ACC Ontario Chapter www.acc.com Recent Developments in Corporate Law Brigitte LeBlanc-Lapointe, Norton Rose Fulbright Phil Shaer, Canopy Growth Corporation April 22, 2021
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Brigitte LeBlanc-Lapointe, Norton Rose Fulbright Phil Shaer, Canopy
Growth Corporation
April 22, 2021
Welcome and Introductions
• Corporate law • Securities law • Corporate governance • Contract
law • M&A • Q&A
Agenda
3
Corporate Law
Say-on-Pay • Will require prescribed issuers to have a annual
advisory say-on-pay vote
Well-Being & Clawback Policies • Prescribed issuers will be
required to make annual disclosure regarding:
(1) the “well-being” of employees, retirees and pensioners; and (2)
the recovery of incentive benefits or other remuneration benefits
paid to
directors and employees of the corporation who are “members of
senior management”
⇒ “comply or explain” regime ⇒ will probably only apply to
reporting issuers
Status • Bill C-97 received Royal Assent June 21, 2019 – awaiting
Proclamation • Consultation period on proposed regulations ended
March 31, 2021
CBCA – Say-on-Pay, Well-Being & Clawbacks
5
• Since January 2020, public CBCA companies have had to make
certain disclosures about the diversity of their boards of
directors and “members of senior management”
• Centered around four designated groups: women, Indigenous
peoples, persons with disabilities and members of visible
minorities
• Targets and actual results to be presented in tabular form, and
any additional targets or statistics should be presented
separately
• Companies to disclose the date of the information
Status • In force since January 2020 • Guidance and report
published April 2021
CBCA – Diversity
6
Annual Elections & No Slate Voting • Directors will be required
to be elected individually Majority Voting • will be required for
uncontested director elections • a director can only be elected if
the “for” votes represent a majority of the votes
cast • exception if need director in order have required min.
number of directors or to
fulfil residency requirements ⇒ applies only to reporting
issuers
Status • Bill C-25 received Royal Assent May 1, 2018 – awaiting
Proclamation • Consultation period on proposed regulations will end
April 27, 2021 • Anticipated to come into force July 1, 2021
CBCA – Election of Directors
7
Shareholder Proposals • Shareholders will be required to submit
notice of matters that they wish to raise
at the AGM 90 to 150 days before the anniversary of the previous
AGM • Change from deadline of at least 90 days before the
anniversary date of the
notice of meeting
Status • Bill C-25 received Royal Assent May 1, 2018 – awaiting
Proclamation • Consultation period on proposed regulations will end
April 27, 2021 • Anticipated to come into force July 1, 2021
CBCA – Shareholder Proposals
9
Diversity disclosure (reporting issuers only)
Received Royal Assent May 1, 2018 and came into force January 1,
2020 Diversity disclosure guidelines published April 8, 2021
Bill C-25 Regs
Election and appointment of directors (reporting issuers only)
Shareholder proposals (all corporations)
Received Royal Assent May 1, 2018 – awaiting Proclamation.
Anticipated to come into force July 1, 2021. Proposed regulations
published March 27, 2021. Comments due April 27, 2021
Bill C-25 Notice & access (reporting issuers only)
Received Royal Assent May 1, 2018 – awaiting Proclamation
Bill C-86 Register of individuals with significant control (private
companies only)
Came into force June 13, 2019 Still awaiting clarifying
regulations
Bill C-97 Fiduciary duties – enumerated factors to consider (all
corporations)
Came into force June 21, 2019
Bill C-97 Proposed Regs
Say-on-Pay Disclosure related to well-being and clawback policy
(probably reporting issuers only)
Received Royal Assent June 1, 2019 – awaiting Proclamation
Consultation period on regulations closed March 31, 2021
Amendments • Will no longer have a residency requirement for
directors (currently ¼ must be
Canadian) ⇒ applies to all corporations
• Ordinary resolutions of shareholders will be able to be passed by
shareholders representing a majority of shares signing a written
resolution
⇒ applies only to private companies
Status • Bill 213 received Royal Assent December 8, 2020 – awaiting
Proclamation
OBCA – Director Residency & Shareholder Approvals
10
11
Bill 190 Electronic signatures and electronic filings - temporary
(all corporations)
Received Royal Assent May 12, 2020 and came into force May 12,
2020. The amendments will be repealed on the day subsection 40 (1)
of Schedule 6 to the Cutting Unnecessary Red Tape Act, 2017 comes
into force.
Bill 190 Virtual meetings and extension of deadline to hold AGM -
temporary (all corporations)
Received Royal Assent May 12, 2020 and came into force with
retroactive effect back to March 17, 2020. The amendments have
effect only until the 120th day after the day the declared
emergency is terminated, unless further extended. On October 1,
2020, a new regulation made under the OBCA (O. Reg. 542/20 –
Extension to temporary suspension period) came into force extending
the application of the temporary legislative amendments until May
31, 2021, subject to further extension.
Bill 213 Removes the residency requirement for directors (all
corporations) Written ordinary resolutions can be passed by a
majority instead of 100% of shareholders (private companies
only)
Received Royal Assent December 8, 2020 – awaiting
Proclamation
(all corporations)
Received Royal Assent May 12, 2020 and came into force
May 12, 2020. The amendments will be repealed on the day
subsection 40 (1) of Schedule 6 to the Cutting Unnecessary Red Tape
Act, 2017 comes into force.
(all corporations)
Received Royal Assent May 12, 2020 and came into force
with retroactive effect back to March 17, 2020. The
amendments have effect only until the 120th day after the day the
declared emergency is terminated, unless further extended.
On October 1, 2020, a new regulation made under the OBCA ( O. Reg.
542/20 – Extension to temporary suspension period ) came into force
extending the application of the temporary legislative amendments
until May 31, 2021, subject to further extension.
(all corporations)
Written ordinary resolutions can be passed by a majority instead of
100% of shareholders
(private companies only)
Securities Law
Amendments to OSC Rule 48-501 – Trading During Distributions,
Formal Bids and Share Exchange Transactions • Rule currently
restricts trading in securities by issuers, selling shareholders
and
insiders during a prospectus distribution, restricted private
placement, etc. • The amendments remove certain trading
restrictions on insiders of issuer and
selling shareholders • Will take effect May 18, 2021
Securities Law
Replacement of Ontario Securities Act • Capital Markets
Modernization Taskforce mandated to make recommendations to
modernize Ontario’s capital markets regulation • final report
published January 22, 2021 • Ontario government announced in March
that it will begin implementing some
recommendations, including replacement of Securities Act with new
Capital Markets Act: – draft: within a few months – consultation:
over the summer – implementation: by year-end
Securities Law
• New non-GAAP financial measures regulation (NI 52-112) ⇒
Anticipated to be published in May and come into force for 2022
proxy season
• Replacement of SEDAR & OSC Electronic Filing Portal ⇒
Anticipated to begin at the end of 2021
Securities Law
ESG
Glass Lewis • Vote withhold for the chair of the governance
committee if the issuer has
inadequate disclosure concerning the board’s role in overseeing
environmental & social issues
• New policy for 2022 • Applies to S&P/TSX 60 Index
companies
Corporate Governance
17
Diversity
CSA Staff Notice 58-312 ⇒ 6th annual report on disclosure regarding
women on boards and in executive
officer positions
• Board Seats => 20% of seats held by women (2015 ~ 11%) •
Executive Officer Positions => 65% of issuers had at least one
woman (2015 ~
60%) • Targets => 26% have board targets & 4% have exec
targets (2015 ~ 7% / 2%) • Term limits => 23% have director term
limits (2015 ~ 19%) • Policy => 54% have a diversity policy
(2015 ~ 15%)
Corporate Governance
18
Diversity ISS • vote withhold if <30% women on board AND there
is no formal written gender
diversity policy that includes a commitment to achieve ≥ 30% women
• new policy for 2022 • applies to S&P/TSX Composite Index
companies
Glass Lewis • vote withhold from chair of nominating committee
if:
– zero women on board (where 6 or fewer total directors) – < 2
women on board (where 7 or more total directors)
• new policy for 2022 • applies to TSX-listed issuers
Corporate Governance
Contract Law
Duty of Good Faith & Honesty in Contractual Relationships • 2
recent SCC decisions regarding the duty • general organizing
principle of common law introduced in 2014 by the SCC in
Bhasin v Hrynew
C.M. Callow Inc. v Zollinger Facts: • Condo group (“Baycrest”)
entered into a 2-year winter maintenance contract and
a separate summer maintenance contract with Callow • Baycrest was
entitled to terminate the winter contract on 10 days’ notice • In
early 2013, Baycrest decided to terminate the winter contract but
chose not to
inform Callow • Throughout the spring and summer, Callow had
discussions with Baycrest
regarding a renewal, which Callow thought he would likely obtain,
performing extra freebies
• Baycrest informed Callow of its decision to terminate the winter
contract in Sept 2013
Contract Law
C.M. Callow Inc. v Zollinger (cont’d)
Held: • Knowingly misleading Callow into believing that the winter
contract would not be
terminated = exercising the termination clause dishonestly = breach
of duty
Key Takeaways: • More than an obligation not to lie => can
include half-truths, omissions, and even
silence, depending on the circumstances • No obligation to
disclose, but can’t let silence be misleading • Contractual rights
must be exercised honestly => no contractual right, including
a
termination right, can be exercised dishonestly and, as such,
contrary to the requirements of good faith
Contract Law
Facts: • Waste removal company and municipal district had a
long-standing contractual
relationship for the removal and transportation of waste to 3
disposal facilities, with differing rates depending on which
disposal facility the waste was directed to
• Contract did not guarantee the company a certain profit in any
given year • Contract gave the municipal district absolute
discretion to allocate waste • Municipal district decided to
reallocate waste in a way that reduced the
company’s profit
Held: • Reallocation of waste = exercise of discretion consistent
with intent of contract =
no breach of the duty to exercise contractual discretion in good
faith
Contract Law
Wastech v. Greater Vancouver (cont’d)
Key Takeaways • Exercise of discretion must be consistent with
contractual intent • Breach of duty occurs where discretion is
exercised unreasonably, in a manner
unconnected to the purposes underlying the discretion • ‘Fairness’
depends on what the parties bargained for. It is not what a court
sees
as fair. Courts must only ensure parties have not exercised their
discretion in ways unconnected to the purposes for which the
parties themselves grant that power.
Contract Law
OSC Decision re: ESW Capital
• application for exemptive relief re: contested proposed take-over
bid of Optiva by a control block shareholder, ESW Capital
• 1st time securities regulator has been asked to grant exemptive
relief from the minimum tender requirement under the “new”
take-over bid regime
• application was denied • OSC found that there were no exceptional
circumstances or abusive or improper
conduct that undermined minority shareholder choice to warrant its
intervention • “Predictability is an important aspect of take-over
bid regulation and the OSC
must be cautious in granting exemptive relief that alters the
recently recalibrated bid regime.”
M&A – Hostile Take-over Bids
26
M&A – Hostile Take-over Bids
27
SolGold plc failed
2020/07/27 Optiva Inc. ESW Capital, LLC failed (never formally
launched)
2020/09/09 Calfrac Well Services Ltd. Wilks Brothers, LLC failed
2020/09/21 Bonterra Energy Corp. Obsidian Energy Ltd. failed
2020/11/04 Osum Oil Sands Corp. Waterous Energy Fund succeeded
(following an
increased price) 2021/02/22 Inter Pipeline Ltd. Brookfield
Infrastructure
Partners L.P. ongoing
Date Bid Launched
2021/02/22
Competition Act • 2021 pre-merger notification threshold relating
to transaction size has decreased
from $96 million to $93 million Investment Canada Act • 2021 review
threshold has been lowered from $1.075 billion to $1.043 billion
in
enterprise value National Security Review of Investments •
Government will subject all foreign investments by state-owned
investors
(regardless of their value) or private investors assessed as being
closely tied to or subject to direction from foreign governments to
enhanced scrutiny
• Guidelines updated in March add new factors that the government
may consider: – potential impact of an investment on critical
minerals and critical mineral supply
chains – potential of an investment to enable access to sensitive
personal data that
could be leveraged to harm Canadian national security
M&A – Competition & National Security
28
Questions
29
Canopy Growth Corporation
OBCA – Director Residency & Shareholder Approvals
Overview of Status of Amendments to the OBCA
Securities Law
Securities Law
Securities Law
Securities Law
Corporate Governance
Corporate Governance
Corporate Governance
Corporate Governance
Contract Law
Contract Law
Contract Law
Contract Law
Contract Law
M&A
Slide Number 29