On April 9, 2010, the Canadian Securities Administrators (CSA)
published Proposed Amendments to National Instrument 54-101 Communication with
Beneficial Owners of Securities of a Reporting Issuer and
other related instruments and policies that are designed to
introduce efficiencies to the procedures used by a reporting issuer
to communicate with the beneficial owners of its securities. The
two most significant changes to NI 54-101 contained in the Proposed
Amendments are the introduction of a "notice-and-access"
procedure for the delivery of proxy-related materials and the
simplification of the process for beneficial owners to appoint
The most interesting change to the existing requirements is the
introduction of a notice-and-access procedure that would permit a
reporting issuer to voluntarily elect to send proxy-related
materials to beneficial owners by posting the information circular
on the issuer's website. To utilize the notice-and-access
procedures, the reporting issuer would be required to:
send each beneficial owner a brief notice containing prescribed
information advising the beneficial owner that the proxy-related
materials have been posted, and explaining how to access them;
issue a news release at least 30 days before the meeting that
contains the information set out in the notice;
send a voting instruction form to each beneficial owner that
can be used to direct the voting of securities; and
establish a toll-free telephone number to permit beneficial
owners to request paper copies of the information circular and
send, at its expense, a paper copy to any beneficial owner that
SEC issuers that comply with the notice-and-access procedures in
the US would be exempt from complying with the Canadian
It is currently proposed that the notice-and-access procedures
would only be available for meetings where no fundamental changes
are being voted on by securityholders. The CSA states that they
would like to monitor implementation of the procedures before
extending them to these "special meetings."
Beneficial Owner Proxy Appointment
The existing "legal proxy" process prescribed by NI
54-101 to enable a beneficial owner of securities to appoint a
proxy and attend and vote at a meeting can be cumbersome,
time-consuming and confusing. The Proposed Amendments would require
intermediaries and reporting issuers to arrange to appoint the
beneficial owner as the proxy holder, if he or she so requests, at
no expense to the beneficial owner and to deposit the proxy by any
relevant cut-off. The Proposed Amendments provide intermediaries
and reporting issuers with flexibility as to how to best meet these
obligations. For example, it could be as simple as permitting the
beneficial owner to print his or her name (or the name of his or
her appointee) in a space provided on the voting instruction form.
That information could then be provided to the proxy tabulator or
meeting scrutineer to enable the beneficial owner or other
appointees to attend and vote at the meeting.
The Proposed Amendments also contain requirements for:
enhanced disclosure in information circulars regarding the
beneficial owner voting process;
stricter rules on the use of beneficial ownership information
by third parties;
indirect sending procedures; and
certain other changes to the technical aspects of the
beneficial owner communication procedures.
Deadline for Comments
The deadline for the submission of comments on the Proposed
Amendments is August 31, 2010. The CSA states that it has provided
this extended comment period to accommodate the 2010 proxy season.
We would be pleased to raise with the CSA, on your behalf, any
comments you may have on the Proposed Amendments or on the proxy
voting system as a whole.
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.
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