TSX Requires Majority Voting Policy


The Toronto Stock Exchange (“TSX”) recently amended its corporate finance manual to require each issuer to adopt a majority voting policy for its first fiscal year ended on or after June 30, 2014.

Under corporate law, a shareholder can only vote for a director or withhold their vote; they cannot vote against a director. As such, the directors with the most votes get elected, even if a majority of shareholders withheld their vote with respect to that director. A majority voting policy requires any director that is not elected by at least a majority of the votes cast with respect to his or her election to tender their resignation to the company. The company must decide within 90 days whether to accept the resignation, which it should do absent exceptional circumstances. The listed issuer must promptly issue a news release with the board’s decision, a copy of which must be provided to the TSX. If the board determines not to accept the resignation, the news release must fully state the reasons for that decision.

The new rules provide that:

  • Each director of a listed issuer must be elected by a majority (50% plus one vote) of the votes cast with respect to his or her election other than at a contested meeting.
  • An issuer must fully describe its majority voting policy on an annual basis in its materials sent to security holders in connection with a meeting in which directors are being elected.
  • A listed issuer may, in lieu of adopting a majority voting policy, satisfy the requirements of the new rule by providing in its articles or by-laws (or being subject to an equivalent statutory requirement) a majority voting requirement which provides that directors must be elected by a majority of the votes cast at a meeting.

There are some exemptions to the policy. Listed issuers that are majority controlled are exempt from the majority voting requirement of the new rules, but must disclose annually their reliance on the exemption and reasons for not adopting a majority voting policy. In addition, the majority voting requirements do not apply to contested meetings where the number of directors nominated for election is greater than the number of seats available on the board.

The new rules spells out the nature of the information required in such release as well as the type of disclosure expected where the vote is conducted by a show of hands.

If you have questions about the majority voting policy requirements, contact any member of Clark Wilson’s Corporate Finance & Securities Group.