There are three recent announcements of note. On October 12, 2007 the Toronto Stock Exchange ("TSX") issued a request for comments regarding security holder approval requirements for acquisitions. On the same day the Canadian Securities Administrators ("CSA") issued a notice regarding amendments to continuous disclosure obligations that, subject to governmental approval, will take effect on December 31. On October 29, the British Columbia Securities Commission ("BCSC") published a notice and request for comments with respect to a proposed instrument targeting abusive promotions of over-the-counter issuers (see Cory Kent's article "Crack Down on Abusive Practices").

Security Holder Approval for Acquisitions – Request for Comments

Currently the TSX requires a listed issuer to obtain shareholder approval for the issue of securities as consideration for acquisitions if the number of securities to be issued will exceed 25% of the issuer's then issued and outstanding securities. This requirement does not apply when the listed issuer is acquiring another public company.

In response to suggestions by some market participants that the exemption from shareholder approval in the case of the acquisition of a public company is inappropriate, the TSX is soliciting public comments as to whether it should revise its requirements.

If the TSX amends its requirements to remove the exemption for acquisitions of public companies (and thus requires listed issuers to obtain shareholder approval), it is likely to have a significant impact on Canadian issuers, particularly on those in industries where acquisitions are more frequent (for example the resource industry. The TSX stated that during the first half of 2007 there were 16 acquisitions of public companies in which the issuers relied on its exemption from shareholder approval, of which 75% were undertaken by resource issuers).

Comments should be made in writing and delivered to the TSX by December 12, 2007. The request for comments, and the specific questions put forward by the TSX, can be accessed at under "Listings – TSX Issuer Re­sources – TSX Company Manual – Request for Comments." Amendments to Continuous Disclosure Obligations

The CSA has announced various amendments to National Instrument 51-102 Continuous Disclosure Obligations ("NI 51-102") and the related Companion Policy, effective December 31, 2007, relating to disclosure of forward-looking information.

"Forward-looking information" is defined in the amendments to include future-oriented financial information ("FOFI") and financial outlooks (for example, expected reven­ues, research and development spending and earnings guidance, among others). The requirements will apply to all disclosure of forward-looking information, except that contained in oral statements. Issuers should consider the many ways they may make forward-looking information available to the public (such as their news releases, SEDAR filings, website disclosure, brochures, meeting materials, presentation handouts, etc.)

The requirements relating to content and update of the disclosure apply to "material" forward-looking information. In the Companion Policy to 51-102, the CSA states that it considers FOFI and financial outlooks to be material forward-looking information. Other forward-looking information that is not financial in nature (such as future store openings of a retail issuer, expected date of commercial production, and so on) may or may not be material – that determination will depend on whether a reasonable investor's decision to buy, sell or hold would be influenced or change as a result of the information.

The principal amendments are: Initial Disclosure

  • Forward-looking information must not be disclosed unless the issuer has a reasonable basis for the information; and, in addition, FOFI or a financial outlook must not be disclosed unless it is based on assumptions that are reasonable in the circumstances.
  • FOFI and financial outlooks must be limited to a period for which the information can be reasonably estimated and must use the accounting policies the issuer expects to use to prepare its financial statements for the same period.
  • For material forward-looking information the disclosure must identify the information as forward-looking, provide the material factors or assumptions used to develop it, include a caution that actual results may differ, identify the material risk factors that could cause actual results to differ, and describe the issuer's policy for updating the information (if that policy is something other than the required Management Disclosure & Analysis ("MD&A") update discussed below).
  • In addition to those general disclosure requirements, disclosure relating to FOFI or a financial outlook must set out the date that management approved the information, explain the purpose of the FOFI or financial outlook and caution readers that the information may not be appropriate for other purposes.


  • Material forward-looking information must be updated in an issuer's MD&A – the issuer must discuss events and circumstances that occurred in the period to which the MD&A relates that are reasonably likely to cause actual results to differ materially from previously disclosed forward-looking information for a period that is not yet complete, and must discuss the expected differences. For example, if an issuer discloses forward-looking information relating to expectations during the upcoming fiscal year, the issuer will need to consider, as it prepares the MD&A for each quarter that follows, whether events have occurred that will require the issuer to update the forward-looking information. The MD&A update is not required if the issuer includes the relevant information in a news release issued and filed before the filing of the applicable MD&A and reference to the news release is made in the MD&A.
  • The issuer must discuss in its MD&A any material differences between actual results for the applicable period and any previously disclosed FOFI or financial outlook for the same financial period.
  • If material forward-looking information is withdrawn, the issuer must, in its MD&A, disclose the decision to withdraw and discuss the events and circumstances leading to that decision, including assumptions underlying the forward-looking information that are no longer valid. Again, the MD&A update is not required if the issuer includes the relevant information in a news release issued and filed before the filing of the applicable MD&A and reference to the news release is made in the MD&A.

Note that the requirement to update applies to all forward-looking information, not simply to forward-looking financial information.

The requirement to update forward-looking information in periodic MD&A will not relieve an issuer of the obligation for timely disclosure of material changes. Thus, if the events that are likely to cause actual results to differ materially from projected results amount to a material change in the affairs of the issuer, or if the fact that the actual results may differ is itself a material change in the affairs of the issuer, securities legislation requires that the issuer make timely disclosure. Under relevant stock exchange requirements, there may also be a timely disclosure obligation where the events or change in projection constitute material information but not a material change.

As well, issuers should be aware of the civil liability provisions in some provincial securities legislation relating to misrepresentations in continuous disclosure materials and in particular, the requirements for the safe harbour for forward-looking information.

Proposed Instrument 51-509 Relating to OTC Issuers – Request for Comments

The BCSC published a notice and request for comments in respect of its proposed instrument to address perceived abuses by certain over-the-counter issuers that have a significant connection to British Columbia. The initiatives currently in effect and the principal provisions of the proposed instrument are discussed in "Crack Down on Abusive Practices" in this issue.

The notice also requests comments with respect to proposed conditions of registration designed to increase dealers' accountability for trading activities in the OTC market. These conditions will apply to B.C. operations of investment dealers (that are registered and have an office in B.C.) that trade in BC OTC issuer securities. The proposed conditions will impose recording and reporting requirements. The BCSC intends to hold a public hearing to permit investment dealers to comment on the proposed conditions.

The deadline for comments is December 31, 2007. The request for comments, which contains details of how to submit comments, can be accessed at under "Securities Law & Policy – Policies and Instruments – BCN 2007/33."