Report: TCHC:2016-06
RECOMMENDATIONS:
(1) approve the Amended Subsidiary and Joint Venture Governance Framework
attached as Appendix 1 to this report; and
(2) forward the Amended Subsidiary and Joint Venture Governance Framework to the
City Manager’s Office as recommended by the City of Toronto’s Auditor General.
At its February 9, 2016 meeting, the GCHRCC adopted the report and resolved to forward
the report to the Board of Directors for approval.
On February 23, 2012, the City of Toronto’s Auditor General (“AG”) delivered three
reports to the Board of Directors of Toronto Community Housing Corporation (“TCHC”)
including the following report: TCHC – The City and Toronto Community Housing
Page 2 of 8
2. The Chief Executive Officer, in consultation with the City Manager, review the
current Shareholder Direction in order to ensure that all provisions contained in the
Shareholder Direction are complied with.
The AG was provided information with respect to the TCHC Subsidiary Review Task
Force (“Task Force”) formed by the TCHC board in January 2010 to review the current
subsidiary structure in light of best practices and deliver recommendations on aspects
governing subsidiary oversight. While the AG agreed with the Task Force on the need to
“strike the balance” between parental oversight and subsidiary independence, the extent
of current TCHC and City oversight is limited particularly in regards to the reporting of
financial information of the subsidiary companies, joint ventures and other business
interests to the City.
The AG noted that quarterly reports together with annual financial reports presented at
the subsidiaries’ Annual General Meetings, serve as the primary accountability
mechanisms to assure the TCHC Board that is subsidiaries are operating in an efficient
manner in line with the key objectives and that intended outcomes are being met.
TCHC’s Board of Directors set out a Framework for Establishing Subsidiary Corporations
in 2003. The Framework recommended that comprehensive assessments of each
subsidiary relationship be periodically performed. The purpose of these reviews would be
to ensure that the corporate structure remains sound, continues to be appropriate, and
beneficial. Such reviews would confirm whether the goals and benefits of maintaining
separate subsidiary relationships are being achieved.
Page 3 of 8
2010 TCHC Board Report (TCHC:2010-75): Subsidiary Review Task Force Report
In January 2010, the Board formed the Subsidiary Review Task Force to review the
current subsidiary structure in light of best practices and deliver recommendations on
aspects governing subsidiary oversight. The Task Force made the following
recommendations:
1. Revamped Subsidiary Board/Officers Structure (appointment of CEO, CFO and
Board nominee(s) to subsidiary Boards with senior management staff designated
as the subsidiary officers).
2. Key Matters Require Parent Board Approval (business objectives and strategic
goals, annual business plan and financial budgets)
3. Annual and Quarterly Reporting (business plan and financial budget performance,
key performance indicators, enterprise risk mitigation strategy, and annual
financial statements in audited form if required by TCHC)
4. New Shareholder Direction (template adopted and CEO authorized to enter into
new shareholder directions with the subsidiaries).
AG Recommendation #5
Board procedures for subsidiaries and joint ventures are set out under Section III,
subsection 9 of the Framework (Attachment 1). Consistent with the Amended and
Restated Shareholder Direction with respect to TCHC Board meetings, meetings of the
Subsidiary Board will be open to the public except where matters may be considered in
a closed meeting for the following reasons:
AG Recommendations #1 and 4
The Amended and Restated Shareholder Direction (“Shareholder Direction”) between the
City of Toronto and TCHC was considered by Executive Committee on October 30, 2013
and adopted by City Council on November 14, 2013. Key amendments include setting
out requirements for the governance of subsidiaries and joint ventures (sections 4.2 and
4.3- excerpts below).
The Shareholder Direction permits TCHC to create subsidiaries and enter into joint
venture interests. In accordance with this Shareholder Direction, the business and affairs
Page 5 of 8
The following are excerpts from the Shareholder Direction that relate to the governance
of subsidiaries and joint ventures which have been addressed in the Framework set out
in Attachment 1.
Definitions:
“Joint Venture” means an investment in: (a) a general or limited partnership; (b) a joint
venture; or (c) any other form of business enterprise with third parties, which investment
is held for active operating business purposes and not as a passives or portfolio
investment.
“Subsidiary” or “subsidiaries” shall have the meaning ascribed thereto by the OBCA. For
ease of reference, these terms refer to any body corporate of which TCHC owns directly
or indirectly more than 50% of the outstanding securities of any class carrying exercisable
voting rights.
4.2.7 Upon the creation of a Subsidiary, TCHC shall establish a Shareholder Direction
for that Subsidiary that applies the same business principles and standards of
accountability and reporting, with appropriate modification as determined by
TCHC, to the Subsidiary as are applied to TCHC by the City through this
Shareholder Director.
4.2.8 TCHC will not permit a Subsidiary to incur or create any indebtedness or interest
or issue any security which impairs the ability of TCHC to comply with provisions
of Section 6.4 (should refer to Section 7.4).
4.2.9 TCHC shall ensure that the directors and officers of the Subsidiaries will strictly
abide by the requirements of the OBCA and the HAS. TCHC shall adopt and apply
a policy, consistent with that of the City, regarding conflicts of interest, including
requirements concerning disclosure and abstention from voting.
4.2.10 The Directors and officers of the Subsidiaries will ensure that no confidential
information of the Subsidiaries is disclosed or otherwise made available to any
Person, except to the extent that:
(a) disclosure to the Shareholder’s or Subsidiary’s employees or agents is
necessary for the performance of any of their duties and obligations under this
Shareholder Director; and
(b) disclosure is required in the course of judicial proceedings or pursuant to law;
or the confidential information becomes part of the public domain (other than
through unauthorized disclosure by any party).
4.2.11 If a member of the Board of Directors of any Subsidiary ceases to be a director for
any reason, TCHC will cause the vacancy to be filled by another director of TCHC
as soon as reasonably possible.
4.3.5 TCHC shall ensure that no Joint Venture shall incur or create any indebtedness or
interest or issue any security which impairs the ability of TCHC to comply with
provisions of Section 6.4 (should refer to Section 7.4).
4.3.6 If a member nominated by or representing the interests of TCHC on any Board of
Directors or other governing body of any Joint Ventures ceases to be a member
for any reason, TCHC will cause the vacancy to be filled by another director or
officer of TCHC as soon as reasonably possible.
The Amended Framework has been drafted with the assistance of external legal counsel.
The Amended Framework is a comprehensive framework that incorporates and complies
with applicable provisions in the recently amended Shareholder Direction between the
City of Toronto and TCHC with respect to subsidiaries and joint ventures. The Amended
Framework also ensures compliance with the Ontario Business Corporations Act, TCHC’s
constating documents, and corporate governance best practices.
The Amended Framework will be applied to newly created subsidiaries and joint ventures.
In 2016, Management will review the existing subsidiaries and joint ventures with a view
to bringing them into compliance with the Amended Framework. Additional resources
may be required to implement the Amended Framework with the existing and newly
created subsidiaries and joint ventures.
SIGNATURE:
“Ismail Ibrahim”
Ismail Ibrahim
Interim General Counsel and Corporate Secretary
ATTACHMENT:
1. Amended Subsidiary and Joint Venture Governance Framework
Page 8 of 8
STAFF CONTACT:
Marta Asturi, Legal Counsel and Assistant Corporate Secretary
416-981-4238
marta.astur@torontohousing.ca