CANADA Law and Practice Contributed by: Sarah Gingrich, Sean Stevens, Marie-Josée Neveu and Tracy Hooey, Fasken
3.3 Decision-Making Processes Canadian corporate law limits the board’s abil - ity to delegate its authority in that certain deci - sions are within the sole authority of the direc - tors. For example, under the CBCA, only the board may (i) submit to shareholders matters requiring their approval, (ii) declare dividends, (iii) approve financial statements for distribution to shareholders, (iv) approve a management proxy circular, takeover bid circular or other circular, or (v) amend or repeal the company’s by-laws. However, committees can (and often do) advise on these matters before the full board makes a final decision. Even where it is legally permissible to delegate decision-making to a board committee or man - agement, best practice in Canada is for the board to carefully consider whether to do so. Typically, matters of strategic importance or material policy, while sometimes at first instance the responsibility of a committee, are reserved for final determination by the board (eg, after the committee has made its recommendations). For example, while risk committees have become common at large Canadian public companies, ultimate authority over the “risk-reward” balance to be assumed at the enterprise level is often reserved for the full board.
for a range in the number of directors so that the board can be expanded or reduced as circum - stances warrant and without having to amend the company’s articles. In order to fulfil its duties, a board should have sufficient directors for its own direct needs and to serve on the board’s committees. 4.2 Roles of Board Members The allocation of roles and responsibilities among board members is generally approached on a case-by-case (ie, company-specific) basis in Canada. Best practice is to develop and imple - ment a formal mandate for the board, which includes a considered delegation of authority to management. Best practice in Canada is also for the board to continually evaluate which spe - cific skill sets are most relevant to its needs and which of those might be absent and thus should be added. 4.3 Board Composition Requirements/ Recommendations Several of Canada’s business corporations stat - utes impose residency requirements. For exam - ple, under the CBCA, a minimum of 25% of the company’s directors must be resident Canadi - ans. For requirements relating to board size, see 4.1 Board Structure . For requirements relating to director independence, see 4.5 Rules/Require- ments Concerning Independence of Directors . In addition, public companies are required to have audit committees composed of directors that are independent directors (see 4.5 Rules/ Requirements Concerning Independence of Directors ) and that are financially literate. 4.4 Appointment and Removal of Directors/Officers In Canada, shareholders elect the company’s directors at the company’s AGM or at a spe - cial meeting called, in whole or in part, for the
4. Directors and Officers 4.1 Board Structure
Canada’s business corporations statutes pre - scribe basic requirements regarding board struc - ture. Private companies are generally required to only have a single director. Public companies are generally required to have a minimum of three directors, at least two of which are not officers or employees of the company or its affiliates. Typically, a public company’s articles will allow
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