The Taskforce has heard from multiple stakeholders that the current proxy and shareholder voting system reflects an imbalance between activist shareholders and the boards of issuers. Issuers facing activist shareholder campaigns may not always be able to adequately respond effectively due to a lack of transparency in shareholder ownership and voting in Canada. The Taskforce hopes that many of the proposals in this section will help address this issue.

Proxy advisory firms

20. Introduce a regulatory framework for proxy advisory firms (PAFs) to: (a) provide issuers with a right to “rebut” PAF reports, and (b) restrict PAFs from providing consulting services to issuers in respect of which PAFs also provide clients with voting recommendations

PAFs play an important role in the proxy voting process by providing services that facilitate investor participation such as analyzing proxy materials and providing vote recommendations. Issuers and other stakeholders have expressed concerns about the influence of PAFs, errors in the reports produced by PAFs, and conflicts of interest arising from PAFs’ provision of voting recommendations in respect of issuers to which PAFs also provide consulting services.


The Taskforce proposes to introduce a securities regulatory framework for PAFs to ensure that PAFs’ institutional clients are provided with the issuer’s perspective concurrent with the PAF's recommendation report. The Taskforce proposes providing an issuer with a statutory right to rebut (at no cost) the reports published by PAFs, provided that the issuer published the relevant materials (such as the Management Information Circular) within a specified time period prior to the meeting. This right of rebuttal would apply, with respect to each of the issuer’s resolution, when the PAF is recommending to its clients to vote against management’s recommendations. The PAF would be required to include the rebuttal in the report it provides to its clients. The Taskforce also proposes a framework that ensures PAFs are not in a conflicted position when providing services to issuers and recommendations to clients by restricting PAFs from providing consulting services to issuers in respect of which PAFs also provide clients with voting recommendations.

Please provide feedback on the proposal above and identify any challenges or concerns that may arise. Should the issuer’s right of rebuttal be extended to shareholders making proposals, dissidents and parties to transactions for which proxy reports are being distributed? Does the proposal to restrict PAFs to either providing consulting services or making voting recommendations in respect of an issuer appropriately address conflicts of interest?

Ownership transparency

21. Decrease the ownership threshold for early warning reporting disclosure from 10 to 5 per cent

Currently, a shareholder is not required to disclose beneficial ownership of, or control or direction over, voting or equity securities of an issuer until it reaches the 10 per cent threshold. However, share ownership at the 5 per cent level is relevant to control of an issuer, in particular given that a shareholder can generally requisition a shareholders’ meeting if it holds 5 per cent of an issuer’s voting securities. Other global jurisdictions, such as the U.S. and U.K., mandate ownership disclosure at the 5 per cent level or even lower in certain circumstances.


The Taskforce believes that, in an era of increased shareholder activism, the 10 per cent early warning reporting threshold is too high. The Taskforce proposes decreasing the shareholder reporting threshold in Ontario from 10 per cent to 5 per cent. The Taskforce suggests the threshold requirement be revisited to uphold harmonization if further changes are made under the U.S. regulatory framework.

The proposal will provide transparency of significant holdings starting at the 5 per cent level so that issuers can more proactively engage with their shareholder base and shareholders can benefit from increased awareness of sizable ownership interests.

Are there reasons to exclude certain issuers from the scope of the proposal, such as venture issuers or those below a specified market capitalization? Would requiring “passive” investors to report ownership at the 5 per cent threshold create undue burden relative to the benefits of disclosure?

22. Adopt quarterly filing requirements for institutional investors of Canadian companies

Because institutional investors are generally not required to disclose their holdings unless they cross the 10 per cent reporting threshold, issuers and other market participants may not have adequate transparency into institutional investors’ ownership positions. The lack of transparency hinders shareholder engagement and the ability for issuers to respond to shareholder concerns.


The Taskforce proposes to adopt a regime that would require institutional investors (who own above a certain dollar threshold) to disclose their holdings in securities of Canadian reporting issuers (that have a market capitalization above a certain threshold) on a quarterly basis. The process currently in place in the U.S. provides a proven framework for similar disclosure that could work in Canada.

Would the proposal provide useful information to issuers and other market participants? What types of exemptions should be provided from the reporting requirement, if any? What would be an appropriate length of lag time before the reporting requirement is in effect?

Shareholder rights

23. Require TSX-listed issuers to have an annual advisory shareholders’ vote on the board’s approach to executive compensation

There is a growing recognition in Canada and globally that periodic advisory votes on executive compensation provide critical input to boards and facilitate shareholder engagement. Many stakeholders have indicated that they support the implementation of a mandatory vote on the board’s approach to executive compensation for issuers.


The Taskforce believes that developments in Canada, such as recently passed amendments to require advisory say on pay votes for CBCA companies, and other jurisdictions, such as the U.K., U.S. and Australia, support the adoption of mandatory annual advisory votes on executive compensation practices for all TSX-listed issuers.

The Taskforce recommends against binding votes because of the importance of preserving the board of directors’ decision-making processes and to avoid the risk that shareholder proposal campaigns become too burdensome on issuers.

Are their concerns with the proposal to require annual advisory say-on-pay votes? Should the proposal be expanded to all reporting issuers?

24. Empower the OSC to provide its views to an issuer with respect to the exclusion by an issuer of shareholder proposals in the issuer’s proxy materials (no-action letter)

In the U.S., the SEC has adopted informal procedures by which a company can seek a no-action letter from SEC staff providing their informal views on whether there is a basis for excluding a shareholder proposal from the company’s proxy materials. The SEC’s no-action letter typically addresses whether the issuer has a basis to exclude the proposal and may offer a remedy to the proposing shareholder to address concerns to allow publication with the issuer’s materials.


In Ontario, the requirements relating to shareholder proposals are set out in the Business Corporations Act (OBCA). Companies and shareholders must apply to the court to settle disputes. The Taskforce proposes that the OSC be empowered to provide its informal views to issuers seeking to exclude shareholder proposals through a no-action letter. This procedure would provide stakeholders with an efficient means of addressing shareholder proposal disputes while reducing litigation in court. It would also allow for greater streamlining of the shareholder proposal process and screening of immaterial proposals.

Please provide feedback on the proposal above and identify any challenges or concerns that may arise. Would the OSC’s involvement improve the shareholder proposal process and reduce litigation costs? Should the OSC be involved by giving it a formal role under the OBCA, or by including proposals in securities legislation as done in the U.S.? Are there other areas of the OSC’s regulatory oversight that would benefit from the ability to issue a no-action letter?

25. Require enhanced disclosure of material environmental, social and governance (ESG) information, including forward-looking information, for TSX issuers

Globally, and in Ontario, there is increased investor interest in issuers reporting on ESG-related information. While many issuers include ESG disclosures, both issuers and investors have expressed concerns about the lack of a standardized framework for this disclosure. Enhanced ESG disclosure can set the basis for improved access to global capital markets and enable an equal playing field for all issuers.

Currently, two widely prevalent frameworks exist that have global support and meet investor needs for concise, standardized metrics on material issues, the Sustainability Accounting Standards Board (SASB) framework and the Taskforce on Climate-Related Financial Disclosures (TCFD) recommendations.


The Taskforce proposes to mandate disclosure of material ESG information which is compliant with either the TCFD or SASB recommendations for issuers through regulatory filing requirements of the OSC. Where feasible, the proposed enhanced disclosure will align with the global reporting standards of both TCFD and SASB.

In order to give issuers time to effectively meet the disclosure requirements, implementation should be phased, to reflect the capacity and sophistication of smaller and larger issuers.

What specific material ESG information is needed beyond what is currently captured by existing disclosure requirements? Should there be a phased approach to implementation, including a comply-or-explain model? Is there a need for a short term “safe haven” regarding ESG disclosures? Should ESG disclosures be subject to the forward-looking information requirements set out in National Instrument 51-102 Continuous Disclosure Obligations,or what, if any, different considerations should apply?

Proxy contests and M&A transactions

26. Require the use of universal proxy ballots for contested meetings where one party elects to use a universal ballot, and mandate voting disclosure to each side in a dispute when universal ballots are used

The majority of shareholders do not attend shareholder meetings and must vote by proxy using either the company’s or dissident’s proxy ballot. Frequently in Canada, these proxy cards can look very different (universal, blended, single-slate, etc.) and are a source of complication for investors whose interests may not be represented on either proxy. These proxy ballots typically do not allow shareholders to vote for a combination of nominees, instead forcing shareholders to vote for either a company’s or dissident’s nominee slate.


The Taskforce’s proposal to facilitate the use of “universal proxy ballots” — a single ballot that lists the director nominees of each side of a dispute and allows a shareholder to vote for a combination of nominees — seeks to provide shareholders who vote by proxy with greater voting flexibility. Mandating disclosure of voting tallies on an ongoing basis to each side in a dispute where universal ballots are used will provide issuers and dissidents with greater transparency.

Please provide feedback on the proposal above and identify any challenges or concerns that may arise. Would the proposal help alleviate the inefficiencies and unfairness of the current approach to proxy ballots?

27. Amend securities law to provide additional requirements and guidance on the role of independent directors in conflict of interest transactions

Multilateral Instrument 61-101 Protection of Minority Security Holders in Special Transactions (MI 61-101) does not fully address the important role that a committee of independent directors has in evaluating, negotiating, approving and advising on conflict of interest transactions.


The Taskforce believes that the best practices for independent committees as described in Multilateral Staff Notice 61-302 Staff Review and Commentary on MI 61-101 and OSC decisions should be codified so that minority shareholders have greater confidence in the role of the independent committee when an issuer is engaging in transactions regulated under MI 61-101.

Would an enhanced role for independent committees in transactions regulated under MI 61-101 be beneficial to minority shareholders?

28. Provide the OSC with a broader range of remedies in relation to M&A matters

The remedies available to the OSC to intervene under section 104 and section 127 of the Securities Act do not address the breadth of compliance and public interest matters that the OSC currently engages in in respect of M&A matters and proxy contests.


The Taskforce proposes that the OSC be granted new powers to enhance its public interest remedies in control contests and similar transactions. British Columbia recently enacted legislation to provide the British Columbia Securities Commission with new powers, including powers to rescind a transaction, require a person to dispose of securities acquired in connection with an M&A transaction or a proxy solicitation, and prohibit a person from exercising voting rights attached to a security. The Taskforce proposes granting similar powers to the OSC. Would the proposal provide a more efficient and consistent forum for market participants to resolve disputes in M&A matters and proxy contests?

Proxy voting system

29. Introduce rules to prevent over-voting

Over-voting occurs when a meeting tabulator does not have documentation establishing that an intermediary submitting proxy votes is entitled to vote as of the meeting record date. If the over-voting is unresolved, the meeting tabulator may reject or pro-rate the proxy votes received.


The Taskforce proposes the following rules be introduced to prevent over-voting:

  1. An intermediary must not submit proxy votes for a beneficial owner client unless it has confirmed that vote entitlement documentation has been provided to the reporting issuer’s meeting tabulator.
  2. An intermediary that holds securities on behalf of another intermediary must provide appropriate vote entitlement documentation to the reporting issuer’s meeting tabulator to establish its client’s vote entitlements.
  3. A reporting issuer (or its meeting tabulator) must notify the reporting issuer and any person that submits proxy votes if it rejects or pro-rates those proxy votes because of insufficient vote entitlements.
  4. A reporting issuer must obtain the DTC omnibus proxy so that its meeting tabulator can verify the vote entitlements of U.S. intermediaries.

These proposals codify best practices found in CSA Staff Notice 54-305 Meeting Vote Reconciliation Protocols.

Are there other approaches that the Taskforce should consider to reduce the risk of over-voting?

30. Eliminate the non-objecting beneficial owner (NOBO) and objecting beneficial owner (OBO) status, allow issuers to access the list of all owners of beneficial securities, regardless of where securityholders reside, and facilitate the electronic delivery of proxy-related materials to securityholders.

In Canada, public issuers generally communicate with beneficial owners of securities indirectly through intermediaries that have outsourced their investor mailing and voting functions. At the time of account opening, an intermediary must obtain instructions on whether the client wishes to be a NOBO or OBO in respect of the securities held in that account. This determination allows an issuer to request a list of NOBOs and obtain a partial view of its beneficial owners of securities from intermediaries, including security and address information. Reporting issuers can use the information in the NOBO list to mail proxy materials and solicit voting instructions directly from these beneficial owners. Issuers are not currently able to directly mail proxy materials or solicit voting instructions from OBO securityholders.


The Taskforce proposes the removal of the NOBO/OBO status in Canada and to allow issuers to access the list of all beneficial owners of their securities. This would enable reporting issuers to know more about the true beneficial owners of their securities, and allow issuers to solicit voting instructions directly from such owners.

The Taskforce also recommends that an intermediary must also provide the beneficial owners’ email address along with the physical address information currently provided to a reporting issuer that wishes to deliver proxy-related materials electronically and solicit voting instructions from such owners as well. Currently, intermediaries provide NOBO/OBO client account address information to outsourced third party service providers; however, beneficial owners are required to separately consent to receive proxy materials electronically directly from reporting issuers (or their transfer agents), which has resulted in a slow adoption rate for electronic delivery of proxy-related materials.

Should reporting issuers be entitled to know who their beneficial owners are? And if so, should beneficial owners be allowed to opt out of being solicited for voting instructions directly by a reporting issuer? If not, are there specific events (i.e. M&A) that should require mandatory disclosures of security positions in reporting issuers? What, if any, are the investor protection concerns with intermediaries providing electronic delivery instructions on behalf of clients delivering proxy-related materials electronically when their investor account address information is already being provided by intermediaries to third parties?