- Notice-and-access system for providing proxy materials to beneficial owners approved for meetings held after February 2013
- Record date if using notice-and-access must be at least 40 days before meeting date
- Notice-and-access system may also be used for sending annual financials and MD&A
The Canadian Securities Administrators (CSA) have approved the final changes to rules permitting the use of “notice-and-access” for proxy solicitation. The changes will become effective on February 11, 2013, for meetings held on or after March 1, 2013.
Amendments to National Instrument 54-101 Communication with Beneficial Owners of Securities of a Reporting Issuer (NI 54-101), and related rules were initially published in April 2010, as described in our Blakes Bulletin: Amendments Proposed to Improve Proxy Solicitation for Beneficial Owners. Further amendments were proposed in June 2011, as described in our Blakes Bulletin: Further Changes Proposed to “Notice‑and‑Access” for Proxy Solicitation. For those who have been following the development of the concept, we will first summarize the most significant changes in the final version, and then summarize how notice-and-access will work in Canada.
Studies of the experience in the U.S. since 2007 with notice-and-access have shown that, while issuers tended to have significant saving on proxy solicitation costs, this was accompanied by lower response rates, especially from retail shareholders. Some SEC and Broadridge studies showed drops of 60% to 70%. This could have governance implications, both for quorum and by potentially amplifying the impact of any shareholder activism.
Some Significant Changes in The Final Version
Overall, the changes to the final version are not considered material by the CSA, shown by the fact that the revised rule has not been re-published for further comment.
The record date for meetings where notice-and-access will be used must be at least 40 days prior to the meeting (compared to 30 days for regular meetings). This, coupled with the requirement to post and send the notice package 30 days before the meeting, means it may actually take longer to convene a notice-and-access meeting than a regular meeting.
Reporting issuers must still provide advance notice of their intention to use notice-and-access the first time, but the time has been reduced to at least 25 days before the record date (i.e., at least 65 days before the meeting date), down from the original proposal of three to six months’ advance notice. Such notice only needs to be filed on SEDAR, not issued by news release as originally proposed.
The notice package sent to shareholders must include the plain-language explanation of notice-and-access, rather than in a separate document.
The notice package may include financial statements to be approved at the meeting and related MD&A or the annual report. The CSA also clarified that issuers may also use notice-and-access for sending annual financial statements and MD&A. The net effect is that an issuer can choose between:
- sending annual financials pursuant to the current annual request mechanism; or
- sending annual financials to all shareholders, using notice-and-access as an acceptable delivery method.
The Notice-and-Access Process Summarized
Reporting issuers, other than investment funds, can use notice-and-access for any meetings. Issuers would have the option to post their information circulars on a website in addition to SEDAR, such as the issuer’s own website or that of a service provider, and send a notice package informing owners that the proxy materials have been posted and explaining how to access them.
These notice-and-access provisions in NI 54-101 apply to beneficial owners and allow its use for registered owners as well, but only if that delivery method is allowed under the applicable corporate law of the issuer’s jurisdiction. For instance, the Canada Business Corporations Act allows notice-and-access, but only if the registered shareholder has consented in writing.
To implement the notice-and-access process for the first time, an issuer must post on SEDAR, at least 25 days before the record date, notice of its intention to use notice-and-access, as part of its usual notification of meeting and record dates. For subsequent meetings for which an issuer uses notice-and-access, the issuer can abridge the timeline for filing the notification of meeting and record dates to three business days before the record date for notice. The record date must be at least 40 days before the meeting date. The form to request beneficial ownership information has been changed to reflect notice-and-access.
Under notice-and-access, at least 30 days before the meeting date, an issuer will post on SEDAR and on another website (for one year) and send to shareholders a notice package. The package must contain: basic information about the meeting and the matters to be voted on; the form of proxy or voting instruction form; a plain-language explanation of the notice-and-access process with website addresses where the proxy-related materials are posted; (if applicable) which types of holders are receiving paper copies of the information circular; how to obtain a paper copy of the information circular (and financials if applicable) and the estimated date and time by which such a request should be received before any deadline for the submission of voting instructions; how to return voting instructions and any deadline for return of those instructions; a reminder to review the information circular before voting; the sections of the information circular where disclosure regarding each matter identified in the notice can be found; and a toll-free telephone number to request paper copies or get information about noticeand- access. An issuer can also include financials or an annual report. Nothing else can be included with the notice package.
A notice package can be sent by mail or, if prior consent has been obtained, electronically. Intermediaries (i.e., brokers) may, but are not required to, obtain standing instructions from their beneficial owners whether they wish to receive paper copies of information circulars and financials. Issuers do not have to maintain such standing instructions lists.
If an issuer “stratifies” and sends proxy-related materials to some beneficial owners through notice-and-access, while sending paper copies to others, the paper copies must be sent on the same timing as the notice package is sent, i.e., at least 30 days before the meeting, instead of the usual 21 calendar days plus three business days for a purely paper-based solicitation.
Paper copies must be sent to requesters within three business days after a request is received (10 calendar days if received after the meeting).
Reporting issuers that are SEC registrants will be permitted to use the U.S. notice-and-access procedures instead, but only if (a) their majority ownership, administration and assets are not in Canada and (b) they are subject to, and comply with, Rule 14a-16 under the 1934 Act and arrange for each intermediary to send the proxy-related materials in accordance with Rule 14b-1 or Rule 14b-2 of the 1934 Act.