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Mar 23, 2020

Court grants Canadian banks approval for virtual AGMs

Lenders and insurance firms are responding to the coronavirus outbreak

A group comprising some of the largest Canadian financial institutions has secured approval to take their upcoming shareholder AGMs to virtual-only or hybrid formats amid the Covid-19 pandemic.

BMO, CIBC, Canadian Western Bank, Laurentian Bank, National Bank, RBC, Scotiabank, TD Bank, Great-West Lifeco, Canada Life, Manulife and Sun Life released a joint statement on March 20 saying that, ‘In line with the latest directives from public health and government authorities, we have jointly obtained a court order that allows us to hold our annual meetings, in whole or in part, using electronic means.’

The firms explain in their statement that it was necessary to obtain a court order because Canadian banks and insurance companies are not allowed to conduct virtual-only AGMs without judicial relief.

The order allows the firms’ meetings to be conducted using webcasting, teleconference or other electronic means in addition to, or instead of, an in-person meeting. It also allows alternative means for distributing meeting materials.

‘We believe these precautions are prudent measures to protect the health and well-being of our stakeholders, while supporting shareholder and policyholder engagement and their ability to attend and exercise their rights,’ the firms state, adding that specific arrangements for each AGM will be announced separately ahead of the scheduled date.

For example, CIBC on Friday announced that its annual shareholder meeting will be on held on April 8 via webcast and teleconference only instead of in-person ‘to support public health efforts in managing Covid-19.’ Registered shareholders and duly appointed proxyholders will be able to ask questions and vote through the live webcast. Any shareholder will be able to watch the live webcast or listen in by calling the bank, it added.

Scotiabank also announced several new options for shareholders to participate remotely in the bank’s April 7 AGM. ‘Considering the potential impact of the Covid-19 pandemic on the bank's stakeholders, and the directives from public health officials on large group settings, the board of directors believes the safest way to participate in the upcoming annual meeting is remotely and we are providing additional ways to enable this for all shareholders,’ Julie Walsh, senior vice president, corporate secretary and chief corporate governance officer with Scotiabank, said in a statement.

She added: ‘The health and well-being of our shareholders, employees and community is of utmost priority to Scotiabank. This decision is consistent with our goal of ensuring the wellbeing of all of our stakeholders, while enabling our shareholders to participate in the annual meeting.’

Glass Lewis states in a recent blog post that, although virtual-only meetings have not previously been used as much in Canada as in the US, ‘they are permitted and appear to be getting more popular.’

The Canadian Securities Administrators (CSA) on March 20 issued guidance on conducting AGMs during the pandemic, stating that is aware that many reporting issuers are considering changes or alternatives to the in-person format.

The CSA states that, if a reporting issuer plans to conduct a virtual or hybrid AGM, it will be expected to notify its securityholders, the parties involved in the proxy voting infrastructure and other market participants in a timely manner and to give clear directions on the logistical details of the AGM.

These disclosures should be included in a reporting issuer’s proxy-related materials if they have not already been filed, according to the CSA. But the group adds that if a company has already filed its proxy-related materials, it does not need to update them if instead it: issues a news release announcing the change in the date, time or location; files the news release on SEDAR; and ‘takes all reasonable steps’ necessary to inform all parties involved in the proxy voting infrastructure.

The Covid-19 outbreak could lead to a surge in the number of US virtual AGMs this year, according to Broadridge vice president of issuer strategy Cathy Conlon. ‘What we are seeing in the upcoming annual shareholder meetings season is that many more companies and their legal advisers are inquiring about what they can do if they need to make a switch to virtual meetings,’ she said recently. ‘Many more companies than before are considering having an option to go virtual.’

Broadridge hosted 326 virtual shareholder meetings for companies last year, from a total of roughly 5,000 issuers incorporated in the US. Although this is still a small proportion of the overall pool of listed companies, it represents a 15 percent rise compared to the total in 2018.

The SEC on March 13 issued similar guidance to the CSA’s, also with the intention of helping companies, shareholders and other market participants affected by Covid-19 hold their upcoming AGMs, 'including through the use of technology, and engage with shareholders while complying with the federal securities laws,' the agency states.

'The SEC staff recognizes that many public companies and other market participants are transitioning to teleworking, virtual meetings and other contingency measures to address health concerns,' agency chair Jay Clayton says in a statement. 'Our staff stands ready to facilitate these transitions and we encourage market participants to contact us with requests for guidance or relief. The SEC has itself moved to teleworking and virtual meetings and remains fully operational.'

Ben Maiden

Ben Maiden is the editor-at-large of Governance Intelligence, an IR Media publication, having joined the company in December 2016. He is based in New York. Ben was previously managing editor of Compliance Reporter, covering regulatory and compliance...