CORPORATE GOVERNANCE
The Standing Senate Committee on Banking, Trade and Commerce
Chairman, The Honourable Michael Kirby
Deputy Chairman, The Honourable David Angus
August 1996
TABLE OF CONTENTS
BACKGROUND
OVERVIEW
A. Mandatory Review of the CBCA
B. The Use of Regulations
C. Harmonization
D. Qualifications of Directors
CHAPTER 1 - DIRECTORS' LIABILITY
INTRODUCTION
FIDUCIARY DUTY
STANDARD OF CARE
DIRECTORS' STATUTORY LIABILITIES .
A. Background
B. Directors' Liability under the CBCA
C. Defence Mechanisms
- Good Faith Reliance Defence
- Due Diligence Defence
REVIEW OF DIRECTORS' LIABILITY LEGISLATION
LIABILITY CAP
LIABILITY OF MANAGEMENT .
DIRECTORS' LIABILITY FOR WAGES
A. Background
B. Wage Liability under the Bankruptcy and Insolvency Act .
- Wage-earner Protection Scheme
- Super-priority
C. Views of the Committee
CHAPTER 2 - THE PROS AND CONS OF A NON-EXECUTIVE CHAIRMAN
CHAPTER 3 - RESIDENCY REQUIREMENTS FOR DIRECTORS
INTRODUCTION
BACKGROUND
VIEWS EXPRESSED BY WITNESSES
VIEWS OF THE COMMITTEE
THE INTERPLAY BETWEEN CORPORATE LAW AND SECURITIES LAW
THE REGULATION OF INSIDER TRADING
A. Background
B. Insider Trading under the Canada Business Corporations Act
- Requirement to File Reports
- Prohibition against Speculative Trading
- Civil Liability
C. Insider Trading Under Provincial Legislation
AMENDING THE CBCA REQUIREMENTS
A. Eliminating All CBCA Insider Trading Requirements
B. Eliminating the Insider Reporting Provision of the CBCA
MODERNIZING THE CBCA INSIDER REPORTING REQUIREMENTS
CHAPTER 5 - SHAREHOLDER COMMUNICATION AND PROXY
SOLICITATION RULES
INTRODUCTION
COMMUNICATIONS BETWEEN CORPORATIONS AND SHAREHOLDERS
A. Background
B. The Nominee System
C. The Depository System
D. National Policy 41
AMENDMENTS TO THE CBCA
COMMUNICATIONS AMONG SHAREHOLDERS
A. Introduction .
B. Views of the Witnesses
CHAPTER 6 - TAKE-OVER BIDS AND GOING-PRIVATE TRANSACTIONS
INTRODUCTION
TAKE-OVER BID THRESHOLD
EXTENDING THE MINIMUM BID PERIOD
A. Background
B. Defensive Mechanisms -- Poison Pills .
GOING-PRIVATE TRANSACTIONS
A. Introduction
B. Views of the Witnesses
CHAPTER 7 - CORPORATE GOVERNANCE AND INSTITUTIONAL INVESTORS
INSTITUTIONAL INVESTORS
A. Background .
B. Views Presented to the Committee
C. Views of the Committee
CANADA'S FOREIGN PROPERTY RULE
A. Background
B. Views of Witnesses Before the Committee
C. Views of the Committee
APPENDIX 1: NEWS RELEASE
APPENDIX 2: MINISTER'S LETTER
APPENDIX 3: DIRECTORS' LIABILITY UNDER SELECTED FEDERAL AND PROVINCIAL STATUTES
APPENDIX 4: LARGEST CANADIAN FUNDS/POOLS
ORDERS OF REFERENCE
Extract from the Journals of the Senate, Thursday, March 21, 1996:
"The Honourable Senator Graham, on behalf of Senator Kirby, moved:
THAT, the Standing Senate Committee on Banking, Trade and Commerce be authorized to examine and report upon the present state of the financial system in Canada;
THAT the papers and evidence received and taken on the subject during the First Session of the Thirty-Fifth Parliament and any other relevant Parliamentary papers and evidence on the said subject be referred to the Committee;
THAT the Committee be empowered to permit coverage by electronic media of its public proceedings with the least possible disruption of its hearings; and
THAT the Committee submit its final report no later than December 12, 1996.
The question being put on the motion, it was adopted."
Paul Bélisle
Clerk of the Senate
Extract from the Journals of the Senate, Thursday, March 28, 1996:
"The Honourable Senator St. Germain, on behalf of Senator Kirby, seconded by the Honourable Senator MacDonald (Halifax), moved:
THAT the Standing Senate Committee on Banking, Trade and Commerce, which was authorized by the Senate on March 21, 1996 to examine the present state of the financial system in Canada, be permitted, notwithstanding usual practices, to deposit a report on the said subject with the Clerk of the Senate, if the Senate is not sitting, and that the said report shall thereupon be deemed to have been tabled in the Chamber.
The question being put on the motion, it was adopted."
Paul Bélisle
Clerk of the Senate
MEMBERSHIP
The Honourable Michael Kirby, Chairman
The Honourable W. David Angus, Deputy Chairman
and
The Honourable Senators:
Austin, Jack, P.C.
* Fairbairn, Joyce, P.C. (or Graham, Alasdair B.)Meighen, Michael Arthur
Hervieux-Payette, Céline, P.C.
Perrault, Raymond, P.C.
Kenny, Colin
Kolber, E. Leo
Stewart, John B.
* Lynch-Staunton, John (or Berntson, Eric)
Kelleher, James F., P.C.
St. Germain, Gerry, P.C.
Simard, Jean-Maurice
*Ex Officio Members
Note: The Honourable Senators Bacon, Buchanan, Hays, Oliver and Stratton served on the Task Force on Corporate Governance or were present at meetings at various stages during the course of this study.
Staff from the Research Branch of the Library of Parliament:
Mr. Gerald Goldstein, Chief, Economics Division; and
Ms. Margaret Smith, Research Officer, Law and Government Division
Staff from the Committees and Private Legislation Directorate:
Mr. Michel Patrice, Legislative Clerk; and
Ms. Lise Bouchard, Administrative Assistant.
Paul Benoit
Clerk of the Committee