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Global rules on foreign direct investment (FDI)
Cross-border acquisitions and investments increasingly trigger foreign direct investment (FDI) screening requirements.
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Canada | Publication | March 2020
Concerns over the coronavirus have prompted issuers to examine whether to hold their upcoming shareholder meetings through electronic means, a format that has seen remarkably slow adoption in Canada. While more common in the US, Canadian issuers have lagged behind, with only four virtual meetings held since the first one in 2017. In contrast, Broadridge hosted 326 virtual meetings in the US in 2019.
A virtual meeting of shareholders is one that takes place using online technology. It can be either a “virtual-only meeting”, which is held exclusively online, without a corresponding in-person meeting, or a “hybrid meeting”, which is held in-person at a physical location and is also open to online participation. In both cases shareholders are validated through a control number, able to cast their votes in real time and able to ask questions. This is different from holding an in-person meeting and offering a simultaneous webcast over the internet, which is already a popular approach in Canada.
Since participation in shareholder meetings is a basic right of shareholders, several organizations that advise institutional investors have recently published voting recommendations on this topic.
Virtual meetings are authorized under corporate legislation to varying degrees and the rules differ across Canada. Under the federal Canada Business Corporations Act and the equivalent provincial legislation in Alberta and Québec, (i) the corporation’s bylaws must expressly allow the meeting to be held entirely by telephone or electronic means and (ii) the virtual platform must permit all participants to “communicate adequately” with each other during the meeting. Note that the Québec requirement is that participants be able to “communicate directly with one another”, which is arguably a higher standard. Corporations subject to the federal, Alberta or Québec corporate legislation will need to review their bylaws to confirm whether they contain the required provisions.
British Columbia corporate legislation permits participation in meetings by telephone or other communications medium, unless the articles or memorandum provide otherwise, but is silent as to whether the meeting may be held entirely by electronic means. Also, it is a requirement in British Columbia that meeting participants be able to “communicate with each other”. Ontario corporate legislation is the most favourable as it permits meetings to be held by telephone or electronic means unless the articles or bylaws provide otherwise. Also, there is no specific requirement that the platform permit “adequate” communication among participants.
Since the meaning of “adequate” communication has not been tested in court, it is uncertain as to whether a virtual meeting is truly permissible under Canadian corporate legislation outside of Ontario. Of the four Canadian companies that have held virtual-only meetings, two have been subject to Ontario corporate legislation and two to British Columbia corporate legislation. So far this proxy season one corporation (which is subject to federal corporate legislation) has announced that it will hold a virtual-only meeting this year as a result of the coronavirus.
We recommend that issuers deciding to hold a virtual meeting establish guidelines that include established best practices to safeguard shareholder participation rights.
A committee of US investors, public company representatives and proxy and legal service providers published the Principles and Best Practices for Virtual Annual Shareowner Meetings in 2018, which contains additional recommendations and best practices.
With conferences cancelled and corporate travel curbed, many issuers are looking to the upcoming shareholder meeting season and considering alternatives to holding the meeting in person. Timing for consideration of the issues is tight with proxy circulars being finalized and scheduled meetings being around the corner.
On the one hand, there is a very limited history and culture of holding virtual meetings in Canada and only a small number of technology providers available to facilitate such meetings. There are also concerns as to whether a virtual meeting provides an adequate forum for discussion and debate and an adequate opportunity for shareholder participation.
On the other hand, taking the necessary steps now to plan for a virtual meeting greatly reduces the risk of the meeting not being able to proceed as planned in the event of an epidemic or other significant issue. If an in-person meeting cannot proceed on the intended date, issuers are generally able (subject to their bylaws) to adjourn the meeting for up to 30 days under corporate legislation without having to provide additional notice. But if the reason for the adjournment is a widespread epidemic, it is questionable whether a 30-day adjournment would be meaningful. A virtual meeting also increases the potential for shareholder engagement at a time when people are avoiding crowds, while also reducing costs to the issuer.
A hybrid meeting provides the best governance option since it allows shareholders to choose whether to attend in person or online and in either case to ask questions and to vote in real time. However, this comes at a much higher cost to the issuer while still requiring management and the board to physically attend when it may not be desirable to do so. It is also worth noting that in 2019, only 8 percent of the virtual meetings conducted by Broadridge in the US were hybrid.
With the heightened focus on, and uncertainty surrounding, the coronavirus, it would be prudent for issuers who do not already provide access to a webcast of the live meeting to consider whether to do so. Perhaps the threat of epidemics such as the coronavirus will usher in a new era of shareholder meeting governance.
Publication
Cross-border acquisitions and investments increasingly trigger foreign direct investment (FDI) screening requirements.
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On February 2, 2024, the Belgian Presidency of the Council of the European Union confirmed that the Committee of Permanent Representatives had signed the Artificial Intelligence (AI) Regulation, referred to as the AI Act. Approval by the EU Parliament followed on 13 March 2024, and the AI Act is likely to appear in the EU’s Official Journal around May 2024. The AI Act aims to establish a stringent legal framework governing the development, marketing, and utilisation of artificial intelligence within the region, thereby marking a significant advancement in the regulation of this burgeoning domain.
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The private credit market and direct lending have grown and diversified immensely in the past decade, offering alternative sources and terms of debt compared to those historically provided by the syndicated leveraged loan and public issuance markets. Consequently, they are fast becoming pivotal components in the capital ecosystem, so much so that the Bank of England consider that the private credit market is currently responsible for approximately $1.8 trillion of debt issuance, which is four times its size in 2015. This growth has been particularly pronounced in Europe and the US but there has also been significant activity in Asia.
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