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Bill S-217

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First Reading

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S-217

Second Session, Forty-first Parliament,

62-63 Elizabeth II, 2013-2014

SENATE OF CANADA

BILL S-217

An Act to modernize the composition of the boards of directors of certain corporations, financial institutions and parent Crown corporations, and in particular to ensure the balanced representation of women and men on those boards

first reading, March 26, 2014

THE HONOURABLE SENATOR HERVIEUX-PAYETTE, P.C.

1110-2

SUMMARY

This enactment requires the following corporations to ensure that the proportion of directors of each sex on their board of directors is not less than 40 per cent and that shareholders may vote against a candidate for a director’s position:

(a) a distributing corporation within the meaning of the Canada Business Corporations Act, any of the issued securities of which remain outstanding and are held by more than one person;

(b) a bank that is listed in Schedule I to the Bank Act;

(d) a distributing company regulated by the Insurance Companies Act;

(e) a distributing company regulated by the Trust and Loan Companies Act; and

(f) any other federally regulated, publicly traded corporation.

The parent Crown corporations listed in Schedule III to the Financial Administration Act are subject to the same obligations as incorporated companies, except with regard to the right to vote against a candidate for a director’s position.

The enactment provides that the obligation relating to the balanced representation of each sex takes effect incrementally, at the end of three-year and six-year periods. If the new obligation entails changes to a company’s by-laws or incorporating instrument, then the three-year deadline may be extended by one year.

In order to enforce compliance with these obligations, the enactment invalidates elections held or appointments made in violation of its provisions and makes compliance a condition for the issuance of a certificate or letters patent or for the exercise of the powers necessary for the implementation of certain processes or certain proposals or amendments.

Available on the Parliament of Canada Web Site at the following address:
http://www.parl.gc.ca

TABLE OF PROVISIONS

AN ACT TO MODERNIZE THE COMPOSITION OF THE BOARDS OF DIRECTORS OF CERTAIN CORPORATIONS, FINANCIAL INSTITUTIONS AND PARENT CROWN CORPORATIONS, AND IN PARTICULAR TO ENSURE THE BALANCED REPRESENTATION OF WOMEN AND MEN ON THOSE BOARDS

Preamble

SHORT TITLE

1. Boards of Directors Modernization Act

PART 1

BUSINESS CORPORATIONS

2–5. Canada Business Corporations Act

PART 2

FINANCIAL INSTITUTIONS

6–8. Bank Act

9–11. Cooperative Credit Associations Act

12–14. Insurance Companies Act

15–17. Trust and Loan Companies Act

PART 3

OTHER PUBLICLY TRADED CORPORATIONS

18. Definitions

19. Balanced representation of women and men

20. Application

21. Deferral

22. Amendment of by-laws or incorporating instrument

23. Invalidity

24. Validity of acts

PART 4

PARENT CROWN CORPORATIONS

25. Financial Administration Act

PART 5

COMING INTO FORCE

26. Coming into force

2nd Session, 41st Parliament,

62-63 Elizabeth II, 2013-2014

senate of canada

BILL S-217

Preamble

Whereas the majority of corporations, financial institutions and parent Crown corporations have many more men than women as directors;

Whereas women are active participants in the business community, as business owners, shareholders, officers, managers and employees, and in the market as consumers, and should have balanced representation in the governance of business;

Whereas women are active participants in the democratic government of the country as voters and politicians and should have balanced representation in the management of parent Crown corporations;

And whereas there are many women in Canada who have the qualifications and experience to act as corporate directors;

Now, therefore, Her Majesty, by and with the advice and consent of the Senate and House of Commons of Canada, enacts as follows:

SHORT TITLE

Short title

1. This Act may be cited as the Boards of Directors Modernization Act.

PART 1

BUSINESS CORPORATIONS

R.S., c. C-44

Canada Business Corporations Act

2. The Canada Business Corporations Act is amended by adding the following after section 105:

Definition of “distributing corporation”

105.1 In sections 105.2 to 105.6, “distributing corporation” means a distributing corporation as defined in subsection 2(1), any of the issued securities of which remain outstanding and are held by more than one person.

Balanced representation of women and men

105.2 (1) Subject to subsection (2), the composition of the board of directors of a distributing corporation must be such that the proportion of directors of each sex is not less than forty per cent.

Board of eight members

(2) Where the board of directors of a distributing corporation consists of no more than eight members, the difference between the number of directors of each sex may not be greater than two.

Application

105.3 (1) Subject to subsection (2), section 105.2 applies to a distributing corporation as of the close of the sixth annual meeting of shareholders after the coming into force of that section.

Interim measure

(2) The proportion of directors of each sex provided for in subsection 105.2(1) may not be less than twenty per cent as of the close of the third annual meeting of shareholders after the coming into force of that subsection.

Deferral

105.4 The Director may, on application by a distributing corporation, defer the time from which the corporation must comply with subsection 105.3(2) until the close of the fourth annual meeting of shareholders after the coming into force of that subsection, if the Director is satisfied that

(a) the act of incorporation would have to be amended to increase the number of directors, or the maximum number of directors, to achieve compliance with that subsection without replacing directors who are officers or employees of the corporation or any of its affiliates; and

(b) filling the increased number of directors’ positions would cause the corporation unreasonable hardship.

Invalidity

105.5 Any appointment or election of a director in violation of section 105.2 is invalid and the vacant position shall be filled in accordance with section 111.

Validity of acts

105.6 An act of the board of directors of a distributing corporation to which sections 105.1 to 105.5 apply is not invalid on the sole ground that the composition of the board is not in compliance with one of those sections.

3. The Act is amended by adding the following after section 107:

Plurality of votes

107.1 Where the articles of a distributing corporation, within the meaning of section 105.1, do not provide for cumulative voting,

(a) subject to paragraph (b), the votes shall be cast for or against a candidate for each of the directors’ positions to be filled;

(b) shareholders may abstain, but without cumulating the votes;

(d) a director who is elected but receives more votes against than for shall serve as a director for a term that ends on the date that is the earlier of

(i) ninety days after the close of the meeting at which he or she was elected, and

(ii) the date on which an individual is appointed by the directors to fill the office; and

(e) the directors shall appoint a replacement for the director referred to in paragraph (d) in accordance with section 111, as if the office were vacant.

4. Section 260 of the Act is replaced by the following:

Appointment of Director

260. The Minister may appoint a Director and one or more Deputy Directors to carry out the duties and exercise the powers of the Director under this Act or any other Act of Parliament.

5. (1) Subsection 262(2) of the Act is amended by striking out “and” at the end of paragraph (a) and adding the following after that paragraph:

(a.1) in the case of a corporation to which section 105.2 applies, the articles or the statement shall have attached thereto a statutory declaration or certificate made by a director or officer of the corporation stating whether the corporation and those of its affiliates to which section 105.2 applies are in compliance with that section; and

(2) Section 262 of the Act is amended by adding the following after subsection (2):

Condition

(2.1) Despite any other provision of this Act but subject to subsection (2.2), the Director shall not issue a certificate under this section in respect of a corporation to which section 105.2 applies unless the Director is satisfied that the corporation and those of its affiliates to which section 105.2 applies are in compliance with that section.

Exception

(2.2) Subsection (2.1) does not apply to a certificate related to a matter that will enable a corporation to comply with section 105.2.

PART 2

FINANCIAL INSTITUTIONS

1991, c. 46

Bank Act

6. The Bank Act is amended by adding the following after section 159.1:

Definition of “bank”

159.2 In sections 159.3 to 159.5, “bank” means a bank listed in Schedule I.

Balanced representation of women and men

159.3 (1) Subject to subsection (2), the composition of the board of directors of a bank must be such that the proportion of directors of each sex is not less than forty per cent.

Board of eight members

(2) Where the board of directors of a bank consists of no more than eight members, the difference between the number of directors of each sex may not be greater than two.

Application

159.4 (1) Subject to subsection (2), section 159.3 applies to a bank as of the close of the sixth annual meeting of shareholders after the coming into force of that section.

Interim measure

(2) The proportion of directors of each sex provided for in subsection 159.3(1) may not be less than twenty per cent as of the close of the third annual meeting of shareholders after the coming into force of that subsection.

Deferral

159.5 The Superintendant may, on application by a bank, defer the time from which the bank must comply with subsection 159.4(2) until the close of the fourth annual meeting of shareholders following the day on which that subsection comes into force, if the Superintendant is satisfied that

(a) the incorporating instrument would have to be amended to increase the number of directors, or the maximum number of directors, to achieve compliance with that subsection without replacing directors who are officers or employees of the bank; and

(b) filling the increased number of directors’ positions would cause the bank unreasonable hardship.

Invalidity

159.6 Any appointment or election of a director in violation of section 159.3 is invalid and the vacant position shall be filled in accordance with section 177.

7. The Act is amended by adding the following after section 168.1:

Plurality of votes

168.2 Where this Act or the by-laws do not provide for cumulative voting,

(a) subject to paragraph (b), the votes shall be cast for or against a candidate for each of the directors’ positions to be filled;

(b) shareholders may abstain, but without cumulating the votes;

(d) a director who is elected but receives more votes against than for shall serve as a director for a term that ends on the date that is the earlier of

(i) ninety days after the close of the meeting at which he or she was elected, and

(ii) the date on which an individual is appointed by the directors to fill the office; and

(e) the directors shall appoint a replacement for the director referred to in paragraph (d) in accordance with section 177, as if the office were vacant.

8. Section 216 of the Act is amended by adding the following after subsection (1):

Condition

(1.1) The Minister may not issue letters patent pursuant to this section to effect a proposal in respect of a bank to which section 159.3 applies unless the Minister is satisfied that the bank is in compliance with that section.

Exception

(1.2) Subsection (1.1) does not apply to a proposal that will enable the bank to be in compliance with section 159.3.

1991, c. 48

Cooperative Credit Associations Act

9. The Cooperative Credit Associations Act is amended by adding the following after section 169:

Balanced representation of women and men

169.1 (1) Subject to subsection (2), the composition of the board of directors of an association must be such that the proportion of directors of each sex is not less than forty per cent.

Board of eight members

(2) Where the board of directors of an association consists of no more than eight members, the difference between the number of directors of each sex may not be greater than two.

Application

169.2 (1) Subject to subsection (2), section 169.1 applies to an association as of the close of the sixth annual meeting of shareholders after the coming into force of that section.

Interim measure

(2) The proportion of directors of each sex provided for in subsection 169.1(1) may not be less than twenty per cent as of the close of the third annual meeting of shareholders after the coming into force of that subsection.

Deferral

169.3 The Superintendant may, on application by an association, defer the time from which the association must comply with subsection 169.2(2) until the close of the fourth annual meeting of shareholders following the day on which that subsection comes into force, if the Superintendant is satisfied that

(b) filling the increased number of directors’ positions would cause the association unreasonable hardship.

Invalidity

169.4 Any appointment or election of a director in violation of section 169.1 is invalid and the vacant position shall be filled in accordance with section 183.

10. The Act is amended by adding the following after section 175:

Plurality of votes

175.1 An association may, by by-law, govern the election of directors as follows:

(a) subject to paragraph (b), the votes shall be cast for or against a candidate for each of the directors’ positions to be filled;

(b) shareholders may abstain, but without cumulating the votes;

(d) a director who is elected but receives more votes against than for shall serve as a director for a term that ends on the date that is the earlier of

(i) ninety days after the close of the meeting at which he or she was elected, and

(ii) the date on which an individual is appointed by the directors to fill the office; and

(e) the directors shall appoint a replacement for the director referred to in paragraph (d) in accordance with section 183, as if the office were vacant.

11. Section 220 of the Act is amended by adding the following after subsection (1):

Condition

(1.1) The Minister may not issue letters patent pursuant to this section to effect a proposal in respect of an association to which section 169.1 applies unless the Minister is satisfied that the association is in compliance with that section.

Exception

(1.2) Subsection (1.1) does not apply to a proposal that will enable the association to be in compliance with section 169.1.

1991, c. 47

Insurance Companies Act

12. The Insurance Companies Act is amended by adding the following after section 167:

Balanced representation of women and men

167.1 (1) Subject to subsection (2), the composition of the board of directors of a distributing company must be such that the proportion of directors of each sex is not less than forty per cent.

Board of eight members

(2) Where the board of directors of a distributing company consists of no more than eight members, the difference between the number of directors of each sex may not be greater than two.

Application

167.2 (1) Subject to subsection (2), section 167.1 applies to a distributing company as of the close of the sixth annual meeting of shareholders and policyholders after the coming into force of that section.

Interim measure

(2) The proportion of directors of each sex provided for in subsection 167.1(1) may not be less than twenty per cent as of the close of the third annual meeting of shareholders and policyholders after the coming into force of that subsection.

Deferral

167.3 The Superintendant may, on application by a distributing company, defer the time from which the company must comply with subsection 167.2(2) until the close of the fourth annual meeting of shareholders and policyholders following the day on which that subsection comes into force, if the Superintendant is satisfied that

(b) filling the increased number of directors’ positions would cause the company unreasonable hardship.

Invalidity

167.4 Any appointment or election of a director in violation of section 167.1 is invalid and the vacant position shall be filled in accordance with section 185.

13. The Act is amended by adding the following after section 176:

Plurality of votes

176.1 Where this Act or the by-laws do not provide for cumulative voting,

(a) subject to paragraph (b), the votes shall be cast for or against a candidate for each of the directors’ positions to be filled;

(b) shareholders and policyholders may abstain, but without cumulating the votes;

(d) a director who is elected but receives more votes against than for shall serve as a director for a term that ends on the date that is the earlier of

(i) ninety days after the close of the meeting at which he or she was elected, and

(ii) the date on which an individual is appointed by the directors to fill the office; and

(e) the directors shall appoint a replacement for the director referred to in paragraph (d) in accordance with section 185, as if the office were vacant.

14. Section 225 of the Act is amended by adding the following after subsection (1):

Condition

(1.1) The Minister may not issue letters patent pursuant to this section to effect a proposal in respect of a company to which section 167.1 applies unless the Minister is satisfied that the company is in compliance with that section.

Exception

(1.2) Subsection (1.1) does not apply to a proposal that will enable the company to be in compliance with section 167.1.

1991, c. 45

Trust and Loan Companies Act

15. The Trust and Loan Companies Act is amended by adding the following after section 163:

Balanced representation of women and men

163.1 (1) Subject to subsection (2), the composition of the board of directors of a distributing company must be such that the proportion of directors of each sex is not less than forty per cent.

Board of eight members

(2) Where the board of directors of a distributing company consists of no more than eight members, the difference between the number of directors of each sex may not be greater than two.

Application

163.2 (1) Subject to subsection (2), section 163.1 applies to a distributing company as of the close of the sixth annual meeting of shareholders after the coming into force of that section.

Interim measure

(2) The proportion of directors of each sex provided for in subsection 163.1(1) may not be less than twenty per cent as of the close of the third annual meeting of shareholders after the coming into force of that subsection.

Deferral

163.3 The Superintendant may, on application by a distributing company, defer the time from which the company must comply with subsection 163.2(2) until the close of the fourth annual meeting of shareholders following the day on which that subsection comes into force, if the Superintendant is satisfied that

(b) filling the increased number of directors’ positions would cause the company unreasonable hardship.

Invalidity

163.4 Any appointment or election of a director in violation of section 163.1 is invalid and the vacant position shall be filled in accordance with section 181.

16. The Act is amended by adding the following after section 172:

Plurality of votes

172.1 Where this Act or the by-laws do not provide for cumulative voting,

(a) subject to paragraph (b), the votes shall be cast for or against a candidate for each of the directors’ positions to be filled;

(b) shareholders may abstain, but without cumulating the votes;

(d) a director who is elected but receives more votes against than for shall serve as a director for a term that ends on the date that is the earlier of

(i) ninety days after the close of the meeting at which he or she was elected, and

(ii) the date on which an individual is appointed by the directors to fill the office; and

(e) the directors shall appoint a replacement for the director referred to in paragraph (d) in accordance with section 181, as if the office were vacant.

17. Section 221 of the Act is amended by adding the following after subsection (1):

Condition

(1.1) The Minister may not issue letters patent pursuant to this section to effect a proposal in respect of a company to which section 163.1 applies unless the Minister is satisfied that the company is in compliance with that section.

Exception

(1.2) Subsection (1.1) does not apply to a proposal that will enable the company to be in compliance with section 163.1.

PART 3

OTHER PUBLICLY TRADED CORPORATIONS

Definitions

18. The following definitions apply in this Part.

“corporation”
« société »

“corporation” means a federally regulated corporation

(a) that is a reporting issuer under one of the legislative provisions that is set out in column 2 of an item of Schedule 1 to the Canada Business Corporations Regulations, 2001; or

(b) in the case of a corporation that is not a reporting issuer referred to in paragraph (a),

(i) that has filed a prospectus or registration statement under provincial or foreign legislation,

(ii) any of the securities of which are listed and posted for trading on a stock exchange in or outside Canada, or

(iii) that is involved in, is formed for, results from or is continued after an amalgamation, a reorganization, an arrangement or a statutory procedure set out in the Canada Business Corporations Act, if one of the participating bodies corporate is a corporation referred to in subparagraph (i) or (ii);

but does not include a corporation

(c) that is subject to an exemption under provincial securities legislation or to an order of the relevant provincial securities regulator that provides that the corporation is not a reporting issuer for the purposes of the applicable legislation;

(d) listed in any of the schedules to the Financial Administration Act; or

(e) to which the Bank Act, the Canada Business Corporations Act, the Cooperative Credit Associations Act, the Insurance Companies Act or the Trust and Loan Companies Act applies.

“Director”
« directeur »

“Director” means the Director appointed under section 260 of the Canada Business Corporations Act.

“incorporating instrument”
« acte constitutif »

“incorporating instrument” means the special Act, letters patent, instrument of continuance or other constating instrument by which a body corporate was incorporated or continued and includes any amendment to or restatement of the constating instrument.

Balanced representation of women and men

19. (1) Subject to subsection (2), the composition of the board of directors of a corporation must be such that the proportion of directors of each sex is not less than forty per cent.

Board of eight members

(2) Where the board of directors of a corporation consists of no more than eight members, the difference between the number of directors of each sex must not be greater than two.

Application

20. (1) Subject to subsection (2), section 19 applies to a corporation as of the close of the sixth annual meeting of shareholders after the coming into force of that section.

Interim measure

(2) The proportion of directors of each sex provided for in subsection 19(1) may not be less than twenty per cent as of the close of the third annual meeting of shareholders after the coming into force of that subsection.

Deferral

21. The Director may, on application by a corporation, defer the time from which the corporation must comply with subsection 20(2) until the close of the fourth annual meeting of shareholders following the day on which that subsection comes into force, if the Director is satisfied that

(b) filling the increased number of directors’ positions would cause the corporation unreasonable hardship.

Amendment of by-laws or incorporating instrument

22. (1) If a corporation to which section 19 applies amends its by-laws or incorporating instrument and the amendment becomes effective on the exercise of a power by any person under an Act of Parliament, that person shall not exercise the power unless satisfied that the corporation is in compliance with that section.

Exception

(2) Subsection (1) does not apply to an amendment that will enable the corporation to be in compliance with section 19.

Invalidity

23. Any appointment or election of a director in violation of section 19 is invalid and the vacant position shall be filled in accordance with the by-laws or incorporating instrument of the corporation.

Validity of acts

24. An act of the board of directors of a corporation to which section 19 applies is not invalid on the sole ground that the composition of the board is not in compliance with that section.

PART 4

PARENT CROWN CORPORATIONS

R.S., c. F-11

Financial Administration Act

25. The Financial Administration Act is amended by adding the following after section 105:

Balanced representation of women and men

105.1 (1) Subject to subsection (2), the composition of the board of directors of a parent Crown corporation must be such that the proportion of directors of each sex is not less than forty per cent.

Board of eight members

(2) Where the board of directors of a parent Crown corporation consists of no more than eight members, the difference between the number of directors of each sex may not be greater than two.

Application

105.2 (1) Subject to subsection (2), section 105.1 applies to a parent Crown corporation as of March 31 of the sixth year after the coming into force of that section.

Interim measure

(2) The proportion of directors of each sex provided for in subsection 105.1(1) may not be less than twenty per cent as of March 31 of the third year after the coming into force of that subsection.

Invalidity

105.3 Any appointment of a director in violation of section 105.1 is invalid and the vacant position shall be filled without delay by the person with authority to appoint directors.

Validity of acts

105.4 An act of the board of directors of a parent Crown corporation to which section 105.1 applies is not invalid on the sole ground that the composition of the board is not in compliance with that section.

PART 5

COMING INTO FORCE

Coming into force

26. This Act comes into force 180 days after the day on which it receives royal assent.

Published under authority of the Senate of Canada

Explanatory Notes

Canada Business Corporations Act

Clause 2: New.

Clause 3: New.

Clause 4: Existing text of section 260:

260. The Minister may appoint a Director and one or more Deputy Directors to carry out the duties and exercise the powers of the Director under this Act.

Clause 5: (1) Relevant portion of subsection 262(2):

(2) Where this Act requires that articles or a statement relating to a corporation be sent to the Director,

. . .

(2) New.

Bank Act

Clause 6: New.

Clause 7: New.

Clause 8: New.

Cooperative Credit Associations Act

Clause 9: New.

Clause 10: New.

Clause 11: New.