It will be of note to companies planning to conduct virtual shareholder meetings, that on February 22, 2024 the CSA provided updated guidance regarding this issue following its initial guidance from February 2022.
Initial Guidance
In the wake of the COVID-19 pandemic, virtual shareholder meetings became more common and in 2022, noting the prevalence of this form of meeting and its related issues, the CSA provided initial guidance following informal consultation with market participants and stakeholders. This initial guidance consisted of the following points, it being noted that the conduct of shareholder meetings is primarily governed by applicable corporate law and the organizational documents of each company, while securities law requirements focus on the disclosure in respect of the shareholders meetings themselves:
- The CSA emphasized the importance of providing clear and comprehensive disclosure in management information circulars and associated proxy-related materials concerning the logistics of accessing, participating in and voting at a virtual shareholder meeting, as well as procedures related to the reception and answering of shareholder questions and other accommodations to be made for shareholder participation at meetings.
- The CSA encouraged reporting issuers to provide shareholders with a level of participation at virtual meetings that would be comparable to that which a shareholder could reasonably expect if they were attending an in-person meeting, including the opportunity to make motions, raise points of order, raise questions and provide feedback, subject to the discretion of the chair of the meeting as necessary.
- Broadly, the CSA recommended that practices applied at virtual shareholder meetings be transparent and consistent with established practices for in-person meetings to promote meaningful interaction between shareholders and management.
- The CSA also noted that in the case of contested shareholder meetings, reporting issuers should consider whether it is appropriate to conduct such a meeting virtually, and if so, to establish meeting protocol with dissidents in advance of such a meeting.
Updated Guidance
Following the COVID-19 pandemic, certain corporate statutes in Canada have been amended to expressly permit virtual shareholder meetings and include requirements reporting issuers must meet when conducting such meetings. However, the CSA noted that stakeholders had continued to raise concerns from their experiences in participating in virtual-only shareholder meetings including challenges in exercising their rights and in expressing themselves to management. Difficulties have also arisen for shareholders in accessing and participating in virtual meetings. In response, the CSA provided the following updated guidance to assist reporting issuers in fulfilling their obligations under securities legislation.
The CSA stated that, in order for reporting issuers to fulfil their obligations under securities legislation, they must provide plain language explanations in proxy-related materials regarding the rights and procedures related registered and beneficial shareholder participation, including the following:
- the registration, authentication and voting process for both registered and beneficial shareholders, and how shareholders can obtain assistance in the event of difficulties during the registration, authentication and voting process; and
- how shareholder participation at the virtual meeting will be accommodated and managed during the meeting, including:
- information on the procedures to allow shareholders to send or ask questions, in advance of and/or during the meeting,
- how shareholder questions will be addressed during the meeting, or after if there is insufficient time to address all questions at the meeting, and
- instructions for voting at the meeting.
The CSA also encouraged reporting issuers to provide for both an ease of access and quality of shareholder participation that is comparable to that which a shareholder could reasonably expect if they were attending an in-person meeting, which the CSA stated reporting issuers can facilitate by:
- simplifying registration and authentication procedures;
- providing shareholders with opportunities to make motions or raise points of order;
- ensuring shareholders have the ability to raise questions and provide direct feedback to management in any question-and-answer segment of the meeting;
- indicating where shareholder proposals will be presented and voted on at the meeting, coordinating with proponents of those proposals in advance of the meeting, and ensuring proponents are given a reasonable opportunity to speak to the proposal and respond to any questions that arise from the proposal;
- ensuring any virtual platform used by an issuer has functionality permitting shareholder participation to the fullest extent possible; and
- ensuring the chair of the meeting is experienced and knowledgeable in the technological platform being used for the virtual meeting.
The CSA also recommended that reporting issuers consider the use of hybrid meetings to allow both in-person and virtual participation.
Conclusion
To facilitate the smooth functioning of a virtual or hybrid shareholder meeting, companies must implement the above measures on a case-by-case basis in accordance with the unique needs and circumstances of each company and its shareholders.
For further questions regarding virtual shareholder meetings and related matters, please contact us at info@sociumlaw.com.