By Leslie McCallum
Canadian securities regulators have adopted new rules permitting annual financial statements, management’s discussion and analysis and meeting circulars to be posted on public companies’ websites instead of being mailed to shareholders. This initiative, which is known as notice-and-access, should be welcome news to issuers seeking to reduce their printing and mailing costs. Securityholders will only have to be sent a notice of the meeting and voting document along with a description of the matters to be voted on, an explanation of the new system, and the website address where the meeting materials are posted. The new system is very similar to the U.S. Securities and Exchange Commission’s e-proxy rules implemented several years ago.
Related Legal Requirements
In implementing notice-and-access, issuers will have to ensure that their procedures also comply with the relevant corporate law requirements for delivering meeting materials to shareholders. The statutes governing corporations, insurance companies and banks generally contemplate notice-and-access as a means of providing meeting materials to shareholders, but those statutes also generally require issuers to obtain consent from individual shareholders before adopting this delivery mechanism. Legislative amendments may be necessary for some issuers to take full advantage of the notice-and-access regime; in the meantime, exemptive relief from the relevant authorities may be available.
Key Features of Notice-and-Access
Issuers are permitted to adopt notice-and-access for meetings held on or after March 1, 2013. Some of the other timing requirements and meeting logistics and under notice-and-access are as follows:
- The package containing the notice of meeting, voting form and other required information must be sent to shareholders at least 30 days before the meeting (compared with the regular 21-day deadline for delivering meeting materials under securities laws).
- The record date for notice of a meeting must be at least 40 days before the meeting.
- When issuers use notice-and-access for the first time, an informational SEDAR filing must be made at least 25 days before the record date (i.e., 65 days before the meeting). For subsequent meetings, this is shortened to three days before the record date.
- Shareholders may request a copy of the annual materials, either for a specific meeting or for all meetings under standing instructions.
- SEC issuers that have a limited presence in Canada may follow the U.S. notice-and-access rules instead of the Canadian rules.
- Notice-and-access is not permitted for investment funds.
Notice-and-Access Is Voluntary
Notice-and-access may be used for annual meetings, special meetings, meetings requisitioned by a shareholder and dissident proxy solicitations. In all cases, however, the use of notice-and-access is voluntary. The Canadian securities regulators have suggested that, in deciding whether to adopt notice-and-access for a particular meeting, issuers should consider the potential impact on beneficial owners of voting securities, including
- whether additional methods of advance notice are appropriate, such as a special purpose mailing to retail beneficial owners before the first meeting for which notice-and-access is used;
- the nature of the meeting business (and whether it is expected to be contentious); and
- whether notice-and-access resulted in material declines in shareholder voting rates in prior meetings for which notice-and-access was used.
Related Rule Changes
Appointing Beneficial Owners as Proxy Holders
In addition to adopting notice-and-access, securities regulators have made rule changes that make issuers and intermediaries responsible for appointing beneficial owners as proxy holders upon request. Subject to corporate law restrictions, the appointment includes the authority to act on all matters coming before the meeting. Intermediaries may continue to use their existing appointee systems to comply with this requirement.
Obtaining Beneficial Ownership Information
The new rules permit entities other than transfer agents, such as proxy solicitors, to assist in obtaining beneficial ownership information, provided that the entity has the required technological capacity.
To discuss these issues, please contact the authors.
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