Equity Compensation Plans and Company Websites: TSX Rules

TSX is proposing new rules for listed companies on security-based compensation arrangements and website postings. Comments on the proposals are due by June 27, 2016.

What You Need To Know

• Shareholder approval and TSX pre-clearance would still be required for security-based compensation arrangements—no rule changes are contemplated in these areas.  
• New disclosure would be required in proxy circulars about the impact of multipliers on the number of securities issuable; burn rates; and default vesting provisions.
• Security-based compensation arrangements would have to be posted on listed companies' websites. This includes inducement grants and other individual awards not granted under a plan. Companies may want to consider amending their arrangements to remove confidential or competitively sensitive information.

Security-Based Compensation Arrangements

TSX-listed companies would have to include the following information in their proxy circulars—something many seasoned companies already do:

1. If an outstanding award includes a multiplier (e.g., treasury-settled PSUs which vest based on the attainment of certain performance criteria), the multiplier must be explained and the maximum payout must be used when disclosing the number of listed securities issuable under the award.
2. The annual burn rate for the past fiscal year would be required in all proxy circulars, while the annual burn rate for the past three years would be required when a compensation plan is being approved by shareholders.
3. Default vesting provisions would have to be summarized for all arrangements, including whether vesting is time-based and/or performance based.

To simplify its rules, TSX would no longer require listed companies to disclose in their proxy circulars information about the maximum number of securities available to insiders; the method for determining exercise prices and market appreciation of SARs; the ability to transform stock options into SARs; terms for stock options; causes of cessation of entitlements; amendment provisions; assignability; financial assistance; and entitlements subject to shareholder ratification.

Listed Company Websites

Listed companies would have to post the following documents on their websites:

• majority voting policies, advance notice by-laws and any other policies impacting shareholder meetings or voting, as well as articles, by-laws and other constating documents;
• securityholder rights plans (poison pills);
• security-based compensation arrangements, as noted above; and
• anti-corruption policies, environmental and social policies and whistleblower policies.

Many public companies already post some of these documents on their websites, and if they don't, the documents can be found on SEDAR (and the SEC's EDGAR system, in the case of U.S.-listed companies). TSX's objective in proposing mandatory website postings is to promote consistency in the marketplace and easier access to listed companies' information.

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.

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