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TSX Proposes to Mandate Website Disclosures and to Modernize Security Based Compensation Arrangement Disclosures

Published: 05/30/2016

By Gregory Hogan, Adria Leung Lim

On May 26, 2016, the Toronto Stock Exchange published proposed amendments to Part IV: Maintaining a Listing – General Requirements and Part VI: Changes in Capital Structure of Listed Issuers of its Company Manual (the Manual) that would:

  • mandate specific additional website disclosure, and
  • revise the manner and content of disclosures regarding security based compensation arrangements.

The TSX is seeking public comment on the proposed amendments and has provided a 30 day comment period.

Part IV Amendments – Adding Website Disclosure Requirements

In keeping with its objective of increasing accessibility to current information for the investing public, the TSX is proposing to introduce a new section 473 to the Manual that requires issuers to maintain a publicly accessible website containing current copies of:

  • constating documents (including articles, trust indentures, partnership agreements, by-laws, and other similar documents),
  • corporate policies that impact meetings of security holders and voting (including advance notice and majority voting policies),
  • security holder rights plans (i.e., poison pills),
  • security based compensation arrangements (“Arrangements”), and
  • corporate governance documents (including charters of board committees, codes of ethical business conduct, position descriptions, board mandates, anti-corruption policies, environmental and social policies and whistleblower policies).

The proposed amendments require the webpage(s) containing the above documents to be easily identifiable and accessible from the issuer’s home page or investor relations page. Non-corporate issuers are also expected to comply with the new section 473 requirements pursuant to Part XI of the Manual.

While many items can be found on SEDAR, locating these documents can be difficult for a number of reasons, including the limited number of labels with which documents are identified by on SEDAR, needing to know when a document was filed, and the fact that a document might be filed as attachments to other documents. The TSX notes some of the difficulties as a rationale for this proposal.

The proposed amendments also simplify the disclosure requirement for issuers that adopt a majority voting policy, by substituting the requirement for issuers to describe such polices on an annual basis in materials sent to security holders, with the requirement to post a copy of the policy on the issuer’s website.

The TSX considers the proposed amendments to Part IV of the Manual not onerous or costly for issuers because virtually all  TSX listed issuers currently have websites, and printing and mailing costs of information circulars will be reduced.

The TSX is asking for feedback on these amendments to Part IV of the Manual, including the following, amongst other things:

  1. whether there are any additional documents that should be included under the new section 473,
  2. whether there are any documents that should not be included under the new section 473, and
  3. whether there are any concerns that security holders may rely on the website disclosure which may not be kept current.

Part VI Amendments – Simplifying Disclosure Requirements for Security Based Compensation Arrangements

Currently, section 613(d) of the Manual requires that materials provided to security holders in respect of a meeting at which approval of an Arrangement will be requested, must provide certain disclosure of the terms of the Arrangement and any other material information that a security holder may reasonably require to approve the Arrangement. Meetings where security holders need to approve an Arrangement differ from other meetings held by the issuer, in that the meeting materials must be pre-cleared by the TSX.

The Part VI amendments are designed to reflect more current security based compensation arrangements and simplify the disclosure required under section 613(d). Under the proposed amendments to Part VI, issuers would disclose in their information circular, in connection with the approval of any security based compensation arrangements, the items described in proposed new Form 15 – Disclosure of Security Based Compensation Arrangements, being:

  • the maximum number of securities issuable,
  • the number outstanding awards,
  • the burn rate (which is essentially the rate at which the unused “plan reserve” at the beginning of the fiscal year was “spent” during the year),
  • the eligible participants,
  • the vesting provisions,
  • amendments in the most recent fiscal year, and
  • other key terms necessary to enable a reasoned judgment on the Arrangement.

Similar disclosure would be made on an annual basis, other than the “other key terms.” A number of former disclosure items under section 613(d) would no longer be mandated under the proposed amendments. The TSX has also stated that where security holder approval will be sought in connection with an Arrangement matter, the materials must still be pre-cleared with TSX.

The Part VI amendments are expected to broaden the range of Arrangements to which the disclosure requirements in Part VI of the Manual are applicable, and reduce the regulatory burden for issuers by eliminating unnecessary or duplicative information under the current regime while maintaining meaningful disclosure.

The TSX is asking for feedback on these amendments to Part VI of the Manual, including the following, amongst other things:

  1. whether there are any other key disclosure items that should be included in the new Form 15,
  2. whether there are any disclosure items that should be removed from the new Form 15,
  3. if the disclosure items which are static terms of an Arrangement be required given that the information is available in an Arrangement on an issuer’s website,
  4. whether the burn rate, and the formula for calculating it, useful and appropriate disclosure, and
  5. whether it is sufficient to have the burn rate only for the most recently completed year, rather than the last three years.

All comments should be submitted to the TSX in writing by June 27, 2016. For the full text of the Amendments and further instructions relating to public comment, please see Amendments to Toronto Stock Exchange Company Manual (May 26, 2016).

The authors of this article gratefully acknowledge the contributions of summer law student Jasmine Qin.