Editor: Martine Guimond.
On November 29, 2012, the Canadian Securities Administrators (the "CSA") announced the adoption of amendments to National Instrument 54-101 Communication with Beneficial Owners of Securities of a Reporting Issuer ("NI 54-101") and National Instrument 51-102 Continuous Disclosure Obligations (together, the "Amendments") that modernize and enhance communication between reporting issuers and their shareholders by allowing greater use of the internet for delivering proxy-related materials. The CSA said that the Amendments are specifically designed to improve procedures for reporting issuer communications with investors who hold securities through intermediaries such as dealers, trust companies and banks, with the aim of increasing the efficiencies of the proxy voting process by reducing the volume of documents sent to shareholders. It is expected that the Amendments will take effect on February 11, 2013, but reporting issuers will be able to take advantage of the Amendments only for security holder meetings taking place on or after March 1, 2013.
Key Features of Notice-and-Access
The Amendments allow reporting issuers (other than investment funds) to use a new notice-and-access mechanism ("notice-and-access") via the internet to send proxy-related materials to security holders rather than printing and mailing all proxy-related materials. With notice-and-access, a reporting issuer may deliver materials by:
- posting the relevant information circular (and other proxy-related materials) on a website, other than SEDAR (for example, the issuer's website or the website of a service provider); and
- sending a notice package (the "Notice Package") informing beneficial owners that the proxy-related materials have been posted, and explaining how to access them.
Record Date for Notice
In order to use notice-and-access, a reporting issuer must set the record date for notice of the meeting to be at least 40 days before the meeting (the "Record Date for Notice").
Notification in Advance of First Use of Notice-and-Access
The form of notification of meeting and record dates (the "Notification") set out in NI 54-101 has been amended to include the following:
- whether the reporting issuer is sending the proxy-related materials to registered holders or beneficial owners using notice-and-access and, if stratification1 will be used, the types of registered holders or beneficial owners who will receive paper copies of the information circular or other proxy-related materials;
- whether the reporting issuer is sending the proxy-related materials directly to non-objecting beneficial owners of its securities ("NOBOs"); and
- whether the reporting issuer intends to pay for a proximate intermediary to send the proxy-related materials to objecting beneficial owners of its securities ("OBOs").
The Notification must be filed at least 25 days before the Record Date for Notice when the issuer is using notice-and-access for the first time (e.g., at least 65 days before the meeting). For subsequent meetings, the issuer can abridge the timeline for filing the Notification to 3 business days before the Record Date for Notice.
Under notice-and-access, the Notice Package sent to shareholders consists of a notice in the required form (the "Notice") and the relevant voting document (a form of proxy or voting instruction form).
The Notice must contain the following information:
- the date, time and location of the meeting;
- a description of each matter or group of related matters identified in the form of proxy to be voted on, unless that information is already included in the form of proxy or request for voting instructions that is being sent to shareholders;
- the website addresses for SEDAR and the non-SEDAR website where the proxy-related materials are posted;
- a reminder to review the information circular before voting;
- an explanation of how to obtain from the reporting issuer a
paper copy of:
- the information circular; and
- if applicable, financial statements of the reporting issuer to be approved at the meeting, and MD&A related to those financial statements, which may be part of an annual report (collectively, the "Financial Information"); and
- a plain-language explanation of notice-and-access that includes
the following information:
- if the reporting issuer is using stratification, a list of the types of registered holders or beneficial owners who will receive paper copies of the information circular and, if applicable, the Financial Information;
- the estimated date and time by which a request for a paper copy of the information circular and, if applicable, the Financial Information, is to be received in order for the requester to receive the paper copy in advance of any deadline for submission of the proxy or voting instructions and the date of the meeting;
- an explanation of how the registered holder or beneficial owner is to return the proxy or voting instructions, respectively, including any deadline for return of the proxy or those voting instructions;
- the sections of the information circular where disclosure regarding each matter or group of related matters identified in the notice can be found; and
- a toll-free telephone number the registered holder or beneficial owner can call to get information about notice-and-access.
Sending of Notice Package
The Amendments contemplate that the Notice Package may be sent by prepaid mail, courier or the equivalent, or, if prior consent has been obtained, electronically. The CSA has also advised that, if a service provider offers an e-delivery method (e.g., an email is sent with hyperlinks to all the proxy-related materials) that is distinct from notice-and-access and that is otherwise compliant with securities legislation, such delivery method can continue to be used in conjunction with notice-and-access.
A reporting issuer using notice-and-access must send the Notice Package to registered holders (and, if it is sending proxy-related materials directly to NOBOs using notice-and-access, to NOBOs) at least 30 days before the date of the meeting. In respect of mailings to beneficial owners to be done by Broadridge or a proximate intermediary, the issuer must deliver such materials to Broadridge or such proximate intermediary at least 3 business days before the 30th day before the date of the meeting, if the materials are to be sent by first class mail, courier or the equivalent, or at least 4 business days before the 30th day before the date of the meeting, if the materials are to be sent using any other type of prepaid mail.
Internet Access of Materials and Toll-Free Number
If a reporting issuer is using notice-and-access, it must also take the steps set out below.
- Provide public electronic access to the information circular and the Notice, on or before the date the issuer sends the Notice, by filing the documents on SEDAR and posting the documents on a website other than SEDAR (the "Non-SEDAR Website") for at least one year from the date the documents are posted. The issuer must also post on the Non-SEDAR Website any disclosure material regarding the meeting that the reporting issuer has sent to registered holders or beneficial owners of its securities, and any written communications the issuer has made available to the public regarding each matter or group of matters to be voted on at the meeting, whether or not they were sent to registered holders or beneficial owners of its securities. Documents posted on the Non-SEDAR Website must be posted in a manner and be in a format that permits an individual with a reasonable level of computer skill and knowledge to access, read and search the documents on the website, and to download and print the documents. The issuer must not collect information that can be used to identify a person or company who has accessed the Non-SEDAR Website.
- Provide a toll-free telephone number for use by registered holders and beneficial owners to request a paper copy of the information circular and, if applicable, the Financial Information, at any time from the date that the issuer sends the Notice up to and including the date of the meeting, including any adjournment. If a request for such documents is received, a paper copy must be sent free of charge by the issuer to the requester at the address specified in the request within 3 business days after receiving the request by first class mail, courier or the equivalent, if the request is received prior to the date of the meeting. Where the request is received on or after the date of the meeting, and within one year of the information circular being filed, the paper copy must be sent within 10 calendar days after receiving the request. If an issuer receives a request, the issuer cannot ask for any information about the requester, other than the name and address to which the documents are to be sent, and the issuer cannot disclose or use the name or address of the requester for any purpose other than sending the requested documents.
New Information Circular Disclosure Requirements
The Amendments require a reporting issuer to provide the following disclosure in its information circular: (a) whether the issuer is sending proxy-related materials to registered holders or beneficial owners using notice-and-access and, if stratification will be used, a description of the types of registered holders or beneficial owners who will receive paper copies of the information circular and, if applicable, the Financial Information; (b) whether the issuer is sending proxy-related materials directly to NOBOs; and (c) whether the issuer intends to pay for an intermediary to deliver to OBOs the proxy-related materials and request for voting instructions and, if the issuer does not intend to pay for such delivery, a statement that OBOs will not receive the materials unless the OBO's intermediary assumes the costs of delivery.
Simplification of Beneficial Owner Proxy Appointment Process
The Amendments attempt to simplify the process by which beneficial owners of securities may attend and vote their own securities at securityholder meetings. The Amendments have removed the requirement for beneficial owners to be sent a legal proxy and instead require the reporting issuer or intermediary (as applicable) to arrange, without expense to the beneficial owner, to appoint the beneficial owner or a nominee of the beneficial owner as a proxy holder if the beneficial owner has instructed the issuer or intermediary to do so either by having filled in and submitted a request for voting instructions sent to the beneficial owner or by having submitted any other document in writing that requests that the beneficial owner or a nominee of the beneficial owner be appointed as proxyholder. A reporting issuer or intermediary who so appoints a beneficial owner as a proxy holder must deposit the proxy within any time specified for the deposit in the information circular if the reporting issuer or intermediary obtains the instructions from the beneficial owner at least one business day before the termination of that time.
1. "Stratification", in relation to a reporting issuer using notice-and-access, means procedures whereby a reporting issuer may choose to include a paper copy of the information circular and, if applicable, the Financial Information, with the Notice Package sent to some shareholders.
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.