Proxy Voting and Shareholder Communications

The Form of Proxy (Banks and Bank Holding Companies) Regulations, 2023, registered under SOR/2024-150, update the existing regulations governing proxy solicitations for banks and bank holding companies in Canada. These regulations, issued under the authority of the Bank Act, reflect a modernization of the regulatory framework surrounding proxy voting and shareholder communications.
A proxy is a legal instrument that allows a shareholder to designate another individual (the proxyholder) to attend and vote on their behalf at shareholder meetings. Under the Bank Act, distributing banks—those classified as reporting issuers under provincial securities laws—and non-distributing banks with over 50 shareholders must solicit proxies from their shareholders prior to meetings. This regulatory requirement ensures that shareholders receive essential information to make informed decisions regarding their voting rights. Historically, these regulations referenced portions of the Canada Business Corporations Regulations (CBCR) that have since been repealed. Recent amendments to the CBCR, effective from March 2021, integrated the National Instrument 51-102 (Continuous Disclosure Obligations), necessitating an update to the Form of Proxy regulations to ensure consistency and compliance with current standards.
The updated regulations introduce specific definitions and provisions related to proxy solicitation and the requisite forms to be provided to shareholders. Notable elements include the definition of key terms, such as “management proxy circular” and “dissident’s proxy circular,” clarifying the distinctions between proxy documents issued by management and those from dissenting shareholders. A significant change is the requirement that forms of proxy comply with section 9.4 of National Instrument 51-102, improving alignment between federal and provincial regulations. Additionally, the regulations specify circumstances under which certain communications are not considered proxy solicitations; for instance, public announcements or speeches made without a formal proxy do not fall under solicitation requirements, provided they do not seek proxy authority. Furthermore, both management and dissident proxy circulars must adhere to prescribed formats based largely on the structure outlined in Form NI 51-102F5 (Information Circular), with management circulars required to include essential information such as the percentage of votes needed for approval on various matters and indemnification details for directors.
The primary objective of the updated regulations is to reduce complexity and regulatory burdens for both distributing and non-distributing banks. By ensuring alignment with provincial securities rules, these regulations aim to improve transparency and streamline compliance processes. For distributing banks, the goal is to maintain high disclosure standards while ensuring that regulatory requirements are coherent and non-duplicative. For non-distributing banks with more than 50 shareholders, the regulations strive to uphold rigorous corporate disclosure standards, reflecting the evolving nature of ownership structures and shareholder rights in the banking sector. The Standing Joint Committee for the Scrutiny of Regulations had expressed concerns regarding the outdated nature of the previous regulations, prompting this revision to effectively modernize the framework.
Canada (SOR/2024-150) July 3, 2024