Legal Updates

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Update

Wednesday, October 22, 2014

By: Luigi Valente

The securities regulatory authorities in New Brunswick, Newfoundland and Labrador, Saskatchewan, Nova Scotia, Nunavut, Quebec, Manitoba, Ontario and Northwest Territories (the Participating Jurisdictions) have adopted new rules regarding the representation of women on boards and in senior management of non-venture reporting issuers. The new rules will be implemented through amendments to National Instrument 58-101 Disclosure of Corporate Governance Practices and Form 58-101F1 Corporate Governance Disclosure (the Rule Amendments) and are scheduled to come into effect on December 31, 2014.

The Rule Amendments are intended to encourage greater transparency regarding the representation of women on boards and in senior management of all non-venture issuers reporting in the Participating Jurisdictions. The objective of this transparency is to assist investors in making investment and voting decisions. The regulatory authorities expect these changes to encourage greater representation by women on boards and in positions of senior management.

Background

In July, 2013 the Ontario Securities Commission initiated a public consultation process focused on advancing the representation of women on boards and in senior management of TSX listed issuers at the request of the Ontario government. As a foundation for the public consultation, the OSC released Consultation Paper 58-401 Disclosure Requirements Regarding Women on Boards and in Senior Management. For a further discussion on the public consultation please refer to the WD Securities Law Update of October 2013.

On January 16, 2014, the Ontario Securities Commission published proposed amendments to Form 58-101F1 Corporate Governance Disclosure for comment. Following an extensive comment period, the Rule Amendments have now been finalized and announced.

Summary of the Rule Amendments

The Rule Amendments will require non venture issuers reporting in the Participating Jurisdictions to provide annual disclosure regarding the following items in their proxy circular or annual information form:

  • Director term limits and other mechanisms of renewal of the board. The Rule Amendments require issuers to disclose whether they have adopted term limits for directors or other mechanisms of board renewal and, if so, to provide a description of such term limits or other mechanisms for board renewal.
  • Policies regarding the representation of women on the board.  The Rule Amendments require issuers to disclose whether they have adopted a written policy regarding identification and nomination of female directors. If they have adopted such a policy, the issuer must disclose certain prescribed information in respect to the policy.
  • The board’s or nominating committee’s consideration of the representation of women in the director identification and selection process. To further transparency, the Participating Jurisdictions have adopted additional required disclosure regarding the director selection process. In particular, the Rule Amendments require the issuers to disclose whether and, if so, how the board or nominating committee considers the level of representation of women on the board in identifying and nominating candidates for election or re-election to the board.
  • The issuer’s consideration of the representation of women in executive officer positions when making executive officer appointments. The Rule Amendments require issuers to disclose whether and, if so, how the issuer considers the representation of women in executive officer positions when making executive officer appointments.
  • Targets regarding the representation of women on the board and in executive officer positions. The Rule Amendments require disclosure of targets regarding the representation of women on the board and in executive officer positions.  In particular, if the issuer has adopted a target for the representation of women on the board and in executive officer positions, the issuer is to disclose the target (as a percentage or range of percentages) and the annual and cumulative progress of the issuer in achieving the target.
  • The number of women on the board and in executive officer positions. The Rule Amendments require issuers to disclose the number and proportion of directors on the issuer’s board, and executive officers of the issuer, including majority subsidiaries of the issuer, who are women.

The Rule Amendments follow a “comply or explain” approach. If the issuer does not comply with the Rule Amendments, it must disclose the reason for such non-compliance in its proxy materials and any risks associated with its decision not to have such a policy.

In some jurisdictions (including Ontario), Ministerial approvals are required for the Rule Amendments. Provided all necessary Ministerial approvals are obtained, the Rule Amendments will come into force on December 31, 2014.

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.

If you would like further information regarding the issues discussed in this update or if you wish to discuss any aspect of this commentary, please feel free to contact us.

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