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).
As a result of the blanket relief:
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.
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:
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:
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.
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.
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.
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