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Corporations Canada Seeking Feedback on Proposed CBCA Regulations

By Matthew Merkley and Karam Putros (Articling Student)
March 3, 2021

In June 2019, the federal government adopted the Budget Implementation Act, 019, No. 1 (Bill C-97), which resulted in several notable amendments to the Canada Business Corporations Act (CBCA). Among these were amendments (Amendments) that will require certain CBCA corporations to provide disclosure on compensation clawback mechanisms and the well-being of employees, retirees and pensioners, and hold annual advisory “say-on-pay” votes (see our April 2019 Blakes Bulletin: Broad Changes to CBCA Proposed: Directors’ Duties, Additional Disclosure and Annual Say-on-Pay).

The coming into force of the Amendments is tied to the implementation of associated regulations identifying the corporations to be subject to the Amendments, prescribing the time, manner and content of new disclosure obligations and defining certain key terms. As set out below, Corporations Canada, through Innovation, Science and Economic Development (ISED), has published a consultation setting out its regulatory proposals and is seeking feedback from stakeholders in relation to those proposals.  


ISED has proposed that each of the provisions contained in the Amendments apply to distributing (i.e., publicly traded) corporations. Accordingly, the proposal does not differentiate among distributing corporations that are, for example, venture issuers or issuers with controlling shareholders. Since the Amendments can apply only to corporations governed by the CBCA, corporations governed by other statutes and non-corporate issuers would not be subject to the new regime.


The Amendments provide for aspects of the required disclosure on the holding of annual advisory “say-on-pay” votes, compensation clawback mechanisms and the well-being of employees, retirees and pensioners, to be established by way of regulations.


Pursuant to the Amendments, prescribed corporations will be required to place before shareholders, at every annual meeting, their approach with respect to compensating members of senior management, to be subject to a non-binding “say-on-pay” vote. The stated objective of such an advisory vote is to establish better oversight of executive compensation and set higher expectations for corporate behaviour by mandating shareholder votes on approaches to compensation and making clear that the best interests of the corporation can include consideration of more than short-term profit and interests (see our October 2019 Blakes Bulletin: Mandatory “Say-on-Pay” May Be on the Way in Canada). ISED is seeking feedback on how and when the results of such “say-on-pay” votes should be disclosed, proposing that disclosure be required at the shareholder meeting, on the corporate website no later than 30 days after the meeting and in the proxy circular for the next annual general meeting. 


Many issuers have adopted “clawback” policies, pursuant to which, under applicable circumstances, certain employees must forfeit previously awarded compensation (see our November 2019 Blakes Bulletin: Clawback Policies Gain More Ground in Canada). The Amendments require prescribed corporations to place before shareholders, at every annual meeting, prescribed information relating to their compensation clawback mechanisms. ISED has proposed that the information should include: disclosure of whether the issuer has adopted such a policy in writing or, if not, an explanation of why not; a summary of the policy, including its objectives; which incentives and other benefits are covered by the policy; what triggers a recovery and any discretion attached to it; the look back period to determine that a recovery is needed; who makes the decision that a recovery is required; and information on recoveries made, if any, in the previous fiscal year.


Pursuant to the Amendments implemented in 2019 (see our July 2019 Blakes Bulletin: CBCA Amendments Codify Best Interests Considerations), codifying into statute some of the principles relating to directors’ duties set out in the landmark 2008 Supreme Court of Canada decision in BCE Inc. v. 1976 Debentureholders, in acting with a view to the best interests of the corporation, directors and officers may consider, but are not limited to, the long-term interests of the corporation, the environment and the interests of shareholders, employees, retirees and pensioners, creditors, consumers and governments.

The Amendments require prescribed corporations to disclose to shareholders, at every annual meeting, prescribed information relating to the well-being of employees, retirees and pensioners. ISED has proposed that such information should include: disclosure of whether the issuer has adopted a written policy concerning such matters or, if not, an explanation of why not; a summary of the policy, including its objectives, key provisions and various elements; a summary of the activities taken pursuant to the policy; a description of the corporation’s progress in achieving the objectives of the policy; and an indication of whether or not the corporation measures the effectiveness of the policy and, if so, a description of how. The stated aim of requiring the disclosure of this information is to motivate boards of directors to consider the interests of employees, retirees and pensioners in their decision-making, and to annually report on their policies in this regard, providing better oversight of corporate behaviour and promoting the interests of the corporation’s current and former employees.


The Amendments use three terms that are to be defined by way of regulations.

“Members of Senior Management”

The Amendments provide that prescribed corporations will be required to disclose to shareholders their approach on renumeration, along with their compensation clawback mechanisms, for “members of senior management”. The CBCA currently requires directors of distributing corporations to disclose diversity-related information regarding members of senior management, being each of the chair and vice-chair of the board, the president, chief executive officer and financial officer of the corporation, a vice-president in charge of a principal business unit and an individual who performs a policy-making function. ISED has proposed to use the same definition of “members of senior management” for purposes of the Amendments. 

“Retirees” and “Pensioners”

For purposes of the prescribed information to be provided under the Amendments relating to the well-being of employees, retirees and pensioners, ISED has suggested that the definition of “retiree” could be “a person who has concluded their working or professional career with a corporation, and receives or will receive post-employment benefits other than a pension from that corporation”, while “pensioner” could be defined as “a person who receives regular payments from a corporation from a fund accumulated during that person's employment with that corporation, or a spouse or dependents of such a person receiving the payments after the person is deceased”. The stated aim of such proposed definitions is to distinguish between ex-employees who receive a pension (pensioners) and those who receive other benefits (retirees), such as health or life insurance.


Corporations Canada is seeking feedback and suggestions from stakeholders on the regulatory proposals until March 31, 2021.

For further information, please contact:

Matthew Merkley           416-863-3328

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