The Toronto Stock Exchange (TSX) has published proposed amendments to its Company Manual that are intended to increase accessibility to certain security holder information for the investing public and to streamline security based compensation arrangement disclosure requirements. The TSX is seeking public comment on the proposed amendments and has provided a 30-day comment period.

Gowling WLG Focus

Through these proposals, the TSX is making an effort to reduce and rationalize regulatory requirements and their proposals are on trend by proposing to improve transparency and to facilitate the accessibility of information. These proposals should address these challenges for investors and other market participants if adopted.

Enhanced Website Disclosure Requirements

The proposed amendments would require listed issuers to maintain a publicly accessible website posting current copies of:

  • constating documents (such as articles, by-laws, trust indentures, partnership agreements and other similar documents);
  • corporate policies that impact meetings of security holders and voting matters (such as advance notice and majority voting policies);
  • security holder rights plans;
  • security based compensation arrangements; and
  • certain corporate governance documents (such as charters of board committees, codes of ethical business conduct, position descriptions, board mandates, anti-corruption policies, environmental and social policies and whistleblower policies).

The amendments are being proposed to provide investors and other market participants with ready access to key security holder documents. While reporting issuers are required to file certain of the above documents with Canadian securities regulators through SEDAR, these documents may at times be difficult to find on SEDAR due to issuers’ differing practices for filing such materials. Additionally, certain of the policies and corporate governance documents set out above may not be required to be filed on SEDAR. Therefore, the TSX believes that the amendments will be beneficial to investors and market participants by making such documents more readily accessible through an alternative channel.

The amendments would also simplify the disclosure requirement for issuers that have adopted a majority voting policy by substituting the requirement to describe such policies on an annual basis in materials sent to security holders with the requirement to instead post a copy of the policy on the issuer’s website.

Since most, if not all, of the TSX listed issuers currently have websites, the TSX considers that the proposed website disclosure requirements are neither onerous nor costly for listed issuers and that the disclosure will benefit security holders and the market in general by improving access to up-to-date documents.

Streamlined Security Based Compensation Arrangement Disclosure

The TSX is proposing amendments to streamline the disclosure required in meeting materials and to introduce a new disclosure form in tabular format (Form 15). If these amendments become effective, issuers would be required to disclose the following items in their information circulars (both for meetings where security holder approval is sought for a security based compensation arrangement (“Approval Meetings”) and for other annual meetings):

  • the maximum number of securities issuable;
  • the number of outstanding awards;
  • the burn rate (being the disclosure regarding the rate at which an issuer uses up the securities available for grant under its security based compensation arrangement(s));
  • the eligible participants;
  • the vesting provisions; and
  • amendments in the most recent fiscal year.

In addition, information circulars for Approval Meetings are to contain other key terms in sufficient detail as may reasonably be required by a security holder to approve the security based compensation arrangements or amendments thereto.

The TSX believes that these amendments would remove certain redundant disclosure requirements for security based compensation arrangements that are otherwise required pursuant to Canadian securities law or that may not be meaningful to security holders and instead would introduce requirements that the TSX considers to be more relevant. The TSX is also proposing to require current copies of each security based compensation arrangement be posted to an issuer’s website.

These amendments would eliminate many of the current disclosure requirements regarding security based compensation arrangements. Some of the disclosure items that would no longer be required include disclosure about the maximum number of securities available to insiders or to one person or company, the amendment procedure, the method for determining exercise price, term, financial assistance and entitlements previously granted but subject to security holder ratification.

The TSX also confirms that, where security holder approval will be sought in connection with a security based compensation arrangement, the materials must continue to be pre-cleared with the TSX.

Comment Period

The TSX has asked for comment on a number of specific items, including the following:

Enhanced Website Disclosure Requirements

  • whether:
    • it is appropriate for the TSX to introduce these requirements;
    • additional documents should be included or certain of the proposed documents should be excluded; and
    • material costs or effort would be required to comply.

Streamlined Security Based Compensation Arrangement Disclosure

  • whether:
    • in addition to the proposed disclosure in Form 15, there are other disclosure elements that should be included in the security based compensation arrangement disclosure; and
    • the burn rate calculation is useful and appropriate disclosure.

The TSX has provided a 30-day comment period that expires on June 27, 2016.