CSA Provide Guidance Regarding Filing Extension Relief Granted by Way of a Blanket Order in Response to COVID-19 | Practical Law

CSA Provide Guidance Regarding Filing Extension Relief Granted by Way of a Blanket Order in Response to COVID-19 | Practical Law

This Legal Update summarizes the guidance regarding filing extension relief granted by way of a blanket order in response to COVID-19 published by the Canadian Securities Administrators (CSA) in April 2020.

CSA Provide Guidance Regarding Filing Extension Relief Granted by Way of a Blanket Order in Response to COVID-19

by Practical Law Canada Corporate & Securities
Published on 06 Apr 2020 • Canada (Common Law)
This Legal Update summarizes the guidance regarding filing extension relief granted by way of a blanket order in response to COVID-19 published by the Canadian Securities Administrators (CSA) in April 2020.

CSA Provide Guidance Regarding Filing Extension Relief Granted by Way of a Blanket Order in Response to COVID-19

On April 3, 2020, the Canadian Securities Administrators (CSA) published CSA Staff Notice 51-360 Frequently Asked Questions Regarding Filing Extension Relief Granted by Way of a Blanket Order in Response to COVID-19 (Staff Notice 51-360). The questions and answers (FAQs) published by the CSA in Staff Notice 51-360 relate to the 45-day extension for periodic filings normally required to be made by issuers that are not investment funds on or before June 1, 2020 (Temporary Relief) as discussed in our Legal Updates, CSA Provides Guidance on Disclosure and Annual General Meetings Affected by COVID-19 and CSA Publish Temporary Exemptions from Certain Corporate Finance Requirements Due to COVID-19. The CSA has implemented the Temporary Relief through local blanket orders that are substantively harmonized across the country. The exemptions are all effective March 23, 2020, for a period of 120 days.
The CSA intend to update the FAQs as they receive more inquiries and encourage checking for updates to Staff Notice 51-360. If the answer to a question cannot be found in the FAQs, issuers should contact their principal regulator.

Material Business Development

The CSA provide guidance on how an issuer should determine whether a business development is material. As with any materiality determination, the determination of whether a business development constitutes a material business development depends on facts and circumstances and may vary from issuer to issuer. When assessing if a business development is material, an issuer should reference existing securities rules and policies for guidance.
The concept of materiality is referenced in a number of existing securities rules and policies, including:
  • The interpretative provision in Part 1(f) of Form 51-102F1 - Management's Discussion & Analysis and Part 1(e) of Form 51-102F2 - Annual Information Form (AIF) that states “Would a reasonable investor’s decision whether or not to buy, sell or hold securities in your company likely be influenced or changed if the information in question was omitted or misstated? If so, the information is likely material.” For more information, see Practice Notes, Management's Discussion and Analysis (MD&A) and Annual Information Form.
  • Section 4.2(1) of National Policy 51-201 Disclosure Standards (NP 51-201) that states "in making materiality judgements, it is necessary to take into account a number of factors that cannot be captured in a simple bright-line standard or test. These include the nature of the information itself, the volatility of the company’s securities and prevailing market conditions. The materiality of a particular event or piece of information may vary between companies according to their size, the nature of their operations and many other factors. An event that is “significant” or “major” for a smaller company may not be material to a larger company. Companies should avoid taking an overly technical approach to determining materiality. Under volatile market conditions, apparently insignificant variances between earnings projections and actual results can have a significant impact on share price once released.” For more information, see Practice Note, Disclosure Standards for Reporting Issuers.
  • The non-exhaustive list of potentially material information contained in Section 4.3 of NP 51-201.
  • The guidance provided in sections 9 and 12 of National Policy 12-203 Management Cease Trade Orders. For more information, see Practice Note, Revoking a Cease Trade Order for Failure to File Financial Statements.

Calculation of Time Period

The extension period starts on the next calendar day following the deadline date. For example, if the deadline is March 30, 2020, the first day of the 45-day period is March 31, 2020. The extension period would end on May 14, 2020.

Prospectuses

The prohibition against filing a preliminary or final prospectus until the continuous disclosure record of an issuer is current applies to preliminary and final base shelf prospectuses even if there is no specific offering contemplated at the time. Similarly, the prohibition applies to a non-offering prospectus, an amended and restated prospectus, a PREP prospectus or an amendment to a final prospectus. CSA staff are also of the view that the prohibition would preclude an issuer from completing a prospectus offering that requires or will require the filing of a prospectus supplement to an existing base shelf prospectus.
For information on shelf prospectuses, see Practice Note, Shelf Prospectus Offerings in Canada: Overview. For information on PREP prospectuses, see Practice Note, National Instrument 44-103: Post-Receipt Pricing (PREP).
The Temporary Relief does not provide an extension of the 90 and 180 day lapse date period contained in section 2.3 of National Instrument 41-101 — General Prospectus Requirements (NI 41-101). The 90- and 180-day limits in section 2.3 of NI 41-101 still apply. Issuers that have questions about section 2.3 of NI 41-101 should contact their principal regulator. For information on lapse dates of prospectuses and amendments, see Practice Note, Prospectus Offerings in Canada: Overview: Time Limits for Filing Prospectuses and Amendments.
CSA staff are of the view that issuers that wish to rely on the Temporary Relief during an ongoing prospectus distribution should cease the distribution. Issuers in this circumstance should contact their principal regulator to discuss this matter as soon as possible.

Annual General Meeting of Securityholders and Related Matters

The deadline extension provided for in the Temporary Relief is for a period of 45 days and is only available for certain documents required to be filed, sent or delivered during the period from March 23, 2020, to June 1, 2020. The Temporary Relief does not contemplate a deadline extension for the filing, sending or delivery of management information circulars or proxy materials for a meeting of securityholders.
CSA staff have received a number of inquiries from issuers regarding the interplay between the Temporary Relief and a delay of an annual general meeting of securityholders, including matters relating to executive compensation, management information circulars and other proxy materials, annual meeting request forms, and delivery of financial statements in conjunction with the delivery of management information circulars.
CSA staff are considering these issues. The CSA is closely monitoring the situation and will consider whether further relief or extension is necessary.
The CSA does not establish meeting requirements. Those requirements are established under the corporate law (or equivalent legislation) applicable to an issuer and its constating documents. Issuers should review their applicable corporate law or other governing statutes and any exemptions or guidance provided by the corporate law regulator or equivalent in the applicable jurisdiction.
Issuers should also refer to the CSA press release Canadian securities regulators provide guidance on conducting Annual General Meetings during COVID-19 outbreak that was issued on March 20, 2020.
For more information, see Practice Note, Management Information Circular: The Impact of COVID-19 on Regulatory Requirements Relating to Annual Meetings.
Issuers that have urgent concerns with respect to these matters are encouraged to contact their principal regulator.

Annual Information Form

The Temporary Relief provides only a filing exemption for an AIF. It does not provide an exemption from the content requirement. An issuer may utilize the Temporary Relief with respect to the filing of an AIF provided the conditions of the Temporary Relief are met.

Normal Course Issuer Bids

An issuer should not make purchases of its own securities pursuant to a normal course issuer bid while it is in possession of material undisclosed information, except to the extent that such purchases are made pursuant to an automatic securities purchase plan that is established and conducted in a manner consistent with the principles set out in OSC Staff Notice 55-701 Automatic Securities Disposition Plans and Automatic Securities Purchase Plans. These views are consistent with requirements under the by-laws, rules, regulations and policies of designated exchanges (see, for example, section 629(l)6 of the TSX Company Manual). Issuers should carefully assess whether they are in possession of material undisclosed information.
Where an issuer is relying on the Temporary Relief, there may be a heightened risk that the issuer, its management and other insiders may have material information that has not been publicly disclosed. If reliance on the Temporary Relief means that the issuer, its management and insiders are in possession of material undisclosed information, CSA staff expect the issuer to suspend any normal course issuer bids that are in operation (except where an automatic securities purchase plan has previously been established and is operative).
Generally, CSA staff expect that an issuer will not make purchases of its own securities in reliance on the normal course issuer bid exemptions (except pursuant to previously established and operative automatic securities purchase plans) until such time as the issuer’s black-out policy is no longer applicable to its management and other insiders and all material undisclosed information has been disseminated.
For more information, see the following Practice Notes:

Insider Reporting

The Temporary Relief does not provide an extension period for insider reports, including those related to compensation plans. Insiders continue to be required to file their insider reports on SEDI within the required period.
For more information, see Practice Note, Insiders: Insider Reporting.

Issuer in Multiple Jurisdictions

The blanket orders are substantively harmonized across Canada. There are some minor areas of difference including those described below. Issuers relying on the blanket orders for an exemption discussed below will need to review the blanket order in each applicable jurisdiction.
The blanket orders contain differences in respect of the Offering Memorandum Exemption (OM Exemption) in section 2.9 of National Instrument 45-106 - Prospectus Exemptions (NI 45-106) as the ongoing disclosure requirements for issuers relying on the OM Exemption vary by jurisdiction and, where applicable, are out set out in different subsections of section 2.9 of NI 45-106:
Ontario, Alberta, Saskatchewan, Quebec, Nova Scotia and New Brunswick have provided the exemption from the ongoing disclosure requirements in connection with distributions made under the OM Exemption (OM Ongoing Disclosure Exemption) in their blanket orders listed above. An issuer that has relied on the OM Exemption to distribute securities in other jurisdictions may want to review the blanket orders in those jurisdictions to ensure that the issuer is complying with the exemptions from those requirements.
The blanket orders in British Columbia, Manitoba, Newfoundland and Labrador, Northwest Territories, Prince Edward Island and Yukon do not provide the OM Ongoing Disclosure Exemption because those requirements do not apply in those jurisdictions.
Section 11 of OSC Instrument 51-502, ASC Blanket Order 51-517, FCNB Blanket Order 51-507 and section 5 of FCAA General Order 51-501 permit a filer relying on the filing extension for certain filings under the OM Exemption to simply refer to the order of the principal regulator of the filer in the news release required to be issued to announce the issuer’s reliance on the filing extension. Section 5 of AMF Decision 2020-PDG-0023, section 3 of NSSC Blanket Order 51-509 and section 3 of FCAA General Order 51-501 contain a similar provision.
For more information about the OM Exemption, see Practice Note, Private Placement Offerings in Canada: Overview: Offering Memorandum Exemption.
Issuers with specific questions about a blanket order should contact the applicable securities regulator.

OM Ongoing Disclosure Exemption

Non-reporting issuers that have used the OM Exemption in Saskatchewan, Quebec and New Brunswick may be required to file materials, including the news release required under the OM Ongoing Disclosure Exemption, on SEDAR and therefore may be SEDAR filers.
Non-reporting issuers in Alberta that have used the OM Ongoing Disclosure Exemption are required to file the news release on SEDAR as a condition of ASC Blanket Order 51-517.
Non-reporting issuers that have used the OM Exemption in Nova Scotia are required to file the news release on SEDAR.
Issuers should refer to Multilateral CSA Staff Notice 13-323 Frequently Asked Questions About Making Exempt Market Offering and Disclosure Filings on SEDAR and, when applicable, the SEDAR Filer Manual for further details.
For more information about SEDAR filing, see Practice Note, SEDAR Filing Fees and How to Calculate Them.
Issuers planning to rely on the OM Exemption have to include in the offering memorandum audited annual financial statements within 120 days after year-end. The Temporary Relief does not provide relief from any disclosure requirements set out in the required form of offering memorandum (Form 45-106F2 or Form 45-106F3) to include annual financial statements. Accordingly, if an issuer chooses to conduct an offering under the OM Exemption in section 2.9 of NI 45-106 during the period from March 23, 2020, to June 1, 2020, the offering memorandum would have to contain the annual financial statements required by the applicable form under section 6.4 of NI 45-106.
Issuers should refer to the OM Ongoing Disclosure Exemption in the applicable blanket order in Alberta, New Brunswick, Nova Scotia, Ontario, Quebec and Saskatchewan. The OM Ongoing Disclosure Exemption only applies to the requirement in subsections 2.9(17.4) and (17.5) of NI 45-106 for an issuer to deliver audited annual financial statements to the securities regulatory authority in Alberta, New Brunswick, Ontario, Quebec and Saskatchewan.
The OM Ongoing Disclosure Exemption applies to the requirement in subsection 2.9(17.6) of NI 45-106 for an issuer to make reasonably available annual financial statements to securityholders in Nova Scotia.
If an issuer relies on the OM Ongoing Disclosure Exemption in the applicable blanket order for the annual financial statements required by subsection 2.9 (17.4), (17.5) or (17.6) of NI 45-106, it would have an additional 45 days to deliver the financial statements required by that subsection.
For more information about the OM Exemption, see Practice Note, Private Placement Offerings in Canada: Overview: Offering Memorandum Exemption.

Report of Exemption Distribution

Issuers that distribute securities relying on prospectus exemptions that require a report of exempt distribution (Form 45-106F1) are required to file the report within the time periods specified in section 6.1 of NI 45-106 or in the specific exemption (which is generally ten days following the distribution). For more information, see NI 45-106 Prospectus Exemptions in Canada: Chart and Practice Note, Conducting a Private Placement Offering in Canada: Overview: Filing Exempt Distribution Reports.

News Releases

Issuers that are listed on exchanges are still required to comply with the rules, regulations and policies of the applicable exchange, including those related to the dissemination of a news release. This may also include compliance with IIROC requirements. Issuers that are also foreign reporting issuers in jurisdictions outside of Canada must also comply with applicable rules in those jurisdictions. Issuers that are SEDAR filers but whose securities are not listed on any stock exchange and that do not report in jurisdictions outside of Canada are only required to issue and file the news release on SEDAR.

Management Cease Trade Order (MCTO)

If an issuer is subject to a management cease-trade order (MCTO) and the issuer cannot file the outstanding continuous disclosure documents by the date expected in accordance with NP 12-203, the issuer cannot rely on the extension period in the blanket order with respect to the outstanding filings. The issuer should contact the CSA jurisdiction that issued the MCTO as soon as possible if the issuer expects it will not be able to file the outstanding continuous disclosure documents by the date expected in accordance with NP 12-203. For more information, see Practice Note, Revoking a Cease Trade Order for Failure to File Financial Statements.

Extension Period

If an issuer is relying on the Temporary Relief but is unable to meet its filing and delivery obligations by the end of the extension period, it should contact their principal regulator as soon as possible and before the end of the extension period. An MCTO application may be appropriate in these circumstances.
An issuer that has concerns about filing by a due date that is after June 1, 2020, should contact their principal regulator.
As noted in the CSA news release Canadian securities regulators publish blanket relief for market participants due to COVID-19 dated March 23, 2020, the CSA is closely monitoring the situation and will consider whether further relief or extension is necessary.

Practical Law Resources

For more information on disclosure requirements and legal implications of COVID-19, see the following Practical Law resources: