CANADA Law and Practice Contributed by: Sarah Gingrich, Sean Stevens, Marie-Josée Neveu and Tracy Hooey, Fasken
pensation committee is ultimately responsible for making recommendations on director com - pensation, and this best practice is generally followed. “Say-on-pay” shareholder proposals have been common for Canadian public com - panies for several years. “Say-on-pay” votes by shareholders (ie, non-binding advisory votes) are not yet mandated by securities law or the CBCA but have been voluntarily adopted by many large public Canadian companies. 4.11 Disclosure of Payments to Directors/Officers Canadian securities law requires the disclosure of the process followed in deciding director and officer remuneration. This should include expla - nation of the board’s process, the rationale for the board’s decision, and why the remuneration is otherwise appropriate or justified. Best prac - tice includes also disclosing the frequency and form of compensation. This disclosure of officer remuneration is required to be included in the Compensation Discussion and Analysis portion of a public company’s proxy circular. 5. Shareholders 5.1 Relationship Between Companies and Shareholders The relationship between a Canadian company and its shareholders is governed primarily by the company’s business corporations statute (fed - eral, provincial or territorial; see 1.1 Forms of Corporate/Business Organisations ). Generally speaking, shareholders in a Canadian company do not owe any fiduciary duties or other duties to the company. Nor do sharehold - ers in Canadian companies owe any fiduciary duties or other duties to other shareholders of the company. A possible exception is where the
company’s shareholders have entered a unani - mous shareholders’ agreement (USA) in which case, to the extent the USA limits or otherwise restricts the authority of the directors to manage the company, the related duties and liabilities of the directors will be transferred from the direc - tors to the shareholders. Caution should also be exercised where a shareholder nominates a director to the company’s board, as the nominee director will owe duties to the company without regard to any duties they may owe to the nomi - nating shareholder in any other capacity. Canadian corporations statutes generally pro - vide that shareholders who dissent regarding shareholder votes on specified fundamental matters can compel the company to acquire their shares at fair value, a process referred to as “dissent and appraisal rights” . A prominent example is where the shareholder dissents in relation to a squeeze-out transaction. It is also typical for shareholders to be granted dissent and appraisal rights in connection with a pro - posed plan of arrangement effecting any negoti - ated (ie, “friendly” ) acquisition of the company. Lastly, the principle of separate corporate per - sonality is a fundamental rule of Canadian law. As such, a shareholder will only be liable for the company’s actions should a court rule it appro - priate to “pierce the corporate veil” . Due to the very high standard generally imposed in such claims – eg, where the company is used to per - petrate a fraud, this occurs relatively infrequently in Canada. 5.2 Role of Shareholders in Company Management The principal role of shareholders in the manage - ment of the company is their right to elect the company’s directors (see 4.4 Appointment and Removal of Directors/Officers ). The approval of
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