As a direct response to the COVID-19 outbreak, the Canadian Securities Administrators (CSA) have announced that they will publish a blanket order granting temporary relief from regular filings.
- Market participants, including public companies and others, will have the benefit of a 45-day extension for certain continuous disclosure, exempt market and other filings due before June 1, 2020.
- Reporting issuers choosing to rely on the blanket relief will not need to apply for management cease-trade orders (MCTOs) if they foresee being unable to file annual or interim financial statements before the applicable prescribed deadlines.
- The CSA has expressed support for issuers who choose to hold virtual-only shareholder meetings this proxy season in order to address social distancing measures.
- The CSA continues to monitor the impact of COVID-19 on Canadian capital markets and further guidance may be issued as warranted.
Filing Relief in the Face of COVID-19
As the impact of the global COVID-19 outbreak continues to evolve, Canadian issuers may find themselves in a position where they are unable to meet annual and quarterly financial statement filing deadlines, particularly as social distancing measures for staff and service providers (for example, audit teams) disrupt normal course audit or review plans and timelines. In response to these concerns, the CSA has announced its intention to grant blanket relief to market participants, including reporting issuers, extending the filing deadline for many continuous disclosure documents and other exempt market filings by 45-days. As stated in the CSA's press release, the blanket relief will apply to financial statements, management's discussion and analysis (MD&A), management reports of fund performance, annual information forms, technical reports and certain other filings. By way of example, this relief would extend by 45 days the usual 90 and 120 day deadlines for annual filings and the usual 45 and 60 day deadlines for interim filings, for venture and non-venture issuers respectively. Full details of the relief are expected to be published shortly.
This news represents a positive development for many issuers who would have potentially otherwise risked a filing default and failure-to-file cease trade orders (CTOs) preventing their securities from being traded or, alternatively, and as suggested by the CSA earlier this week, the requirement to seek a management cease trade order (MCTO). Cross-listed issuers or those otherwise reporting with the U.S. Securities and Exchange Commission or other foreign regulators will also need to ensure compliance is coordinated to the extent any relief available is not harmonized.
While such blanket relief may relieve some of the pressure faced by issuers, those who may plan to take advantage should still consider the broader implications of extended filing deadlines:
- Compliance with Credit Facilities and Other Contractual Obligations. Issuers should review any existing credit facilities to assess whether an extended filing deadline will be considered an event of default thereunder, particularly where there is no cure period for such default. Waivers should be requested promptly in such case. Issuers should also consider any other contractual obligations which may be impacted by a later filing.
- Continuation of "Black-Out" and Quiet Periods. Many issuers maintain regular black-out periods and quiet periods restricting trading by insiders or discussions with market participants. These periods often expire on release of the issuer's annual or quarterly financial statements. A delay in the release of the issuer's financial results will generally extend those windows.
- Subsequent Events. Delaying the filing of financial statements will affect the disclosure ultimately included in the financial statements and related MD&A, including the potential need for subsequent event disclosure. In light of business disruption as a result of COVID-19 and anticipated impacts on the issuer's financial performance and condition, this could include, among other things, an updated going concern analysis or re-evaluating the potential impairment of assets.
Today's CSA press release also indicates that the CSA will publish guidance for those considering virtual securityholder meetings as soon as possible and are supportive of such social distancing measures being taken. All CSA proposals currently out for comment will also have their comment periods extended by 45 days.
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