Bill C-25: Shaking up Federal Corporate Governance in Canada

By Kelly Kane

In the near future, hundreds of thousands of Canadian corporations may see changes in the way they conduct business in light of the proposed amendments to Canada’s Business Corporations Act (CBCA).

Background of Canada’s Business Corporations Act

Both small and large businesses in Canada are governed by the CBCA, which provides Canadian businesses the basic corporate governance framework for federal incorporation.[1] The main purpose of the Act is to ensure uniformity of business incorporations across Canada.[2] In 2015, nearly 265,000 companies were incorporated under the CBCA, and approximately 40% of Canada’s largest publically-traded business corporations were incorporated under the CBCA. Companies incorporated under the CBCA also include private and publically traded companies.[3]

Under the current regime, directors of CBCA corporations may be elected for terms of up to three years, and may be nominated as a group (or “slate”) rather than individually.[4] Further, the CBCA provides for a plurality voting system, where shareholders vote “for” or “withhold” from voting.[5] Under this system, directors who receive the largest number of “for” votes are elected, regardless of how many votes were withheld for the nominee. In an uncontested election situation where the number of nominees is the same as the number of vacant director positions, a nominee will be elected even if they receive just one “for” vote. [6] The rationale behind this seemingly unfair regime is that although shareholders are enabled to express objections to nominees, “corporations cannot be bereft of a board of directors.”[7]

The last time the CBCA underwent “comprehensive” updating was in 2001, however the Act has not remained up to par with best practices of publically traded companies.[8] Improving corporate transparency and the director election process, as well as increasing diversity will ensure Canada’s corporate governance framework reflects new economic realities and the changing composition of the workforce.[9]

Bill C-25: Proposed Amendments to Canada’s Business Corporations Act

On September 28, 2016, Canada’s federal Minister of Innovation, Science and Economic Division, introduced bill C-25, which contains proposed amendments to Canada’s business corporations act.[10] Specifically, the amendments to act requires true majority voting, annual director elections, and diversity disclosures of board of directors.[11]

Specifically, the proposed amendments would do away with “for” or “withhold” voting. The proposed amendments give shareholders the power to actively oppose a nominee by voting against them. A shareholder who votes against a nominee is not required to suggest an alternate nominee. If only one candidate is nominated for each board position, the nominee must still obtain approval by a majority of shareholders. If the shareholders fail to elect the minimum number of directors required by the corporation’s articles of incorporation, the directors who did receive a majority vote will be empowered to exercise all powers of directors.[12] The proposed amendments also require annual shareholder elections, and no longer allows staggering terms of directors.[13] Each director is also nominated on an individual basis rather than on a “slate” voting basis.[14]

The amendments also aim to improve transparency and facilitate communication between shareholders and directors. Shareholder communications will be updated to a “notice and access system,” where CBCA corporations use electronic communications to provide notice of meetings, and also provide an online forum for access to relevant documents.[15]

Finally, and perhaps the most important, the proposed amendments require that directors of a CBCA corporation annually disclose information to shareholders regarding diversity of the board of directors and senior management.[16] The goal of this proposed amendment is to improve representation of women in director positions and senior management. This will be addressed through a “comply or explain model,” where all CBCA corporations will be required to disclose their diversity representation and policies, or explain why they do not have policies in place.[17]

Potential Impacts on CBCA Corporations if Proposed Amendments Are Passed

 Bill C-25, if passed, will likely have significant impacts on all CBCA corporations. Specifically, the majority voting requirement empowers shareholders or groups of shareholders to oppose the election of certain directors by voting against their election without proposing an alternative nominee. However, the proposed amendments fall short because they do not consider what would happen if all director nominees fail to obtain majority approval of shareholders.[18] The annual election requirement, although uncommon in Canada, will bring the CHCA up to speed with current corporate governance best practices.[19]

The diversity reporting requirement requires directors to look at the composition of their current boards and recognize the opportunity for growth by including individuals with diverse experiences. Reporting requirements may also encourage boards to recruit beyond their own networks when seeking to nominate potential new directors.[20] However, the information required in the diversity disclosures have not been determined, so the full extent of the benefits derived from the diversity reporting cannot be conceptualized yet. 

Although some questions are left unanswered, if the proposed amendments are implemented, shareholders of CBCA corporations would enjoy increased transparency, diversity and empowerment because of the true majority voting requirement, annual elections, and diversity reporting requirements.

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[1] Business Corporations, Corporations Canada (last updated Jul. 5, 2016); An Act to amend the Canada Business Corporations Act, Bill C-25, [hereinafter Bill C-25]

[2] Canada Business Corporations Act, R.S.C., 1985, c. C-44,

[3] Statutory Review of the Canada Business Corporations Act, Report of the Standing Committee on Industry, Science and Technology (Jun. 2010),

[4] Brad Ross & Chris Sunstrum, Canada: Government of Canada Proposes Amendments to Canada Business Corporations Act and Other Key Federal Business Statutes, Mondaq (Oct. 16, 2016), C

[5] Id.

[6] Id.

[7] Zev Smith et al., Proposed Amendments to the Canada Business Corporations Act, Dentons (Oct. 18, 2016),

[8] Enhancing Business Frameworks and Promoting Inclusive Economic Growth, Government of Canada, (last visited Nov. 5, 2016).

[9] Id.

[10] Bill C-25, Summary.

[11] Smith, supra note 7.

[12] Id.

[13] Id.

[14] Id.

[15] Government of Canada, supra note 8.

[16] Smith, supra note 7.

[17] Id.

[18] Smith, supra note 7.

[19] Louis-Martin O’Neill et al., Proposed Canada Business Corporations Act Amendments: A new Era of True Majority Voting and Diversity?, DWPV (Oct. 4, 2016),

[20] Vision and Mandate, Canadian Board Diversity Council, (last visited Nov. 4, 2016).