New Laws

Bill C-25: corporate transparency and diversity on corporate boards

The Senate improved a bill that increases corporate transparency and diversity on corporate boards.

Background

Bill C-25 was introduced to help modernize best practices and rules governing publicly-traded companies under federal corporate laws, given the changing global marketplace. A main objective of the bill is to increase diversity and the participation of women on corporate boards and within senior management by requiring Canadian corporations to disclose their diversity policies or explain why none are in place. The legislation also increases shareholder democracy and participation; improves corporate transparency; and reduces regulatory burden. Independent Senator Howard Wetston took the lead as sponsor of the bill when it arrived in the Senate. “Much like the Senate itself, one of Canada’s strengths is in its diversity of voices. I view Bill C-25 as a tool ensuring those voices and their viewpoints are heard more often in Canadian corporate boardrooms,” Sen. Wetston said during his second reading speech.

The Senate’s Role

During committee study in the fall of 2017, Sen. Wetston proposed three important amendments to the bill. A significant change would create a grace period of 90 days for current directors who were not re-elected under new majority voting rules to continue their duties. Sen. Wetston told the committee that the change was “intended to mitigate the risk that the majority voting requirement in the bill would result in sudden and unexpected disruptions in the corporate decision-making culture for the board, or that the board be inadvertently paralyzed to continue to do its work.” This change is reflected in two separate amendments that apply to the Canada Cooperatives Act and the Canada Business Corporations Act. Another change would allow corporations to share information with their shareholders electronically in a broader range of circumstances to ensure greater transparency. Sen. Wetston explained that the amendment was meant to ensure the law “reflects modern ways of communicating information to shareholders and that it continues to support innovation and economic growth.”

The Result

The Standing Senate Committee on Banking, Trade and Commerce accepted the amendments. Senator Peter Harder, the Government Representative in the Senate, indicated during third reading that the Government supported the changes. The amended bill was adopted by the Senate at third reading on March 22, 2018. When the amended bill returned to the House of Commons, Parliamentary Secretary to the Minister of Innovation, Science and Economic Development David Lametti said the Senate amendments “clearly improve this bill.” He noted that in its careful assessment of the legislation, the Senate found that the bill’s strict application of the majority voting rule could lead to unintended consequences. The Senate found “a simple but effective solution,” he said. The amendment to broaden and improve electronic communication methods was also lauded. “Everyone agrees that, in today’s world, we should give people every incentive to communicate electronically,” Lametti said. The House of Commons concurred with the message from the Senate on April 19, 2018.

Bill C-25: corporate transparency and diversity on corporate boards