On March 20, 2020, we sent out a client note summarizing some recent announcements made by the Canadian Securities Administrators (the “CSA”) in response to the impact of COVID-19 on market participants. Since that time, the CSA has published (i) more specific guidance relating to annual general securityholder meetings, and (ii) blanket orders which provide details of the temporary relief that the CSA is willing to grant to certain market participants who run into difficulties with completing regulatory filings due to COVID-19.
ANNUAL MEETING GUIDANCE
This guidance, which is timely due to the proxy season being underway in Canada, relates to (i) changing the specifics of in-person meetings, and (ii) conducting meetings through the internet or other electronic means instead of holding an in-person meeting (“virtual meetings”) or meetings that otherwise permit electronic participation by shareholders at an in-person meeting (“hybrid meetings”).
- Changing the date, time or location of an in-person annual meeting
Proxy-related materials have already been sent and filed
If a reporting issuer has already sent out and filed its proxy-related materials and subsequently decides to change the date, time or location of its in-person meeting because of difficulties relating to COVID-19, the issuer can notify securityholders of the change, and is not required to send additional materials or update the materials that have already been sent. In order to do so, the issuer must do the following promptly after making the decision to change the meeting details, and sufficiently in advance of the meeting to alert the market in a timely manner:
- issue and file on SEDAR a news release announcing the change in date, time or location of the meeting; and
- take all reasonable steps necessary to inform the parties involved in the proxy infrastructure (including intermediaries, transfer agents and proxy service providers) of the change.
Proxy-related materials have not yet been sent and filed
If a reporting issuer is planning a meeting but has not yet sent and filed its proxy-related materials, the CSA advises that the issuer consider including disclosure in the proxy-related materials about the possibility that the date, time or location of the meeting may be changed due to COVID-19.
- Virtual or hybrid annual meetings
In order to implement appropriate social distancing measures, reporting issuers may consider conducting virtual or hybrid shareholder meetings. In this case, the CSA expects that the issuer will notify securityholders, the parties involved in the proxy infrastructure and other market participants of their plans in a timely manner, and provide clear directions on the logistical details of the meeting (including how securityholders can remotely access, participate in and vote at the meeting).
These details should be included in the issuer’s proxy-related materials, if such materials have not been sent and filed at the time the decision is made to conduct a virtual or hybrid meeting. If the materials have already been sent and filed, the issuer does not have to send additional materials or update the prior materials just for the purpose of switching from an in-person to a virtual or hybrid meeting if the issuer follows the steps above for announcing a change in the details of the meeting.
Special considerations relating to beneficial owners
The CSA also provided specific guidance relating to the application of section 2.15 of National Instrument 54-101 Communication with Beneficial Owners of Securities of a Reporting Issuer. This section requires a reporting issuer that sends a notice of adjournment or other change relating to an annual meeting to registered securityholders to concurrently send the notice to beneficial owners. Specifically, the CSA indicated that it takes the view that no exemptive relief is required by issuers that are considering changes/alternatives to their annual meeting, provided that the registered holders and beneficial owners are treated equally and receive the same information.
The CSA stated that the above guidance relates to all business transacted at annual general meetings of securityholders (including, for example, the election of directors and amendments to equity incentive plans). If a reporting issuer is involved in a proxy contest, holding a special meeting for a transaction such as a merger/acquisition, or obtaining shareholder approval for transactions under Multilateral Instrument 61-101 Protection of Minority Securityholders in Special Transactions (including related party transactions), the CSA advises that the issuer should contact their principal regulator to discuss appropriate steps.
In addition to complying with the rules and guidance of securities law, issuers also need to keep in mind that annual meetings are subject to applicable corporate law and the issuer’s articles and by-laws, which may impose further restrictions or requirements in addition to the above. As we noted in our March 20 note, the capability to hold virtual meetings is already a feature for federal corporations under Sections 132(4) and (5) of the Canada Business Corporations Act and for Ontario corporations under Section 94(2) of the Business Corporations Act (Ontario). We would be glad to help consider your options relating to your upcoming annual meeting, including helping you navigate how to set up a virtual or hybrid meeting.
TEMPORARY FILING RELIEF
The CSA has published orders setting out the conditions of blanket relief that provides for a 45 day extension for certain regulatory filings normally required to be made by issuers, investment funds registrants, certain regulated entities and designated rating organizations during the period from March 23, 2020 to June 1, 2020. This note focuses on the continuous disclosure relief provided to issuers through the blanket relief order in Ontario, which is substantially similar to the relief granted in the other provinces and territories of Canada. If you are interested in learning more about the relief granted to other market participants, including investment funds and registrants, please let us know.
Relief is granted for filings of annual and interim financial statements (as well as financial statements required after becoming a reporting issuer or financial statements of a reverse takeover acquirer for periods ending before a reverse takeover) and management’s discussion and analysis, annual information forms, executive compensation disclosure, technical reports, and statements of reserves data and certain other information required under National Instrument 51-101 (for oil and gas issuers), provided that:
- the person or company required to make the filing issues, and files on SEDAR as soon as reasonably practicable, a news release in advance of the filing deadline, which discloses:
- the requirements for which it is relying on the relief;
- that its management and other insiders are subject to an insider trading black out policy;
- the estimated date by which the required disclosure is expected to be filed or the required document is estimated to be sent or delivered; and
- the following information about the person or company:
- an update of any material business developments since the date of the last annual financial statements or interim financial reports that were filed; or
- confirmation that there have been no material business developments since that date.
Also, the person or company must issue, and file on SEDAR as soon as reasonably practicable, a news release no later than 30 days after the first day of the extension period, and a subsequent news release no later than 30 days following the date of that news release if it has not yet filed each document for which it is relying on the relief. These news releases must provide an update of any material business developments since the date of the last news release required under the relief, or confirmation that there have been no material business developments since that date.
In order to rely on the relief, an issuer also must not file a preliminary prospectus or a final prospectus for an offering of securities until it has filed all of the documents for which it is relying on the relief.
If a person or company is relying on the relief in respect of certain financial information relating to an annual shareholders meeting (including sending an annual request form, or delivering annual financial statements or management’s discussion and analysis), the person or company must comply with all of the conditions set out above, and must adhere to the following timelines:
- an annual request form must still be sent before the record date for the next annual meeting of securityholders; and
- annual financial statements and management’s discussion and analysis must still be delivered before, or in conjunction with, the delivery of the management information circular for the next annual meeting of securityholders.
Relief is also granted for the filing of auditor reporting packages, notices of change in year end, business acquisition reports, notices of change in corporate structure and certain filings required by issuers relying on the offering memorandum exemption or the crowdfunding exemption, provided that the issuer issues, and files on SEDAR, as soon as reasonably practicable, a news release in advance of the filing deadline that discloses each applicable requirement for which it is relying on the relief.
The blanket orders are available on the websites of each of the securities regulators across Canada. While the relief currently covers regulatory filings required to be made until June 1, 2020, the CSA has advised that they are monitoring the situation and will consider whether further relief or extension is necessary.