A coalition of Canadian shareholders is raising concerns about recent changes made to Yukon’s Business Corporations Act.
Stephen Erlichman, executive director of the Canadian Coalition for Good Governance, is worried some of the changes, which came into force in May, will diminish the accountability of directors to shareholders in public companies.
The coalition lobbies for “good governance practices” in publicly owned companies, according to its website.
The biggest issue Erlichman found with the new Yukon legislation is an amendment that allows a company’s directors to consolidate proxy votes. “We made it clear we thought it was very wrong,” said Erlichman.
“Directors are fiduciaries, elected by shareholders, they shouldn’t be transferring their right to another director.”
With modern technologies, it’s hard to justify not being able to join a director’s meeting by phone, he said.
He points out this is a departure from other jurisdictions’ regulations.
“A director must give thought to whatever the issue is,” he added.
Yukon corporations can also now register as a director of another company, whereas before all directors had to be actual people.
The change will make it harder to ensure individual liability, Erlichman said. “We want humans who will have legal liability.”
However, even if a corporation becomes the director of another one, the first company will still be required to have directors, human ones, and they will be liable for the choice they make, said Whitehorse lawyer Lorne Austring.
“There is a system set up in the legislation,” he said.
Erlichman isn’t convinced. He notes that the legislation describes the directors and the corporations as “jointly and severally liable” for their obligations. That could result with only the company being on the hook, giving the directors a free pass, he said.
The new measures granted by the legislation are only available to companies with suitable bylaws - meaning that shareholders would have to approve it in the first place.
“There is an opportunity for the shareholder to restrict changes directors can make to bylaws,” said Fred Pretorius, director of corporate affairs for the Yukon government.
The changes, he said, offer those possibilities but have to be first implemented by the corporation.
Erlichman is worried some companies may flock to be registered in the territory to take advantage of these new provisions.
“We at the coalition would be very upset if existing public companies tried to continue into the Yukon to take advantage of these Yukon provisions which we believe are not in the best interest of shareholders,” he said.
Yukon’s mining companies are commonly registered in British Columbia, and the territory’s lawyers have observed a steady decline in locally registered firms.
Pretorius said the act’s update was much needed. “It is essentially 1980s legislation with changes in 2002,” he said.
“We did that to foster business activity in the Yukon.”
The amendments were drafted after extensive consultation with businesses, he added.
“We believe we’ve adequately balanced the director’s rights and the shareholder’s right,” Pretorius said.
Since the act only recently came into force, it’s hard to tell what the effects will be, Austring said.
He said one thing is clear, though: the legislation needed to catch up to other jurisdictions.
“Ten years ago we had tons of public companies, but the legislation didn’t catch up,” which resulted in the decline, said Austring,
“You can’t sit on your 10-year-old smartphone.”
Contact Pierre Chauvin at
pierre.chauvin@yukon-news.com