Capital Markets/Corporate Governance

John Tuzyk and Stefania Zilinskas

On September 28, 2015, the Canadian Securities Administrators (CSA) released a staff notice summarizing the findings from its review of the corporate governance disclosure of non-venture issuers related to policies regarding director term limits and other mechanisms for board renewal. 

The review relates to the amendments to National Instrument 58-101– Disclosure of Corporate Governance Practices and Form 58-101F1 Corporate Governance Disclosure (Amendments), implemented by the securities regulatory authorities of Manitoba, New Brunswick, Newfoundland and Labrador, Northwest Territories, Nova Scotia, Nunavut, Ontario, Quebec, Saskatchewan and Yukon (Participating Jurisdictions) on December 31, 2014. 

The staff notice, titled CSA Multilateral Staff Notice 58-307– Staff Review of Women on Boards and in Executive Officer Positions – Compliance with NI 58-101 Disclosure of Corporate Governance Practices (Staff Notice), also provides some limited guidance to assist issuers with the quality of their disclosure with respect to such mechanisms for board renewal.

For background information regarding the development of the Amendments, please see our October 21, 2014 Blakes Bulletin: Just in Time for 2015 Proxy Season: Disclosure Requirements for Gender Diversity, Director Tenure, our January 2014 Blakes Bulletin: OSC Proposes Disclosure Requirements for Gender Diversity and Director Term Limits and our September 2013 Blakes Bulletin: OSC Consultation Paper on Women on Boards and in Senior Management.

For a discussion of the CSA’s contemporaneous review of issuer disclosure of policies regarding the levels of representation of women on boards and in senior management and their actual and any targeted figures for such representation, please see our October 6, 2015 Blakes Bulletin: CSA Findings from Gender Diversity Disclosure Requirements Review Released.


The Staff Notice summarizes the CSA’s review of the corporate governance disclosure of 722 non-venture issuers (Sample Group) listed on the Toronto Stock Exchange.

The CSA found that among the issuers in the Sample Group, only 19 per cent disclosed that they have adopted director term limits and 56 per cent disclosed that they have adopted a mechanism for board renewal other than director term limits. The most commonly disclosed mechanism for board renewal was board assessments. Just over 20 per cent of issuers in the Sample Group disclosed that they did not have director term limits or similar mechanisms for board renewal.

The most significant indicator of whether issuers adopted mechanisms of board renewal, and particularly director term limits, was issuer size. For example, the CSA found that:

  • Issuers with a market capitalization of C$2 billion and above were more likely to adopt director term limits
  • Issuers with a market capitalization of less than C$1 billion were most likely to adopt mechanisms for board renewal other than director term limits

Types of Term Limits

Of the 137 issuers in the Sample Group that disclosed they have director term limits, just over half of that group disclosed they have director age limits in place. Twenty-four per cent of that group disclosed they have director tenure limits in place and the remaining 23 per cent have both director term and age limits in place.

Reasons for No Term Limits

Several reasons were provided by the Sample Group issuers that disclosed they have neither director term limits nor other mechanisms in place. The most frequently cited reason for not adopting term limits is the belief that they reduce continuity or experience on the board. Other reasons include the belief that director term limits are arbitrary and that they force valuable, experienced and knowledgeable directors to leave the issuer’s board. Reasons for not adopting term limits or other mechanisms include that the boards’ effectiveness is regularly assessed, that the issuer’s industry is unique and retaining knowledge of the board is desired, and the belief that annual elections are a sufficient mechanism for board renewal.


In addition to setting out the findings of the CSA’s review of the corporate governance disclosure resulting from the Amendments, the Staff Notice also provides some limited guidance to assist issuers with the level and detail of disclosure that is necessary to satisfy Item 10 of Form 58-101F1 Corporate Governance Disclosure, which requires issuers to describe any mechanisms of board renewal that the issuer has implemented other than director term limits. The CSA Staff Notice provides that non-venture issuers must not disclose only that a board assessment process is in place, but also how such assessment relates to board renewal. The Staff Notice includes an example of disclosure compliant with that item of the Amendments.

For further information, please contact:

John Tuzyk 416-863-2918
Stefania Zilinskas 212-893-8141

or any other member of our Capital Markets or Corporate Governance group.

Tags: Capital Markets, Corporate Governance

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