By Zach Lechner-Sung
Welcome back to Friday Finds, the recurring series where we discuss the week’s top business law stories. This week, we will be covering recent criticism over CPPIB’s investment practices, developments regarding the Keystone XL pipeline, and some proposed changes to securities regulation in British Columbia and the United States.
The Canada Pension Plan Investment Board (CPPIB) has been under fire recently for the donation practices of Crestone Peak Resources, a Colorado-based oil and natural gas producer owned by the asset manager. Crestone, like many of its counterparts, participates in policy making through donations to industry-friendly political groups and lobbyists. CPPIB’s public mandate, however, requires that the company refrain from “favoring or disapproving” a particular political group, candidate, or political position. As such, environmental groups and plan holders have accused the company of breaking its own rules by allowing Crestone to make these donations. CPPIB disputes these claims, asserting that Crestone is an independent operator, and that virtually every similar company in the U.S. is engaged in the “policy making process”. The pension provider explained that abstaining from investing in companies that make these types of donations would prevent them from effectively participating in large markets like the United States. Environmentalist groups like Friends of the Earth have criticized this response, hoping for a more forward-looking strategy from Canada’s largest pension fund. Legal analysts have also called into question whether CPPIB has sufficiently prepared themselves to transition to a low-carbon economy, especially as other large investment managers across the globe attempt to reduce their reliance on fossil fuel investments.
Proposed amendments to the B.C. Business Corporation Act (BCA) have recently been removed just two weeks before implementation, reducing the proposed disclosure requirements for the limited partners of private funds. The amendments, if implemented, would have deemed each limited partner a “significant individual”, requiring them to disclose their own “significant individuals”. This change had the goal of combating money laundering and tax avoidance by increasing transparency about the control of corporate entities. Issues arise where funds have hundreds of limited partners with relatively small ownership interests. In these cases, burdensome disclosure requirements would potentially have an adverse effect on the attractiveness of setting up private funds in British Columbia. The revised amendments, which took effect yesterday, only require disclosure by limited partners who demonstrate real control over the limited partnership. This includes those entitled to at least 25% of the LP’s profits or assets, limited partners who have at least 25% of the votes in partnership management, and those with the right to appoint or remove the majority of the partnership’s management.
On September 29, TC Energy Corporation, the company tasked with building the Keystone XL pipeline, announced that Indigenous communities will be given the chance to purchase an ownership interest in the project. More specifically, a memorandum of understanding has been signed with Natural Law Energy, an organization representing five First Nations groups located between Alberta and Saskatchewan (the Nakaneet First Nation, the Ermineskin Cree Nation, the Montana First Nation, the Louis Bull Tribe, and the Saddle Lake Cree Nation). Premier of Alberta Jason Kenney has explained that the opportunity will bring “jobs and steady economic benefits” for the communities involved, however this may depend on the outcome of the U.S. presidential election, and its influence on the pipeline’s ability to receive necessary permits. The CBLB will continue to report on any future developments in this story.
Last week, the U.S. Securities and Exchange Commission (SEC) voted 3-2 in favour of adopting controversial amendments to Rule 14a-8 of the Securities Exchange Act. Rule 14a-8 governs the shareholder proposal process, setting out the eligibility requirements for a shareholder to have a proposal included in the proxy statement of a public company. Where shareholders previously had to hold at least $2,000 of stock for one year before being able to file a proposal, they now need to hold their position for a minimum of three years. Additionally, the SEC raised the proportion of votes a proposal must win to be eligible for resubmission the following year. These amendments have been met with pushback from investors, who claim that the higher threshold for eligibility will reduce shareholder opportunity to voice concerns over climate change, diversity and inclusion, and other issues that affect a company’s triple bottom line. Supporters for the amendments, like the U.S. Chamber of Commerce, argue that the changes will help prevent “special interest activists” from pursuing goals that are not in the best interest of the company or other shareholders who may not share the same interests.
Thank you for joining us for another Friday Finds! Be sure to check back next week for more business and securities law news updates.