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CSA Provide Temporary Relief to Public Companies with Delayed Annual Meetings Due to COVID-19
Practical Law Canada Legal Update w-025-3317 (Approx. 7 pages)
CSA Provide Temporary Relief to Public Companies with Delayed Annual Meetings Due to COVID-19
by Practical Law Canada Corporate & Securities
| Published on 06 May 2020 • Canada (Common Law) |
This Legal Update summarizes the temporary relief (to be implemented under local blanket orders) announced by the Canadian Securities Administrators (CSA) on May 1, 2020 in connection with certain filing and delivery requirements for reporting issuers with annual shareholder meetings delayed due to COVID-19.
Background
In response to the current COVID-19 outbreak, the members of the Canadian Securities Administrators (CSA) issued on March 23, 2020 substantively harmonized temporary exemptions which provide (subject to certain conditions) a 45-day extension for certain continuous disclosure filings (including annual and interim financial statements and related management’s discussion and analysis (MD&A) generally required to be filed by reporting issuers within certain time periods). For more information, see Legal Update, CSA Publish Temporary Exemptions from Certain Corporate Finance Requirements Due to COVID-19.
The temporary exemptions did not contemplate an extension for the filing, sending or delivery of management information circulars and other proxy-related materials prepared in connection with a reporting issuer's annual meeting of shareholders; however, the CSA indicated at the time of the temporary exemptions that CSA staff would monitor the situation and consider whether further relief was necessary.
Subsequent to the temporary exemptions, a number of developments occurred in relation to annual shareholder meetings, including the following:
- The Toronto Stock Exchange (TSX) and the TSX Venture Exchange (TSXV) provided blanket relief to allow listed reporting issuers to delay holding their annual shareholder meetings up to December 31, 2020 subject to compliance with applicable corporate and securities laws.
- As part of Ontario Regulation 107/20 made on March 30, 2020 (with retroactive effect to March 17, 2020) under the Emergency Management and Civil Protection Act, R.S.O. 1990, c. E.9, the Government of Ontario temporarily suspended and replaced certain provisions of the Ontario Business Corporations Act, R.S.O. 1990, c. B.16 (OBCA), among other things, to extend the deadline to hold annual meetings of shareholders:
- to a date that is no later than the 90th day after the day the emergency is terminated, in the case of a corporation that is otherwise required to hold its annual meeting during the period that the current declaration of emergency applies to; and
- to a date that is within 120 days after the date the current declaration of emergency is terminated, in the case of a corporation that is required to hold its annual meeting within the 30-day period that begins on the day after the date the current declaration of emergency is terminated.
For more information, see:
In response to these developments and related decisions by reporting issuers to delay their annual shareholder meetings, CSA staff have received inquiries from reporting issuers with respect to certain filing and delivery requirements which are generally tied to the sending of materials for annual general meetings of shareholders, including the following:
- Executive compensation disclosure. A reporting issuer is required to prepare and file a statement of executive compensation in prescribed form within 140 days (for non-venture issuers) or 180 days (for venture issuers) after its financial year-end. In most cases, the statement of executive compensation is included as part of a reporting issuer's management information circular prepared in connection with its annual meeting of shareholders and filed in advance of the deadlines referred to above.
- Annual request form requirement. A reporting issuer is required to send annually a request form to its securityholders that may be used by the securityholders to request copies of a reporting issuer's annual and interim financial statements and related MD&A. There is an exemption from this requirement (and the requirement to send-on-request such materials) with respect to annual financial statements and related MD&A in circumstances where a reporting issuer sends its annual financial statements and related MD&A with the information circular for its annual meeting of shareholders, provided that the annual financial statements and related MD&A are sent within 140 days of the reporting issuer's financial year-end.
- Send-on-request requirements. If a securityholder (other than a holder of debt instruments) of a reporting issuer requests annual financial statements or interim financial reports, the reporting issuer must send a copy of the requested financial statements (together with the relevant MD&A) to the person or company that made the request, without charge, by the later of:
- ten calendar days after the filing deadline for the requested financial statements; and
- ten calendar days after receiving the request.
For reporting issuers:
- Delaying their 2020 annual meeting of shareholders:
- it may not be possible to include the required executive compensation disclosure as part of an information circular prepared and filed within the required deadlines; and
- it may not be practicable to rely on the exceptions to the annual request form requirement and related send-on-request requirements available in circumstances where annual financial statements and the related MD&A are delivered to securityholders with the information circular sent within the required deadline.
- Complying with the send-on-request requirements may be difficult as a result of COVID-19 in circumstances where employees are working from home and complying with, or following, physical distancing requirements and recommendations of public health authorities.
Temporary Relief to Public Companies with Delayed Annual Meetings Due to COVID-19
On May 1, 2020, the CSA issued Canadian Securities Regulators Provide Temporary Relief to Public Companies with Delayed Annual Meetings Due to COVID-19, which announced temporary relief (to be implemented under local blanket orders) with respect to executive compensation disclosure, the annual request form requirement and the send-on-request requirements applicable to reporting issuers.
Under the terms of the temporary relief, a reporting issuer is permitted to file either:
- A statement of executive compensation as part of its management information circular relating to its 2020 annual meeting of shareholders provided that the management information circular is filed and sent on or before December 31, 2020.
- File a stand-alone statement of executive compensation on or before December 31, 2020 (in this case, the issuer must include this disclosure in the next management information circular sent to shareholders in connection with an annual meeting).
Reporting issuers that intend to delay filing their executive compensation disclosure are required to:
- Issue and file a news release disclosing that they intend to rely on the temporary relief.
- File their annual financial statements and related MD&A for their most recently completed financial year-end before they file and send their management information circular or file a stand-alone statement of executive compensation.
The temporary relief also provides an exemption from the:
- Annual request form requirement and the send-on-request requirements in respect of annual financial statements and MD&A provided that the reporting issuer sends to securityholders (other than holders of debt instruments) its annual financial statements and MD&A on or before December 31, 2020 and in accordance with National Instrument 54-101 - Communication with Beneficial Owners of Securities of a Reporting Issuer (NI 54-101).
- Send-on-request requirements for requests received before December 31, 2020 provided that the reporting issuer sends a copy of the requested financial statements and related MD&A to the securityholder that made the request as soon as practicable after the applicable deadline set out in subsection 4.6(3) of National Instrument 51-102 - Continuous Disclosure Obligations (NI 51-102).
Reporting issuers that intend to rely on the relief should consult their local blanket order as noted below to ensure that they comply with the conditions for the relief.
Jurisdiction | Blanket Order |
Alberta | |
British Columbia | |
Manitoba |
|
New Brunswick | |
Newfoundland and Labrador | |
Northwest Territories | Not yet published |
Nova Scotia | |
Nunavut | Not yet published |
Ontario | |
Prince Edward Island | Not yet published |
Quebec |
|
Saskatchewan | |
Yukon | Not yet published |
The temporary relief came into effect on May 1, 2020 and expires on December 31, 2020.