Canada: Issuers Cautiously Adopt Notice-And-Access This Proxy Season

The numbers are in and we've counted them. The notice-and-access system – under which public issuers may post proxy information circulars online rather than distribute them by mail – was adopted by a total of 319 companies this proxy season. This number, a small fraction of the approximately 3,500 companies currently listed on the Toronto Stock Exchange (TSX) and TSX Venture Exchange (TSXV), indicates that issuers as a whole are proceeding cautiously with respect to electronic communication with shareholders, still preferring to distribute paper copies. Few CBCA issuers are seeking an exemption to use notice-and-access.

NOTICE-AND-ACCESS PROCESS

Notice-and-access, as provided for in National Instrument 54-101 Communication with Beneficial Owners of Securities of a Reporting Issuer (NI 54-101), permits a reporting issuer (that is not an investment fund) to distribute proxy-related materials relating to a meeting to beneficial owners by posting the information circular on a website in addition to SEDAR and sending – in most cases by mail – a voting instruction form and a notice package informing the shareholders how to access the posted materials. The reporting issuer must also satisfy other requirements in the instrument, such as provision of a toll-free telephone number by which shareholders can request a paper copy of the information circular.

National Instrument 51-102 Continuous Disclosure Obligations (NI 51-102) allows a reporting issuer to distribute proxy-related materials by notice-and-access to its registered shareholders so long as that delivery method is permitted under the reporting issuer's corporate law statute. For instance, the Canada Business Corporations Act (CBCA) allows sending by notice-and-access for registered shareholders and beneficial owners only if the recipient has consented in writing.

WHO IS ADOPTING NOTICE-AND-ACCESS, AND HOW?

Notice-and-access was launched in February 2013, partway through the 2013 proxy season. Most issuers have a December 31 year-end and are required to hold annual meetings by June 30. While the notice-and-access procedures may increase set-up and  handling costs, and its notice packages must be sent earlier (30 days before the meeting) than paper proxy materials (21 days), these disadvantages are expected to be offset by significant savings for issuers in printing and postage costs.

To determine the level of adoption of notice-and-access, we identified all notice packages filed between October 1, 2013 and July 15, 2014. We then dissected the search results to compare issuers based on a variety of characteristics.

We learned that:

  • Notice-and-access was adopted most frequently by issuers incorporated in Ontario (134), followed by British Columbia (78) and Alberta (47)
  • Only 34 CBCA issuers adopted it, representing less than 5 per cent of the over 700 distributing or publicly held CBCA corporations, even though according to Industry Canada, CBCA corporations make up approximately 50 per cent of Canada's largest business corporations
  • 16 per cent (160 issuers) of TSX non-investment fund issuers and 6.5 per cent (133 issuers) of TSXV issuers have adopted notice-and-access
  • Notice-and-access has been adopted by issuers across all asset sizes. Of the 319 adopters, 101 issuers had less than C$5 million in assets, while 57 issuers had greater than C$1 billion in assets. This suggests that the cost advantages of notice-and-access are being recognized by both large and small issuers.
  • Issuers are adopting notice-and-access predominantly for annual meetings or annual meetings with some special business. Only one issuer used notice-and-access for a special meeting. Most significantly, none of the meetings involving proxy contests appeared to use notice-and-access. This suggests that issuers prefer to still use traditional proxy solicitation methods for those meetings with particularly important resolutions to be considered.
  • Issuers employed a variety of stratification strategies in order to adopt notice-and-access only in respect of certain types of shareholders. For instance, some issuers chose to distribute materials by notice-and-access only to beneficial shareholders or only to shareholders who consented to electronic delivery. As explained below, strategic stratification policies can ensure that issuers stay on side of the corporate law statute under which they are incorporated.

HOW ARE ISSUERS USING NOTICE-AND-ACCESS UNDER CBCA?

Our review of the data also yielded some insight into how issuers incorporated under the CBCA are using notice-and-access. The CBCA poses a particular challenge because while its regulations expressly contemplate use of notice-and-access, it is a condition of that use that the addressee has consented in writing. Section 150 of the CBCA deals with sending proxy circulars to registered shareholders, while section 153 (unusually for corporate legislation) deals with intermediaries sending proxy circulars to beneficial owners. The Director under the CBCA can grant an exemption from section 150 pursuant to section 151, but has no power to grant exemptions from section 153.

Only 18 of the 34 CBCA notice-and-access adopters received a section 151 exemption for a specifically identified meeting. Under the terms of the exemptions that were granted, those issuers did not need to comply with the strict wording of the CBCA in the distribution of proxy materials to registered shareholders so long as the materials were distributed by notice-and-access in accordance with NI 54-101 and NI 51-102.

Of the 16 CBCA notice-and-access adopters that did not receive an exemption, many employed stratification strategies that allowed them to use notice-and-access while complying with the CBCA requirements. These issuers distributed proxy materials by notice-and-access either only to registered shareholders who had expressly consented to electronic delivery or only to beneficial shareholders. For this latter group, since there is no Director's exemption and the consent requirement still applies, the issuers were presumably relying upon intermediaries having obtained the necessary consent from beneficial owners, such as having consent included in the terms of brokerage account agreements.

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.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Events from this Firm
26 Oct 2018, Other, Vancouver, Canada

Cybersecurity, including data privacy and security obligations, has become a critical chapter in every company’s risk management playbook.

30 Oct 2018, Other, Toronto, Canada

Please join us for discussions on recent updates and legal developments in pension and employee benefits as well as employment law issues.

12 Nov 2018, Other, Toronto, Canada

Stories aren’t falsehoods. Stories are the root of all effective human communications: they motivate, animate and clarify. If you aren’t telling stories, you probably aren’t getting your point across.

Similar Articles
Relevancy Powered by MondaqAI
 
In association with
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions