CSA Provides Updated Guidance on Virtual Shareholder Meetings

On February 22, 2024, the Canadian Securities Administrators (the “CSA”) published new guidance on virtual shareholder meetings, updating its initial guidance published in February 2022.

Background

Virtual shareholder meetings gained widespread popularity during the COVID-19 pandemic. Although restrictions on in-person gatherings no longer necessitate the format, it continues to be popular among many reporting issuers. Certain corporate statutes in Canada have been amended to expressly permit virtual shareholder meetings, as have many issuers’ organizing documents, making it a new normal for proxy season and one which we expect is here to stay.

Virtual meetings may be conducted entirely virtually or through a “hybrid” format held in-person and simultaneously allowing participation via electronic means.

In February 2022, the CSA published initial guidance in the still-evolving landscape for virtual shareholder meetings to assist reporting issuers in fulfilling their obligations under securities legislation. Two years later, the CSA notes that stakeholders continue to raise concerns with the virtual-only shareholder meeting format, citing challenges faced by shareholders looking to exercise their rights, engage with management and otherwise access and participate in virtual-only meetings. The CSA’s updated recommendations provide further clarity and guidance to assist reporting issuers in fulfilling their obligations under securities legislation and encourage the adoption of practices that facilitate shareholder participation in response to these concerns.

Disclosure on How to Access and Participate

The updated guidance emphasizes the importance of clear and comprehensive disclosure regarding the logistics required to access, participate in and vote at a virtual shareholder meeting.

To achieve this, the CSA encourages the use of plain language explanations in proxy-related materials of how shareholders (both registered and beneficial) can participate in the virtual meeting, including information on:

• the registration, authentication and voting process, and how shareholders can get assistance in the event of difficulties during this process; and
• how shareholder participation will be accommodated and managed during the meeting, including information concerning:
  • 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.

Facilitating Shareholder Participation

The updated guidance recommends that the ability to participate in a virtual meeting should require no more than basic technological proficiency on the part of the shareholder. The CSA further encourages issuers to provide for an “ease, level and quality” of shareholder participation comparable to that which could reasonably be expected at an in-person meeting, noting that annual shareholder meetings have traditionally represented the only opportunity for many investors (and, in particular, retail investors) to engage with management in a meaningful way.

With this in mind, the CSA recommends that reporting issuers can better facilitate shareholder participation in virtual shareholder meetings 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, co-ordinating 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 is experienced and knowledgeable in the technological platform being used for the virtual meeting.

Reporting issuers are further encouraged to consult and follow accepted best practices relating to the conduct of virtual shareholder meetings. This includes consideration of hybrid meetings, which give investors the opportunity to attend in-person.

Other Considerations

Virtual shareholder meetings have a number of benefits outside of the pandemic context. They can be less expensive and time-consuming to attend than in-person meetings, particularly for those located out of province or abroad, theoretically enabling attendance and participation from a wider shareholder base. Logistics for hosting virtual meetings can also be easier, offering convenience and flexibility for issuers and investors alike.

However, issuers should be mindful that virtual shareholder meetings face increased scrutiny in a post-pandemic context, with the concerns identified by the CSA being shared by many stakeholders, including proxy advisory firms and shareholder advocacy groups.

Glass Lewis has previously expressed concern that a shift toward virtual-only shareholder meetings could lead to shareholder disenfranchisement, absent the development and disclosure of clear procedures to enable participation and meaningful engagement.^[1]

The CEO of the Canadian Coalition for Good Governance has also expressed concern that virtual-only meetings may be used to limit shareholder participation and are an unsatisfactory substitute for in-person shareholder meetings.^[2]

Going into the 2024 proxy season, issuers are encouraged to work with their legal counsel and transfer agent to evaluate how to utilize a virtual meeting format in light of the CSA’s updated guidance. A hybrid format supported by clear disclosure may be optimal from a governance perspective.

The Capital Markets Group at Aird & Berlis LLP will continue to monitor developments in this area. Please contact a member of the group if you have questions or require assistance.