[Last updated: 1 January 2024, unless otherwise noted]

Apart from the general requirement to disclose corporate governance practices, there are few prescriptive rules in Canada with respect to corporate governance. For the most part, the primary source for information on corporate governance norms within Canada is found in National Policy 58-201 - Corporate Governance Guidelines. This policy provides a non-binding set of best-practice guidelines for corporate governance.

In terms of board composition, the guidelines recommend that a company maintain a majority of independent directors and that the chair of the board be independent. Where this is not appropriate, it is suggested that there be a "lead director" to ensure that the board's agenda will enable it to successfully carry out its duties.

The requirement to have independent directors is also critical to fulfilling the audit committee requirement to have independent members. National Instrument 52-110, Audit Committees requires that all issuers have an audit committee and sets out the composition (generally all independent for TSX issuers) and other responsibilities of the audit committee.

In addition, it is recommended that the board adopt a written mandate in which it explicitly acknowledges responsibility for the stewardship of the company. The board should also adopt a written code of business conduct and ethics that is applicable to directors, officers and employees of the issuer.

Certain requirements that relate to the disclosure of corporate governance practices, such as the requirement to disclose which directors are independent and the board's written mandate, are found in National Policy 58-101, Disclosure of Corporate Governance Practices. TSX issuers must disclose director term limits and other mechanisms of renewal of the board as well as the representation of women on boards and in executive officer positions.

As for the nomination of directors, the guidelines recommend that the board appoint a nominating committee composed entirely of independent directors. This committee should be responsible for identifying individuals qualified to become new board members and recommending to the board new director nominees for the next annual meeting of shareholders.

Finally, it is also recommended that the board appoint a compensation committee composed entirely of independent directors to:

• Review and approve corporate goals and objectives relevant to CEO compensation.
• Evaluate the CEO's performance in light of those corporate goals and objectives.
• Determine (or make recommendations to the board with respect to) the CEO's compensation level based on this evaluation.

Overarching all corporate governance requirements is "exchange discretion" in considering all factors related to management of a company to determine the acceptability of a company for TSX listing. For a TSX issuer, this section allows the exchange, "in pursuit of its goal of public protection and to promote integrity and honesty in the capital markets" to:

• Require that any document submitted to the TSX constitute full, true and plain disclosure.
• Review the conduct of an officer, director, promoter, major shareholder or any other person or company (or a combination of any of the above) who, in the TSX's opinion, holds enough of the company's securities to materially affect control, in order to satisfy itself that:
  • The business of the company is and will be conducted with integrity and the best interests of its security holders and the investing public.
  • The rules and regulation of the TSX and all other regulatory bodies having jurisdiction are and will be complied with.