Written by Will Osler, Juliamai Giffen, Matthew Olson and Elyse van Spronsen
The Toronto Stock Exchange (TSX) has published for comment proposed amendments to the TSX Company Manual (Manual). If adopted, the amendments would, among other things, introduce mandated website disclosure for all TSX listed issuers (Part IV Amendments), and amend the current disclosure requirements regarding security based compensation arrangements (Part VI Amendments). The TSX is seeking public comment on the proposed amendments until June 27, 2016.
Part IV Amendments – Mandated Website Disclosure
If adopted, the Part IV Amendments would introduce a new section 473 to the Manual containing requirements for listed issuers to maintain current copies of the following security holder documents on a publicly accessible website: (i) constating documents (including, as applicable, articles, by-laws, trust indentures, partnership agreements and other similar documents); (ii) corporate policies that impact meetings of security holders and voting; (iii) security holder rights plans (i.e. poison pills); (iv) security based compensation arrangements; and (v) certain corporate governance documents.
The Part IV Amendments also seek to amend existing provisions in the Manual relating to disclosure requirements applicable to TSX listed issuers that adopt a majority voting policy, by substituting the requirement to describe majority voting policies annually in materials sent to security holders with the requirement to post a current copy of such policy on the issuer's website.
While certain key security holder documents are already publicly available on the System for Electronic Analysis and Retrieval (SEDAR), they may be difficult to locate due to issuers' differing practices for identifying and filing materials under consistent categories. The requirement to publish the above noted documents on an issuer's website is intended to address accessibility issues and ensure that policies and corporate governance documents that may not otherwise be required filings on SEDAR are made readily accessible to the investing public. In publishing the proposed Part IV Amendments, the TSX conducted a review of website requirements of other exchanges, including the New York Stock Exchange and London Stock Exchange's AIM, each of which has its own form of similar mandated website disclosure.
Part VI Amendments – Security Based Compensation Arrangement Disclosure Requirements
The Part VI Amendments are intended to simplify the disclosure required in annual meeting materials and introduce a new form (Form 15) to replace the current narrative description of security based compensation arrangements (Arrangements) required to be filed with the TSX with tabular disclosure meant to be more user-friendly. Additionally, the proposed Part VI Amendments would amend certain parts of the Manual to specifically refer to a broader scope of Arrangements filed with the TSX, including plans that set out the general terms and conditions of options, deferred stock units, restricted stock units or other awards; individual awards not granted pursuant to a plan; financially assisted purchases of securities; and other compensation or incentive mechanisms involving the issuance of equity securities.
The Part IV Amendments, if implemented, would require the following new or modified disclosure (Disclosure Elements):
|Outstanding Awards||The disclosure of the number of awards outstanding under an Arrangement would continue; however, if an Arrangement includes a multiplier (a feature where a participant in an Arrangement is eligible to receive a higher award based on corporate performance), the maximum payout must be used to calculate the number of securities that are issuable under the award (including as a percentage of issued and outstanding securities). Details in respect of the multiplier will require explanation in footnotes to the disclosure.
|Burn Rate||New disclosure regarding the burn rate (rate at which the issuer grants awards under the Arrangement), defined as the number of awards granted in a year (net of cancellations), multiplied by a multiplier, if applicable, and divided by the number of issued and outstanding securities of the issuer at the beginning of that year.
|Vesting||Updated and more specific disclosure will be required regarding default vesting provisions and whether vesting is time and/or performance based.
|Amendments||Disclosure of any amendments to awards or an Arrangement will only be required in respect of amendments completed without security holder approval during the most recent fiscal year. Disclosure of amendments previously approved by security holders is no longer required.
|Other Key Terms||Disclosure of "other key terms" in annual meeting materials will no longer be required; however, this disclosure will continue to be required in respect of meetings for the approval of an Arrangement or any amendments thereto.|
Additionally, in coordination with the proposed Section IV Amendments and addition of section 473 to the Manual, an issuer will be required to disclose a hyperlink or webpage address providing the location on the issuer's website where a copy of any Arrangement may be found.
Under the Part VI Amendments, disclosure regarding, among other things, the amendment process, financial assistance, term, exercise and purchase price calculation and maximum securities available to insiders or to any one person or company would no longer be required by the TSX, although certain of these items may still be required to be disclosed by Form 51-102F6 – Statement of Executive Compensation.
The TSX believes the proposed Part VI Amendments, including the updated or modified Disclosure Elements, simplify the disclosure of Arrangement details, while eliminating the disclosure of unnecessary information that may not be useful to security holders. The concurrent introduction of section 473 means that the full copy of the Arrangement would also be made available to the investing public on a listed issuer's website, diminishing the need for certain disclosure in annual meeting materials. The TSX has requested comment on a number of specific questions arising from the proposed Part VI Amendments, including whether the Disclosure Elements are useful and appropriate disclosure in the context of Arrangements.
Bennett Jones invites clients to contact the firm with any questions or comments and is available to assist clients who wish to submit comments on the proposed amendments to the TSX. We will also continue to monitor the proposed amendments and provide updates on any further developments.