On March 17, 2008, National Instrument 51-102, Continuous Disclosure Obligations (the "Instrument") was amended (the "Amendments"). The Amendments include, among other things, significant changes to the requirement of reporting issuers ("Issuers") to file material contracts on SEDAR. Prior to the Amendments, Issuers were not required to file material contracts on SEDAR entered into in the ordinary course of business. The Amendments set forth a list of categories of material contracts that must be filed on SEDAR notwithstanding the fact that they are entered into in the ordinary course of business. Issuers are encouraged to carefully review these categories, set out below, to determine whether certain of their material contracts need to be filed on SEDAR as a result of the Amendments. This may result in Issuers having to file material contracts entered into in the ordinary course dating back to January 1, 2002, if such contracts are still in effect.

Summary of Obligations to File Material Contracts Under the Instrument Prior to the Amendments

Previously, Issuers were required to file each contract that (i) was material to the Issuer, (ii) was entered into within the last financial year, or, was entered into since January 1, 2002 and is still in effect and (iii) was not entered into in the ordinary course of business. Whether a contract was entered into "in the ordinary course of business" is a question of fact that Issuers should consider in the context of their business and industry.

Summary of Significant Changes

The most significant change resulting from the Amendments is that Issuers are now required to file contracts that are entered into in the ordinary course of business which fall into certain specified categories. These categories are:

  • a contract, other than an employment contract to which directors, officers or promoters are a party;
  • a continuing contract to sell the majority of an Issuer's products or services or to purchase the majority of an Issuer's requirements of goods, services or raw materials;
  • a franchise or licence agreement to use a patent, formula, trade secret, process or trade name;
  • a financing or credit agreement with terms that have a direct correlation with anticipated cash distributions;
  • an external management or external administration agreement; such agreements include agreements between an Issuer and a third party or an affiliate of an Issuer, in which the latter provides management or other administrative services to the Issuer; and
  • a contract on which an Issuer's business is substantially dependent; this would be a contract that is so significant that an Issuer's business depends on the continuance of the contract; one example of this would be a financing or credit agreement from which an Issuer receives a majority of its capital and for which no alternative financing on similar terms can be obtained.

Determining When to File Material Contracts

In accordance with the Instrument, a material contract must be filed no later than (i) the time an Issuer files a material change report, if the entering into of the material contract constitutes a material change for the Issuer, or (ii) no later than when the Issuer's annual information form is filed.

Redaction of Material Contracts to be Filed

The Instrument permits an Issuer to redact provisions from material contracts which are confidential or which, if disclosed, would be seriously prejudicial to the Issuer. Nonetheless, certain provisions may not be redacted. These include:

  • debt covenants and ratios in financing or credit agreements;
  • events of default or other terms relating to the termination of a material contract; and
  • other terms necessary for understanding the impact of the material contract on the business of the Issuer, such as the duration of a patent, trademark, license, franchise, concession or similar agreement, disclosure about related party transactions, contingency, indemnification, non assignment or change of control clauses and take or pay clauses.

Notwithstanding the above, securities regulators may grant an exemption to permit the redaction of such clauses if such disclosure would violate a confidentiality provision and if the material contract in question was negotiated prior to the coming into force of the Amendments. In deciding to grant such an exemption, the regulator may consider, among other things, whether an executive officer of the Issuer reasonably believes that the disclosure would be prejudicial to the Issuer and whether the confidentiality provision in question may be waived. Finally, if a provision is redacted, the Issuer must include a brief description of the type of information that has been redacted.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.