On November 29, 2012 the Canadian Securities Administrators (CSA) adopted amendments to National Instrument 54-101 Communication with Beneficial Owners of Securities of a Reporting Issuer, National Instrument 51-102 Continuous Disclosure Obligations and certain related forms and policies (the Amendments). The Amendments intend to improve shareholder communication by introducing a "notice-and-access" system which will allow issuers to satisfy delivery requirements for shareholder meeting materials by posting such materials online. The Amendments also require reporting issuers to provide enhanced disclosure regarding the beneficial owner voting process and seek to simplify the beneficial owner proxy appointment process. If the necessary ministerial approvals are obtained, the Amendments will take effect February 11, 2013 but reporting issuers will only be permitted to use the notice-and-access process for meetings that are held on or after March 1, 2013.
What is notice-and-access?
Notice-and-access is a mechanism which allows reporting issuers other than investment funds to choose to deliver proxy-related materials to registered holders and beneficial owners of securities by posting such materials on a non-SEDAR website (usually the reporting issuer's website) rather than delivering such materials by mail (notice-and-access). Notice-and-access can be used to deliver materials for both special and general meetings. Reporting issuers may still choose to continue to deliver such materials by mail, and beneficial owners will be entitled to request delivery of a paper copy of the information circular at the reporting issuer's expense. In addition, notice-and-access can also be used to send the annual financial statements and related MD & A. As a reminder, reporting issuers that have obligations to communicate with securityholders and/or deliver securityholder materials under any other applicable legislation, such as corporate legislation, will also need to comply with those obligations.
Requirements of notice-and-access use
A reporting issuer who wishes to use notice-and-access must:
- set a record date for notice of the meeting which is at least 40 days prior to the meeting; and
- provide advance notice on SEDAR, in the notification of meeting and record dates prescribed by NI 54-101 of its intention to use notice-and-access at least 25 days prior to the record date set for notice of the first shareholders' meeting in respect of which notice-and-access is to be used (i.e. at least 65 days prior to the date of the meeting). Reporting issuers will be allowed to abridge the 25 day period to three business days before the record date for notice for subsequent meetings where notice-and-access is being used.
In order to rely on notice-and-access, reporting issuers must also send a notice package to all registered holders and beneficial owners indicating that they are relying on the process (the "Notice"). The Notice may be sent by mail or, if a shareholder consent has previously been obtained, by other delivery means (e.g. e-mail) at least 30 days before the date of the meeting. However, where the Notice is being forwarded by the issuer to proximate intermediaries for indirect delivery to beneficial owners, the Notice must be sent to such intermediaries at least three business days (for first class mail, courier or the equivalent) before the 30th day before the date of the meeting, or at least four business days, if any other type of prepaid mail is used, before the 30th day before the date of the meeting. The Notice must contain certain prescribed information including the following:
- a plain-language description of the notice-and-access process (including the estimated date and time by which a request for a paper copy of the information circular and, if applicable, annual financial statements and MD & A, is to be received in order for the requester to receive a paper copy in advance of any deadline for the submission of voting instructions and the date of the meeting);
- basic information about the meeting and matters to be voted on, together with cross references to the section of the information circular which describes the relevant matter;
- the website addresses for SEDAR and the non-SEDAR website where the proxy materials are made available;
- an explanation of how to obtain a copy of the information circular and, if applicable, annual financial statements and MD & A;
- a reminder to review the information circular before voting;
- an explanation of how a beneficial owner is to return voting instructions (including any applicable deadline for return); and
- a toll-free telephone number for security holders to obtain further information about notice-and-access or to obtain a copy of the information circular and, if applicable, annual financial statements and MD & A.
The Notice should be accompanied by the voting document (a form of proxy in the case of registered holders or a request for voting instructions for beneficial owners). A copy of the information circular may be included with the Notice where a security holder has requested a paper copy of the information circular by way of standing instructions. The documents included in the Notice must be filed on SEDAR and posted on a website other than SEDAR such as the issuer's website on or before the day that the reporting issuer sends the Notice.
Reporting issuers will also be permitted to mail with the Notice annual financial statements and MD & A. The current continuous disclosure rules provide that a reporting issuer can choose to send its annual financial statements and MD & A to all shareholders or can use an annual request form mechanism whereby shareholders can request such documents. Issuers will be able to use notice-and-access to send annual financial statements and MD & A to all shareholders or can choose to use the annual request mechanism which can contain a request to get a paper copy of the statements and MD & A (and the information circular if requested) in the Notice.
If a holder requests a paper copy of the information circular prior to the date of the meeting, the circular must be sent by first-class mail, courier or the equivalent within 3 business days of receipt of the request. If the request is received on or after the date of the meeting, and for a period of one year after the information circular has been filed, the issuer must send the circular by prepaid mail, courier or the equivalent within 10 calendar days of the request.
The use of notice-and-access is not restricted to proxy material where the solicitation is made by management of a reporting issuer but may be used also by third party participants such as dissidents.
Simplification of the beneficial owner proxy appointment process
Under the Amendments, these rules are simplified and an intermediary who is a registered holder who has voting authority on behalf of a beneficial owner must arrange to appoint the beneficial owner as proxy holder if the beneficial owner has given instructions to be appointed as proxy holder.
Enhanced disclosure in Information Circular
The Amendments require additional disclosure be included in the information circular outlining that the issuer is using notice-and-access and explaining in plain language of how a beneficial owner of securities can exercise its voting rights.
SEC issuer exemption
SEC issuers (as defined) who are subject to the notice-and-access procedures set out in federal US securities laws are exempt from the obligations imposed by the Amendments and can use the US delivery method but only if the SEC issuer has a limited Canadian presence. To rely on this exemption, residents of Canada may not own, directly or indirectly, voting securities of the SEC issuer carrying more than 50% of the votes for election of directors and none of the following can apply to the SEC issuer: (i) a majority of its executive officers or directors are Canadian residents, (ii) more than 50% of its consolidated assets are located in Canada; and (iii) its business is administered principally in Canada.
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