COVID-19 and Annual Shareholder Meetings: Update

Bennett Jones LLP

This piece was updated on April 2, 2020, to include updates from Ontario and British Columbia.

Canadian public companies typically look to their federal or provincial governing statutes for timeline requirements regarding their annual general meeting (AGM). Generally, business corporation legislation requires an AGM to be held within 15 months of the last preceding AGM. Certain legislation, such as the Canada Business Corporations Act (CBCA), also imposes a requirement that an AGM be held within six months of the corporation's financial year-end. Companies listed on the Toronto Stock Exchange (TSX) are also required to hold an AGM within six months of the company's financial year-end. Due to a number of issues arising from the ongoing COVID-19 pandemic, including social distancing requirements, corporate regulators have issued statements that may affect typical regulatory and statutory requirements surrounding timing of an issuer's AGM, depending on an issuer's jurisdiction of incorporation.

Summary of Statements from Regulators

In a recently released notice, Corporations Canada clarified that, despite COVID-19 concerns, companies incorporated under the CBCA must still adhere to legislative timelines for AGMs. This means that CBCA corporations will continue to require a court order if they wish to extend their meeting beyond the earlier of six months following their financial year-end or 15 months following their last preceding AGM.

The Alberta Business Corporations Act (ABCA) requires a court order to extend the requirement to hold a meeting within 15 months following the last preceding AGM. Alberta Registries recently provided notice to filing agents to the effect that ABCA corporations may postpone any upcoming AGM until regulations put in place by provincial and local authorities regarding gathering restrictions have been lifted. However, the effect of such notice may be uncertain given that the ABCA similarly requires a court order to extend this deadline.

The Ontario Business Corporations Act (OBCA) ordinarily requires a court order to extend the 15 month deadline to hold an AGM in the same vein as the ABCA. However on March 31, 2020, the Government of Ontario issued Ontario Regulation 107/20 under the Emergency Management and Civil Protection Act. (O.Reg. 107/20). O.Reg 107/20 temporarily suspends the operation of the provision of the OBCA requiring AGMs to be held within 15 months. Instead, the OBCA will temporarily provide that where the last possible date to hold an AGM falls within a period of an emergency declared by the Government of Ontario, the deadline for such AGM is extended to the date that is 90 days following the end of the declared emergency. No advance approval is required for OBCA corporations to access the extension. For those Ontario corporations not wishing to extend AGM dates, the OBCA, in contrast to the CBCA, provides more flexibility for facilitating the holding by OBCA corporations of an AGM via telephonic or electronic means, provided that shareholders of an OBCA corporation are able to vote or establish a communications link to an AGM via such means. Under normal circumstances, such a virtual or hybrid AGM framework is available to an Ontario corporation unless the articles or by-laws prohibit the holding of an AGM in such fashion. Following the implementation of O.Reg 107/20, however, this framework is available even where prohibited by a corporation’s articles or by-laws.

The British Columbia Business Corporations Act (BCBCA) does not require a court order to delay holding an AGM and ordinarily permits corporations to make a request for an extension to the British Columbia Corporate Registrar, which they may grant if they determine it is appropriate to do so. The Corporate Registrar has issued guidance confirming that corporations may continue to request extensions from the Corporate Registrar and that they will grant an extension of six months for corporations looking to delay holding their AGMs due to the COVID-19 pandemic.

The TSX has recently provided that issuers may hold their 2020 AGM up to and including December 31, 2020, regardless of the company's financial year-end. Despite this relief, federal and provincial corporate legislative requirements still apply and issuers must adhere to the requirements of their governing statute.

What to do if Required to Comply

As both provincial and federal governments continue to institute measures to limit the spread of COVID-19, public companies may be required to hold virtual or hybrid AGMs to continue to be in compliance with legislative requirements.

Issuers contemplating whether to hold a virtual shareholder meeting should review their constating documents and governing statute to determine whether electronic participation is permitted and whether shareholders and proxyholders who attend the meeting electronically are considered to be present at the meeting for the purpose of establishing quorum.

For more information on the practicalities and regulations surrounding virtual meetings see COVID-19 and Annual Shareholder Meetings.

Disclosure Considerations

For corporations considering holding a virtual or hybrid AGM, the Canadian Securities Administrators (CSA) has provided guidance on disclosure. The CSA expects reporting issuers to notify security holders, the parties involved in the proxy voting infrastructure, and other market participants in a timely manner and to disclose clear directions on the logistical details of the virtual or hybrid AGM, including how security holders can remotely access, participate in, and vote at such AGM.

Under section 2.15 of National Instrument 54-101 Communication with Beneficial Owners of Securities of a Reporting Issuer, a reporting issuer that sends a notice of adjournment or other change related to an AGM to registered holders of its securities is required to concurrently send the notice to its beneficial owners. However, the CSA takes the position that no exemptive relief from section 2.15 is required by reporting issuers that are considering changes or alternatives to their AGMs as long as their registered holders and beneficial owners are treated equally and receive the same information.

Going Forward

As the effects of COVID-19 on the regulatory and legal landscape continue to progress, it is expected that regulators will continue to release additional updates and guidance on matters applicable to shareholder meetings. Any additional guidance issued from Canadian regulators will need to be carefully considered and issuers will need to continue to evaluate the appropriate manner and time to hold their AGM and comply with related disclosure requirements.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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