CANADA Law and Practice Contributed by: Sarah Gingrich, Sean Stevens, Marie-Josée Neveu and Tracy Hooey, Fasken
election of directors. Directors are generally removed either by being replaced at a subse - quent AGM or by resolution at a special meeting held between AGMs. Majority voting applies to uncontested elections at companies governed by the CBCA or listed on the TSX or other non- venture exchanges. The board appoints the company’s officers and these officers serve at the pleasure of the board. 4.5 Rules/Requirements Concerning Independence of Directors There are different definitions of “independence” as it relates to corporate governance in Canada. The CBCA provides that a director is independ - ent if they are not employed by the company or any of its affiliates. Canadian securities laws define independence as the lack of “material relationship” with the company. A material relationship is defined as one which could be reasonably expected to interfere with the exercise of independent judgement. Cer - tain relationships are automatically deemed to be material, including being a current or recent executive officer (or other employee) of the company or being a current or recent partner (or employee) of the company’s auditor. Canadian securities laws also require that pub - lic companies disclose which directors are inde - pendent and which are not. Where a majority of the board does not qualify as independent, the company must disclose what the board does to ensure the independent exercise of judgement in fulfilling its duties. Canadian securities laws also require that all members of an audit committee are independent and provide guidance (which is adhered to by almost all public companies) that all members of a compensation committee should be independent.
Directors must disclose the nature and extent of any conflict of interest they have in a material contract or material transaction, whether made or proposed, with the company where the direc - tor (i) is a party to the contract or transaction, (ii) is a director of a party to the contract or transac - tion, or (iii) has a material interest in a party to the contract or transaction. Subject to limited exceptions (see 4.10 Approvals and Restric- tions Concerning Payments to Directors/ Officers ), the director cannot vote on any board resolution relating to the contract or transaction. For a discussion of key legal issues related to nominee directors, see 5.1 Relationship Between Companies and Shareholders . 4.6 Legal Duties of Directors/Officers The principal legal duties of officers and direc - tors under Canadian corporate law are twofold: the duty of care and the duty of loyalty. Satisfying their duty of care in managing the company requires that officers and directors exercise the care, diligence and skill that a rea - sonably prudent person would exercise in com - parable circumstances. This includes the officers and directors sufficiently informing themselves and considering all related material information before taking action. Satisfying their duty of loyalty in managing the company requires that officers and directors act honestly and in good faith with a view to the corporation’s best interests. They must act impartially and free of self-interest or self-deal - ing and always put the company’s best interests first, regardless of any competing or conflicting interests, including their own or of any of the company’s shareholders.
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