Minister of Finance Ralph Goodale announced today that the federal government is introducing legislation to modernize the corporate governance framework of Canada’s federally-regulated financial institutions.

The legislation fulfills a commitment made in the last budget. It will bring the governance standards for financial institutions up to the levels adopted in 2001 for other federally incorporated companies and update certain governance standards unique to financial institutions.

The new legislation clarifies the role of directors in carrying out their important functions, for example, by explicitly allowing for a due diligence defense and clarifying the conflict of interest rules. It enhances the ability of shareholders to exercise their rights by, for example, permitting electronic participation in meetings and allowing shareholders greater freedom to communicate without triggering the proxy rules.

The reforms also facilitate electronic communication with shareholders and the regulator, adds a going-private framework to the federal statutes, and enables insider reporting, proxy and prospectus rules to be harmonized with the rules applied by provincial regulatory authorities. And it harmonizes various governance standards within and across the financial institutions statutes, among other things.

“Financial institutions such as banks, insurance companies and cooperative credit associations all play a key role in Canada’s economy,” Goodale says. “Therefore, it is important that Canadian financial institutions have the most modern and up-to-date governance tools available.”