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CSA Provide Guidance on Disclosure and Annual General Meetings Affected by COVID-19
Practical Law Canada Legal Update w-024-5872 (Approx. 7 pages)
CSA Provide Guidance on Disclosure and Annual General Meetings Affected by COVID-19
by Practical Law Canada Corporate & Securities
| Published on 23 Mar 2020 • Canada (Common Law) |
This Legal Update summarizes guidance on disclosure and annual general meetings affected by COVID-19 provided by the Canadian Securities Administrators (CSA) in March 2020.
CSA Guidance Regarding Potential Delays Due to COVID-19
On March 16, 2020, the Canadian Securities Administrators (CSA) released Canadian securities regulators provide update on COVID-19 and potential filing delays by reporting issuers. They encourage reporting issuers to contact their principal regulator to discuss any potential effect of the current COVID-19 outbreak on their ability to comply with their obligations under securities legislation, including filing deadlines or delivery of meeting materials. A staff contact list for issuers was included in the announcement.
Issuers that foresee not being able to file their annual or interim financial statements by their prescribed deadline because of the current COVID-19 outbreak have been advised to consider applying for a management cease-trade order (MCTO).
Under normal circumstances, applications for an MCTO should be filed at least two weeks before the due date for the required filings; however, the CSA indicated they will work to accommodate shorter periods where necessary.
An MCTO restricts certain officers and directors from trading and may be issued by a regulator instead of a failure-to-file cease-trade order. Conditions for granting an MCTO are provided in National Policy 12-203 - Management Cease Trade Orders (NP 12-203). If an MCTO is issued, the issuer must comply with alternative information guidelines as provided in NP 12-203 until the required documents are filed. MCTOs issued in these circumstances will not be considered required disclosure in future documents. For more information on failure-to-file cease-trade orders and MCTOs, see Practice Note, Revoking a Cease Trade Order for Failure to File Financial Statements.
The CSA also indicated that it is continuing to monitor the impact of COVID-19 on Canadian capital markets and may issue further guidance in due course.
On March 18, 2020, the CSA announced Canadian securities regulators to provide blanket relief for market participants due to COVID-19, which will provide a 45-day extension for periodic filings normally required to be made by issuers, investment funds, registrants, certain regulated entities and designated rating organizations on or before June 1, 2020. This includes the following:
- Annual and interim financial statements.
- Management’s discussion and analysis (Part 1, section (a) and Part 2, section 1.2, Instruction (iii), section 1.3, section 1.4(g), section 1.5, Instruction (v), section 1.6(d), section 1.6(h), section 1.6, Instruction (ii), section 1.8, Instruction (ii), section 1.14 (b), section 1.14 (c), and Instruction (iii) and section 2.2.1, Form 51-102F1 - Management's Discussion & Analysis (Form 51-102F1)). For more information, see Practice Note, Management's Discussion and Analysis (MD&A).
- Annual information forms (AIFs) (Part 1, section (a) and Part 2, section 1.2, Instruction (iii), section 5.2, section 7.3(e), Form 51-102F2 - Annual Information Form (Form 51-102F2)). For more information, see Practice Note, Annual Information Form.
- Management reports of fund performance.
- Technical reports. For more information, see Practice Note, Standards of Disclosure for Mineral Projects.
- Certain other filings.
Issuers choosing to rely on this exemption and that are complying with the conditions of the relief will not need to file applications for MCTOs as they will not be noted in default.
Finally, all CSA proposals currently out for comment will have their comment periods extended by 45 days.
CSA Guidance Regarding Annual General Meetings During the COVID-19 Outbreak
On March 20, 2020, the CSA released Canadian Securities Regulators Provide Guidance on Conducting Annual General Meetings During COVID-19 Outbreak. Reporting issuers involved in proxy contests, holding special meetings for merger and acquisition transactions, or obtaining securityholder approval for transactions under Multilateral Instrument 61-101 Protection of Minority Securityholders in Special Transactions were advised to contact their principal regulator to discuss what steps would be appropriate in those circumstances.
A reporting issuer that has decided to change the date, time or location of its in-person annual general meeting (AGM), or to hold a virtual AGM or hybrid AGM due to difficulties arising from COVID-19 and that has already sent and filed its proxy-related materials, can notify securityholders of the change without sending additional soliciting materials or updating its proxy-related materials if the reporting issuer does all of the following:
- Issues a news release announcing the change in the date, time, location or manner.
- Files the news release with the applicable securities regulatory authorities in Canada through the System for Electronic Document Analysis and Retrieval (SEDAR).
- Takes all reasonable steps necessary to inform all the parties involved in the proxy voting infrastructure (such as intermediaries, transfer agents and proxy service providers) of the change.
These actions should be taken promptly after deciding to make the change and sufficiently in advance of the AGM to alert the market in a timely manner.
If a reporting issuer has not yet sent and filed its proxy-related materials, the reporting issuer should consider including disclosures in its proxy-related materials regarding the possibility of such changes due to COVID-19.
If a reporting issuer plans to conduct a virtual AGM or hybrid AGM, the reporting issuer should notify its securityholders, all involved and other market participants of such plans in a timely manner and disclose clear directions on the logistical details of the virtual or hybrid AGM, including how securityholders can remotely access, participate in and vote at such AGM.
Under section 2.15 of National Instrument 54-101 Communication with Beneficial Owners of Securities of a Reporting Issuer, a reporting issuer that sends a notice of adjournment or other change related to an AGM to registered holders of its securities is required to concurrently send the notice to its beneficial owners. The CSA indicated that no exemptive relief from section 2.15 is required by reporting issuers that are considering changes or alternatives to their AGMs as long as their registered holders and beneficial owners are treated equally and receive the same information.
For more information, see Legal Update, Remote Participation and Virtual Shareholder Meetings: The New Best Corporate Practice.