CANADA Law and Practice Contributed by: Sarah Gingrich, Sean Stevens, Tracy Hooey and Marie-Josée Neveu, Fasken
Fasken Bay Adelaide Centre 333 Bay Street, Suite 2400 Toronto, ON, M5H 2T6 Canada Tel: +1 416 366 8381 Fax: +1 416 364 7813 Email: toronto@fasken.com Web: www.fasken.com
1. Corporate Governance Requirements 1.1 Corporate Forms and Governance Requirements The principal form of business organisation in Canada is the business corporation which affords shareholders limited liability protection, and Canada has 14 different business corporations statutes under which these can be incorporated. The Canada Business Corporations Act (CBCA) is Canada’s federal business corporations statute. Each of Canada’s ten provinces and three ter - ritories also has its own business corporations statute. However, these are generally modelled on the CBCA such that, in most cases and subject to limited excep - tions (such as director residency requirements), there is generally little substantive difference among them practically speaking. Several provincial business cor - porations statutes in Canada provide for unlimited liability corporations, which may be advantageous as part of cross-border tax planning (but which do not necessarily provide shareholders the same extent of limited liability protections that business corporations do). 1.2 Corporate Governance Legislation and Regulation The principal sources of corporate governance requirements in Canada are the business corporations statute under which the company is incorporated and, if the company is publicly listed in Canada, Canadian securities laws. Also, while not technically binding or obligatory, corporate governance practices in Canada can be significantly impacted by various non-legal sources such as proxy advisory firm recommenda - tions and contemporary industry best practices.
A particularly notable non-legal source of corpo - rate governance practice in Canada is the potential influence of Canadian institutional investors such as pension funds. Many of these investors have distinct expectations regarding various corporate governance matters, including as relates to such issues as diver - sity, equity and inclusion (DEI) and sustainability, and they can proactively exert pressure on their portfolio companies towards these ends. This pressure can sometimes be significant, including where institutional investors together hold a sizeable shareholding and because many Canadian public companies are not as widely held as public companies often are in certain other jurisdictions. Overall, corporate governance in Canada continues to evolve and is an area of acute interest among com - panies, investors, regulators and other market par - ticipants. 1.3 Companies With Publicly Traded Shares Publicly traded companies in Canada are subject to various corporate governance rules and guidelines of both mandatory and voluntary application. Man - datory requirements are imposed principally by the company’s governing corporate statute (see 1.1 Cor- porate Forms and Governance Requirements ) or by applicable securities laws. Voluntary requirements result principally from non-legal sources such as the expectations of institutional investors (eg, pension funds; see 1.2 Corporate Governance Legislation and Regulation ), proxy advisory firm recommenda - tions, and contemporary industry best practices. Notwithstanding the 14 different corporations statutes (federal, provincial and territorial; see 1.1 Corporate
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