COVID-19: Canadian securities regulators and TSX extend deadlines, TSX increases NCIB purchase limits

To assist reporting issuers impacted by the COVID-19 pandemic, the Canadian Securities Administrators (CSA) and the Toronto Stock Exchange (TSX) have published blanket relief which both extends deadlines for certain continuous disclosure filings and the holding of annual shareholder meetings (AGMs), and increases purchase limits under normal course issuer bids (NCIBs).

What you need to know

  • Issuers have been granted a 45-day extension to the deadlines for filing financial statements, management’s discussion and analysis (MD&A), annual information forms (AIFs), technical reports and business acquisition reports (BARs) that would normally be required to be filed on or before June 1, 2020.
  • Provided that an issuer is not relying on the extension for its financial statement and MD&A filings, base shelf prospectuses expiring between March 23 and June 1 may be extended for 45 days.
  • Issuers relying on the 45-day extension must file a press release. If financial statement, MD&A or AIF filings are being delayed, the press release must disclose the estimated date by which the documents are expected to be filed and an update of any material business developments since the date of the last financial statement filing, or confirmation that there have been no such material business developments.
  • The TSX is allowing TSX-listed issuers to hold their 2020 AGM anytime in 2020. Unless similar relief from applicable corporate law requirements is announced, the TSX AGM relief will have limited practical effect.
  • The TSX has increased the daily purchase limit for NCIBs to 50% of average daily trading volume (ADTV) until June 30, 2020—double the daily limit set when the NCIB was established for issuers with existing NCIBs.

Summary of CSA blanket relief

As a result of the blanket relief:

  • TSX-listed issuers with December 31 fiscal year ends will now have until:
    • May 14, 2020 to file annual financial statements, MD&A and an AIF
    • June 29, 2020 to file Q1 2020 interim financial statements and MD&A
  • TSX Venture-listed issuers with December 31 year ends will now have until:
    • June 15, 2020 to file annual financial statements and MD&A
    • July 16, 2020 to file Q1 2020 interim financial statements and MD&A
  • BARs and technical reports required to be filed on or before June 1 may be filed up to 45 days following the normal filing deadline.
  • Provided that an issuer is not relying on the extension for financial statement and MD&A filings, base shelf prospectuses expiring between March 23 and June 1 may be extended for 45 days.

Issuers relying on the 45-day extension may not file a preliminary or final prospectus for an offering of securities until they have filed all documents that would otherwise be required to be filed absent the extension.

In addition, annual financial statements and MD&A must be delivered before or in conjunction with the circular for the issuer’s upcoming AGM1.

Conditions for reliance on CSA blanket relief

An issuer relying on the 45-day extension must issue a news release as soon as reasonably practicable and prior to the applicable filing date or lapse date disclosing each requirement for which it is relying on the extension.

In addition, issuers that rely on the 45-day extension for financial statement, MD&A and AIF filings must issue a news release in advance of the normal filing deadline that discloses:

  1. that its management and other insiders are subject to an insider trading black-out policy;
  2. the estimated date by which the required disclosure is expected to be filed; and
  3. an update of any material business developments since the date of the last annual or interim financial statements that were filed, or confirmation that there have been no material business developments since that date.

No later than every 30 days after the first day of the extension period, issuers relying on the relief for annual and interim filings must update the market by way of news release disclosing any material business developments since the last news release issued in compliance with the blanket relief order, or confirming that no such material business developments have occurred.

The CSA has not provided guidance as to what kinds of corporate events or circumstances would constitute a “material business development” for the purposes of the required press release disclosure2. In identifying potential material business developments, an issuer should consider its past approach to disclosure in its continuous disclosure filings, including:

  • corporate events or developments, or other updating disclosure about the business, that it would have highlighted in the MD&A were it being released as scheduled; and
  • the kind of disclosure that it would typically make in a recent developments section in its annual information form or a prospectus.

The press release must address any material business developments since the last filing of the issuer’s annual or interim financial statements, so an issuer would also need to reflect the content of any material change reports or press releases covering those business developments.

TSX extension of AGM deadlines

Under TSX rules, a TSX-listed issuer must hold its annual meeting of security holders within six months from the end of its fiscal year, or at such earlier time as is required by applicable legislation. The TSX is now permitting issuers to hold their 2020 AGM on any date up to and including December 31, 2020, regardless of the issuer’s fiscal year end.

While we expect the TSX extension will be welcomed by many issuers, unless similar relief from applicable corporate law requirements is announced, the TSX AGM relief will have limited practical effect. Typically, to comply with applicable corporate law requirements regarding the presentation of annual financial statements at an annual meeting, companies are effectively required to hold their AGMs within 6 months of their fiscal year ends3.

NCIB daily purchase limits increased

Until June 30, 2020, the TSX will allow an increase in the daily purchase limit under NCIBs to the higher of (i) 50% of ADTV (double the current limit of 25% of ADTV), and (ii) 1,000 securities. For issuers with existing NCIBs, the ADTV calculation should be based on same 6-month period as was used to calculate the ADTV when establishing the NCIB.

Annual purchase limits under NCIBs are not affected as a result of the TSX relief. Cross-listed issuers remain subject to U.S. daily purchase limits for purchases made on a U.S. exchange (25% of the security’s U.S. ADTV).

Issuers with automatic securities purchase plans (ASPPs) in place should contact their broker prior to entering into their next regularly scheduled blackout period to inform the broker of the TSX blanket order and provide updated instructions as necessary.

We expect most issuers/brokers will be comfortable relying on TSX relief without making a formal amendment to the terms of their engagement letter, broker/repurchase agreement or ASPP. If the issuer or broker requires a formal amendment to the terms of their ASPP, the amendment should be pre-cleared with the TSX and executed prior to entering the blackout.

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1 On May 1, in recognition of the fact that many issuers may be required to delay their AGMs, the CSA provided additional blanket relief from certain filing and delivery requirements. The relief exempts reporting issuers from the requirement to file executive compensation disclosure within 140 days of year end (180 days for venture issuers), provided that they issue a press release disclosing that they are relying on the exemption and send their executive compensation disclosure or AGM information circular to securityholders by December 31, 2020. In addition, relief was granted from the requirement to send, or send upon request, copies of annual and interim financial statements and MD&A within certain time periods as well as send-on-requests for annual and interim financial statements and MD&As.

2 On April 3, the CSA published Staff Notice 51-360 with responses to a number of frequently asked questions regarding the blanket relief. The CSA reminded issuers that determinations of whether a development constitutes a material business development is contextual, may vary from issuer to issuer and encouraged issuers to reference existing securities rules and policies for guidance, including Section 4.2(1) of National Policy 51-201 Disclosure Standards.

3 In April, the Ontario government passed an emergency order granting OBCA companies an extension to the AGM deadline for at least 90 days following the termination of the emergency (120 days for OBCA companies who would otherwise be required to hold their AGM within 30 days following termination of the emergency). In addition, for AGMs held between March 17, 2020 and the 120th day after the emergency is terminated, the requirement that annual financial statements placed before the meeting relate to a period ending no more than six months before the meeting has been suspended and instead financial statements for the most recently completed fiscal year prior to the meeting must be placed before shareholders. Similarly, under an emergency order passed in Alberta, the obligation of ABCA companies to hold an AGM during the period of the declared emergency has been suspended and ABCA companies will have additional time following the termination of the emergency to hold their AGMs.

Read all our coronavirus-related updates on our COVID-19 guidance for organizations resource page.

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.

© 2020 by Torys LLP.
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