Canada: TSX Amends Proposal For New Website And Equity Compensation Plan Disclosure

On April 6, 2017, the Toronto Stock Exchange (TSX) published for comment a revised version of proposed amendments (Revised Amendments) to Part IV and Part VI of the TSX Company Manual (Manual) and certain other ancillary amendments to the Manual. The Revised Amendments are a revision to proposed amendments (May 2016 Proposal) that were originally published for comment by the TSX on May 26, 2016, in response to comments received on that previous proposal. For a summary of the original proposed amendments, please see our June 2016 Blakes Bulletin: TSX Proposes New Website and Equity Compensation Plan Disclosure.

BACKGROUND

The May 2016 Proposal would have introduced website disclosure requirements for all TSX listed issuers that were in addition to, and in some cases different than, the materials that must be filed with the Canadian Securities Administrators on the System for Electronic Document Analysis and Retrieval (SEDAR), including disclosure of the full text of all security based compensation plans such as stock option plans. In addition, the May 2016 Proposal proposed to amend the disclosure requirements for security based compensation arrangements in Part VI of the Manual, in particular by introducing a new disclosure form, Form 15 – Disclosure of Security Based Compensation Arrangements (Form 15) and new requirements for disclosure of "burn rate" under security based compensation arrangements.

The TSX received 15 letters from commenters on the May 2016 Proposal. Some commenters were generally supportive of the May 2016 Proposal, or certain aspects of it. Others expressed concerns with the May 2016 Proposal including an increase to the regulatory burden on listed issuers; disclosure requirements that were duplicative of, or in addition to, those under applicable Canadian securities laws; uncertainty over certain types of documents proposed to be required to be posted on a listed issuer's website; and concerns regarding significant proposed changes to equity-based compensation plan disclosure.

The TSX has revised the May 2016 Proposal as a result of comments received and has published the Revised Amendments for comment.

REVISED PART IV AMENDMENTS

Proposed Amendments

In the Revised Amendments, the TSX has proposed a new section 473 to the Manual with a more limited list of governance documents a listed issuer would be required to make available on its website (as compared to the May 2016 Proposal). The Revised Amendments would require listed issuers to make available current, effective versions of the following documents (or their equivalent), as applicable:

  1. Articles of incorporation, amalgamation, continuation or any other constating or establishing documents of the issuer and its bylaws
  2. If adopted, copies of:

    • Majority voting policy
    • Advance notice policy
    • Position descriptions for the chairman of the board, the lead director and key officers
    • Board mandate
    • Board committee charters

The TSX stated in the request for comment that, following discussion with interested parties, including institutional investors who are members of the Canadian Coalition for Good Governance, it continues to believe that there is value in providing investors with a centralized location for a listed issuer's corporate governance information. While it recognizes the concern that the Revised Amendments will result in an increased regulatory burden, the TSX states that it believes the "modest increase" in regulatory burden is outweighed by the benefits to investors.

These proposed requirements are scaled back somewhat from what would have been required by the May 2016 Proposal. In particular, security holder rights plans, security based compensation arrangements and various ethical, anti-corruption and "other environmental, social and governance policies" have been removed from the proposed list of required documents in the Revised Amendments. To the extent this removes some of the uncertainty in the May 2016 Proposals and somewhat reduces the regulatory burden, it will likely be a welcome change for listed issuers.

Exemption for Non-Corporate Issuers

The Revised Amendments would also amend Part XI of the Manual to provide that "Non-Corporate Issuers" (as defined in the Manual) would not be subject to the new section 473 requirements for website disclosure of security holder information. Non-Corporate Issuers include certain exchange-traded funds, issuers of exchange-traded notes, closed-end funds and issuers of certain structured products where an investor's return is contingent on, or highly sensitive to, changes in the value of underlying assets, indices, interest rates or cash flows. Such a provision was not included in the May 2016 Proposal.

Specific Requests for Comment

The TSX has asked for comments on a number of specific questions relating to the Part IV Amendments, including:

  • Should the proposed section 473 require an issuer to disclose, if adopted, its (a) code of business conduct and ethics, (b) diversity policy, (c) anti-corruption policy, (d) human rights policy, (e) environment policy or (f) health and safety policy?
  • Should certain types of issuers (e.g., Eligible Interlisted Issuers or Eligible International Interlisted Issuers) be exempt from the requirements of proposed section 473? If so, please provide an explanation of why they should be exempt.
  • Are there other modifications TSX should make to the list of documents proposed to be made available?

REVISED PART VI AMENDMENTS

Proposed Amendments

The TSX stated that a significant number of commenters to the May 2016 Proposals were not supportive of the proposed introduction of a new Form 15 disclosure for security based compensation plans. Accordingly, the proposed Form 15 disclosure has been deleted from the Revised Amendments. The existing disclosure requirements for security based compensation arrangements (in section 613 of the Manual) are proposed to remain in place largely in their current form, but with new requirements for burn rate disclosure and amended disclosure for the maximum number of awards issuable, the number of outstanding awards and the number of awards available for grant.

The change from the May 2016 Proposals, to largely revert back to the existing disclosure requirements for security based compensation arrangements, reflects in part that the Revised Amendments relating to website disclosure no longer propose required disclosure of the text of security based compensation arrangements on the issuer's website.

Burn Rate

In the April 6 request for comment, TSX stated that there was support for "burn rate" disclosure, with certain modifications and that the proposal for such disclosure in the Revised Amendments is derived from the comments received.

Under the Revised Amendments, disclosure of the annual burn rate of each security based compensation arrangement would be required. Under a new section 613(p) of the Manual, the burn rate would be expressed as a percentage and calculated by dividing the number of awards granted under the arrangement during the applicable fiscal year, by the weighted average number of securities outstanding for the applicable fiscal year (calculated in accordance with the CPA Canada Handbook).

If the award includes a multiplier, a listed issuer would be expected to provide details in respect to such multiplier.

Under the Revised Amendments, for security holder meetings where security holder approval will be sought at a meeting for a matter relating to a security based compensation arrangement (Approval Meeting), listed issuers would be expected to disclose the annual burn rate for each of the listed issuer's three most recently completed fiscal years for the relevant arrangement. Where the arrangement has not existed for a listed issuer's last three fiscal years (including predecessor security based compensation arrangements which were similar) or where the arrangement was approved by security holders within a listed issuer's last three fiscal years, listed issuers would be expected to disclose the annual burn rate for each of the listed issuer's fiscal years completed since adoption or the most recent security holder approval.

For annual security holder meetings where security holder approval will not be sought for a security based compensation arrangement matter, listed issuers would be expected to disclose the annual burn rate for the listed issuer's most recently completed fiscal year.

Disclosure of Awards Issuable, Outstanding and Available for Grant

The Revised Amendments propose to amend section 613(d) of the Manual to clarify the type of disclosure required in respect of the maximum number of awards issuable, the number of outstanding awards and the number of awards available for grant. Specifically, if implemented, the Revised Amendments would require disclosure in shareholder meeting materials of:

  • Plan Maximum: the maximum number of securities issuable under each security based compensation arrangement expressed as a fixed number (together with the percentage this number represents relative to the number of issued and outstanding securities of the listed issuer) or fixed percentage of the number of issued and outstanding securities of the listed issuer
  • Outstanding Securities Awarded: the number of outstanding securities awarded under each security based compensation arrangement, together with the percentage this number represents relative to the number of issued and outstanding securities of the listed issuer
  • Remaining Securities Available for Grant: the number of securities under each security based compensation arrangement that are available for grant, together with the percentage this number represents relative to the number of issued and outstanding securities of the listed issuer

Timing of Disclosure

As was the case in the May 2016 Proposal, the Revised Amendments would amend section 613 to state that for annual meetings (including Approval Meetings), the required disclosure about security based compensation arrangements would be required to be prepared as at the end of the listed issuer's most recently completed fiscal year. For Approval Meetings, other than annual meetings, the information (other than annual burn rate) would continue to be provided as at the date of the shareholder meeting materials.

Specific Requests for Comment

The TSX has asked for comments on specific questions relating to the Part VI Amendments, including:

  • Should the requirement to disclose static terms of a security based compensation arrangement (e.g., financial assistance, vesting, etc.) be limited to Approval Meetings?
  • Is the burn rate and the formula for calculating it useful and appropriate disclosure?

COMMENT PERIOD

The Revised Amendments are open for comment until May 8, 2017.

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
23 Nov 2018, Other, Toronto, Canada

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

28 Nov 2018, Speaking Engagement, Toronto, Canada

Arbitration has a number of advantages and some disadvantages for the resolution of domestic and international commercial disputes.

 
In association with
Related Topics
 
Related Articles
 
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