, but I look forward to royal assent.
