By Danica Bennewies
Happy Friday, and welcome back to Friday Finds on the CBLB! This is the weekly series where we share five corporate and securities law news stories that dominated the headlines and our conversations over the past week. In today’s installment we’re talking about the federal budget, the TransAlta/Brookfield deal, and more. Keep reading to find out which stories grabbed our attention this week.
Big changes are coming to the Canada Business Corporations Act (CBCA). The federal budget, released in late March, proposed a number of significant amendments to the CBCA, including new disclosure requirements and a mandatory say-on-pay vote for “prescribed corporations”. Of particular interest are the changes in the scope of directors’ and officers’ duty to act in the best interests of the corporation. The proposed amendments would modify the current duty in the CBCA to include that, in the course of exercising this duty, directors and officers may consider the best interests of shareholders and other stakeholders (such as employees and suppliers), the environment, and the long-term interests of the corporation. These amendments codify key elements from the Supreme Court of Canada’s ruling in BCE Inc. v 1976 Debentureholders. This change is anticipated to come into effect in June 2019, though it remains to be seen whether and it what respects the statutory amendments will impact the duties of the board and corporate governance broadly speaking. The budget also proposed enforcement provisions to the new share register requirements. Starting in mid-June, private CBCA corporations will be required to keep a share register of individuals with “significant control” over the corporation. Under the proposed amendments in the federal budget, corporations will have to disclose this register to investigative bodies when there are reasonable grounds to think that it would be relevant to an investigation. While these amendments highlight the federal government’s focus on promoting corporate governance best practices, there is also some overlap with existing securities laws, potentially creating a greater regulatory burden for corporations.
In other regulatory news, the Investment Industry Regulatory Organization of Canada (IIROC) is moving forward with plans for a number of new disciplinary tools. In a statement released on Thursday, IIROC proposed two new forms of alternative disciplinary action – the Minor Contravention Program and Early Resolution Offers. The Minor Contravention Program would impose a standard fine of $5,000 on individual advisers that admit to minor violations where investors are not harmed. The contravention and fine would not impact advisers’ disciplinary records. According to IIROC, this program would allow cases to be resolved more efficiently where a formal disciplinary proceeding is not warranted. The Early Resolution Offers would provide dealers and advisers with a 30% discount on sanctions for resolving cases early rather than undergoing a full hearing. IIROC believes that both of these new programs would make its disciplinary measures “more timely and proportionate to the offenses,” improving the organization’s efficiency. The proposals are open for comment until July 24th.
In Quebec, the Autorité des marchés financiers (AMF) finished its review of Bombardier Inc.’s executive compensation plan this week. Back in November, we talked about how Bombardier was facing investigation by the AMF regarding the implementation of its automatic stock disposition plan (ASDP). Following the roll out of the plan in August, Bombardier’s market value fell by more than $6-billion as the company announced disappointing financial results, major job cuts, and the sale of a string of assets. While the timing of the executive share sale plan may have raised eyebrows, this week the AMF announced that the aerospace company did not breach securities laws when it implemented the plan. However, in its release the AMF did note that the plan has generated a negative perception and recommended that Bombardier “reconsider the merits of maintaining its ASDP.”
TransAlta Corp. is still struggling with an activist investor over a deal with Brookfield Renewable Partners. New York-based activist investor Mangrove Partners has been attempting to derail the $750-million partnership deal with Brookfield. Last week we discussed how Mangrove withdrew its application to the Alberta Securities Commission to have TransAlta’s annual meeting delayed. However, Mangrove is not giving up its attempts to stop the deal yet. This week, the activist investor launched a lawsuit against TransAlta. Mangrove claims that TransAlta’s executives and directors are putting their own interests above their shareholders’. On the other side of the dispute, board chairman Gordon Giffin called the lawsuit a “frivolous tactic” and said that TransAlta does not intend to back down. Its clear that neither party intends to cede its position at this point, meaning Mangrove may have an opportunity to test its arguments out in court.
Bayer is also dealing with unhappy shareholders this week. The pharmaceutical company has been facing mounting litigation concerns following its acquisition of Monsanto, the maker of the weed killer “Roundup”. Following a drop in Bayer’s stock price this week, its major shareholders expressed their anger over the poor stock performance. In fact, a number of large investors are refusing to support Bayer’s management in a vote scheduled for the drugmaker’s upcoming annual meeting. Both Glass Lewis and Institutional Shareholder Services (ISS) recommend that other investors do the same. All of this discontent comes out of a variety of legal issues that Bayer has faced since acquiring Monsanto regarding the allegedly carcinogenic effects of Roundup. While Bayer’s chairman said that the company’s executives “very much regret” its falling share price, he also claimed that the acquisition of Monsanto was and continues to be the right choice for Bayer.
Those are all the stories that we have for this week. Friday Finds will be on a brief hiatus next week, but be sure to come back to the CBLB on May 10th for another installment of Top Five Friday Finds!