Privately held companies that enter into contracts with
Canadian reporting issuers (public companies) may be surprised
to learn that those contracts may become publicly available
through the Internet. Recent changes to National Instrument
51-102 Continuous Disclosure Obligations now require
reporting issuers to publicly file certain "material
contracts" entered into "in the ordinary course of
business" on SEDAR. Material contracts entered into on or
after January 1, 2002 and still in effect will also be subject
to this new filing requirement if they were not previously
Before these changes came into effect on March 17, 2008,
reporting issuers were not required to file on SEDAR material
contracts entered into "in the ordinary course of
business." A material contract is a contract to which a
reporting issuer or any of its subsidiaries is a party that is
material to the reporting issuer. It generally includes a
schedule, side letter or exhibit referred to in the contract,
as well as any amendment to the material contract.
Now, reporting issuers must file certain types of material
contracts which are entered into in the ordinary course of
business. These contracts include franchise, licence or other
agreements to use a patent, formula, trade secret, process or
trade name. In addition, material contracts on which the
reporting issuer's business is substantially dependent
are also subject to the new filing requirement. Thus, material
technology licensing agreements and outsourcing agreements may
need to be filed and could therefore become publicly
The National Instrument permits redacting or omitting
certain contractual provisions if an executive officer of the
reporting issuer reasonably believes the disclosure of that
provision would be seriously prejudicial to the interests of
the reporting issuer or would violate confidentiality
provisions. A one-sentence description of the type of
information omitted or redacted must be included.
It should be noted, however, that no omission or redaction
is possible if a provision relates to:
debt covenants and ratios in financing or credit
events of default or other terms relating to the
termination of the material contract; or
other terms necessary for understanding the impact of the
material contract on the business of the reporting
For material contracts entered into prior to March 17, 2008,
regulators may consider granting an exemption to redact certain
provisions if the disclosure of that provision would violate a
confidentiality provision. In considering whether to grant an
exemption, regulators will take into consideration a number of
whether an executive officer of the reporting issuer
reasonably believes the disclosure of the provisions would be
prejudicial to the interests of the reporting issuer;
whether the reporting issuer is unable to obtain a waiver
of the confidentiality provision from the other party.
McCarthy Tétrault Notes:
Privately held companies may want to include confidentiality
provisions in their contracts that include a right to approve
any redaction of the contract. While any approval right will
always be subject to the requirements of applicable law
(including those of the National Instrument), such a provision
would give privately held companies some ability to review what
sensitive contractual provisions are publicly available.
Reporting issuers will need to carefully review material
contracts still in effect that were entered into on or after
January 1, 2002 and that have not been previously filed. As
part of this review, close attention should be paid to any
existing confidentiality obligations in the agreements. Before
posting the contracts on SEDAR, confidential or prejudicial
information in the contracts and the schedules should be
redacted or omitted (if permitted by the National Instrument)
and a one-sentence description added. In addition, reporting
issuers must be careful not to disclose personal information in
contravention of privacy legislation.
Reporting issuers should also be mindful of the new filing
requirements when negotiating material contracts. In
particular, they should ensure that the confidentiality
provisions permit filing the contract on SEDAR. In adapting to
the new requirement, reporting issuers should also identify
standard form material contracts and establish a systematic
review process for those contracts.
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.
Under the Income Tax Act, the Employment Insurance Act, and the Excise Tax Act, a director of a corporation is jointly and severally liable for a corporation's failure to deduct and remit source deductions or GST.
Under the Income Tax Act, the Employment Insurance Act, the Canada Pension Plan Act and the Excise Tax Act, a director of a corporation is jointly and severally liable for a corporation's failure to deduct and remit source deductions.
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).