Equity Compensation Plans and Company Websites: New TSX Proposals

TSX is proposing new rules for listed companies on security-based compensation arrangements and website postings. In response to substantial feedback from market participants on the original TSX proposals published in mid-2016, the TSX has scaled back the proposed new disclosure requirements for security-based compensation arrangements and reduced the number of documents that would have to be posted on websites. New disclosure would be required on burn rates and the impact of multipliers on the number of securities issuable under security-based compensation arrangements.

Security-Based Compensation Arrangements

Listed issuers would have to disclose annual burn rate information for each security-based compensation arrangement. The formula for calculating the burn rate percentage would be as follows:

number of awards granted in the fiscal year

÷

weighted average number of outstanding securities for the fiscal year

No burn rate disclosure would be required for the first year of a new compensation plan; new plans adopted to replace similar plans would not fall within this exception.

Details about any multipliers on awards (such as treasury-settled PSUs which vest based on the level of achievement of certain performance criteria) would have to be disclosed.

Other than the burn rate information, annual security-based compensation arrangement disclosure would be presented as at the end of the most recently completed fiscal year rather than as at the date of the meeting materials.

Website Postings

TSX-listed companies would have to post the following documents on their websites. TSX’s objective is to promote consistency in the marketplace and easier access to companies' corporate governance information.

  • articles of incorporation or other constating documents and the issuer's by-laws;
  • majority voting policies;
  • advance notice policies;
  • position descriptions for the chair of the board, lead director and key officers;
  • board mandates; and
  • committee charters.

TSX is not mandating that companies adopt the above documents if not otherwise required – for example, advance notice policies are not mandated by securities laws or TSX rules. TSX is no longer proposing to require website postings of securityholder rights plans (poison pills) or security-based compensation arrangements.

Compared to the list of documents originally proposed by TSX, the above list aligns more closely with current market practice by Canadian public companies.

Canadian securities laws generally do not prescribe disclosure that must be posted on companies' websites, while the SEC and NYSE prescribe a limited number of documents – including board mandates, committee charters and codes of ethics – that U.S. companies must post on their websites, with the website address disclosed in the corresponding SEC filing.

Comments on the revised proposals are due by May 8, 2017.

To discuss these issues, please contact the author(s).

This publication is a general discussion of certain legal and related developments and should not be relied upon as legal advice. If you require legal advice, we would be pleased to discuss the issues in this publication with you, in the context of your particular circumstances.

For permission to republish this or any other publication, contact Janelle Weed.

© 2017 by Torys LLP.
All rights reserved.

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