Relief from the Regulators – Shareholder Meetings during the COVID-19 Pandemic
Monday, April 13, 2020
The COVID-19 pandemic has created unprecedented regulatory compliance challenges for corporations, especially with respect to shareholder meetings. In light of these challenges, regulators have granted relief in certain circumstances to enable corporations to comply with their regulatory obligations without compromising their obligations to promote and adhere to social distancing measures that have been put in place.
Ontario Corporations
Pursuant to Ontario regulation 107/20 (the “Order”) made under the Emergency Management and Civil Protection Act (the “EMCPA”), the government of Ontario has granted temporary relief to Ontario corporations from certain provisions of the Business Corporations Act (Ontario) (the “OBCA”) in respect of shareholder meetings and directors’ meetings. The Order is retroactive to March 17, 2020, the date that an emergency was declared under the EMCPA.
Shareholder Meetings
Ordinarily, the directors of a corporation governed by the OBCA must call an annual meeting of shareholders not later than 18 months after the corporation came into existence and subsequently not later than 15 months after the date of the last annual meeting. However, in light of the COVID-19 pandemic, the Order has temporarily extended such deadlines as follows:
- if the last day on which a meeting is required to be held is a day that falls within the period of the declared emergency, the last day on which the meeting is instead required to be held is no later than the 90th day after the day the emergency is terminated under the EMCPA; and
- if the last day on which a meeting is required to be held is a day that falls within the 30-day period that begins on the day after the day the emergency is terminated, the last day on which the meeting is instead required to be held is no later than the 120th day after the day the emergency is terminated under the EMCPA.
We note that the OBCA requires a corporation to “call” an annual meeting within 15 months or 18 months as applicable, while the language in the Order extends the last day on which an annual shareholder meeting can be “held.” Until this discrepancy in language is clarified, it may be safe to interpret the Order as ordinarily requiring annual shareholder meetings to be “held” within the applicable 15 or 18 month time period.
In addition, the Order provides that a corporation governed by the OBCA may temporarily hold a virtual or hybrid shareholder meeting despite any provisions to the contrary in its articles or by-laws. For more information on virtual and hybrid shareholder meetings, please refer to our previous update: Shareholder Distancing: Virtual Shareholder Meetings.
Directors’ Meetings
Pursuant to the Order, a corporation governed by the OBCA may temporarily hold a meeting of directors or of a committee of directors by phone or other electronic means so long as all persons participating in the meeting are able to communicate simultaneously and instantaneously, despite any provisions to the contrary in its articles or by-laws.
Corporations Act (Ontario)
Similar relief was granted to not-for-profit corporations governed by the Corporations Act (Ontario) as to corporations governed by the OBCA.
Federally-Incorporated Corporations
Canada Business Corporations Act
Corporations Canada recently confirmed that the directors of corporations governed by the Canada Business Corporations Act (the “CBCA”) must still hold an annual general meeting not later than 18 months after the corporation comes into existence and subsequently not later than 15 months after the date of the last annual meeting or 6 months after the corporation’s financial year-end. To comply with social distancing requirements, Corporations Canada suggests holding a virtual or hybrid shareholder meeting. For more information on virtual and hybrid shareholder meetings, please refer to our update: Shareholder Distancing: Virtual Shareholder Meetings.
To delay an annual general meeting, corporations governed by the CBCA still require court approval.
Canada Not-for-Profit Corporations Act
Most federal not-for-profit corporations are governed by the Canada Not-for-Profit Corporations Act (the “CNCA”). Similar to the CBCA, the CNCA requires corporations to hold an annual general meeting within 18 months of incorporation, or within 15 months of its previous annual general meeting, and not later than six months after its last financial year end. However, in contrast to corporations governed by the CBCA, not-for-profit corporations governed by the CNCA can apply to delay their annual general meeting if it would be detrimental to hold the meeting within the prescribed timeframe. Such applications can be made by email to [email protected] at least 30 business days before sending the notice calling the meeting.
Corporations Listed on the TSX or the TSXV
Extension for Annual Meetings
The Toronto Stock Exchange (the “TSX”) and the TSX Venture Exchange (the “TSXV”) are permitting any corporation that must hold an annual general meeting during 2020 to hold such meeting on any date in 2020 up to and including December 31, 2020 (a “2020 Annual Meeting”). Ordinarily, a TSX-listed corporation would be required to hold its annual general meeting within 6 months of its financial year-end and a TSXV-listed corporation would be required to hold its annual general meeting not later than 18 months after the corporation came into existence and subsequently not later than 15 months after the date of the last annual meeting.
Extension for Shareholder Approval for Security-Based Compensation Plans
Given the 2020 meeting extension, the TSX is extending the three-year deadline for obtaining securityholder approval for all unallocated awards under security-based compensation plans, allowing a corporation that requires such approval to obtain approval at their 2020 Annual Meeting. Further, if the corporation’s security-based compensation plan is up for approval in 2020, the corporation may continue to grant awards under the plan until the earlier of the 2020 Annual Meeting and December 31, 2020, and such awards may be exercised absent ratification by securityholders during this time.
Similarly, the TSXV is allowing corporations that require annual approval for rolling stock option plans to obtain such approval at the corporation’s 2020 Annual Meeting.
Full details of the relief granted by the TSX may be found in Staff Notice 2020-0002 and full details of the relief granted by the TSXV may be found in this bulletin to issuers. Corporations wishing to avail themselves of the above-mentioned relief granted by the TSX and TSXV will still need to comply with the requirements of applicable corporate and securities legislation.
If you have any questions with respect to this legal update, please contact Troy Pocaluyko ([email protected]), Al Wiens ([email protected]), Sanjeev Patel ([email protected]), Peter Volk ([email protected]), Michael Rennie ([email protected]), Jeff Bookman ([email protected]), Melissa Smith ([email protected]) or any other member of our Corporate Governance practice group.
This update is intended as a summary only and should not be regarded or relied upon as advice to any specific client or regarding any specific situation.