The Canadian Securities Administrators (CSA) recently published final amendments to National Instrument 54-101 Communication with Beneficial Owners of Securities of a Reporting Issuer (NI 54-101) that give reporting issuers and others the option to use the “notice-and-access” method to post proxy-related materials on a website (in addition to SEDAR) instead of having to mail materials to registered holders (under National Instrument 51-102 Continuous Disclosure Obligations (NI 51-102) and to beneficial owners (under NI 54-101). Under NI 51-102, notice-and-access may also be used to post annual financial statements and management discussion & analysis (MD&A ) in lieu of sending such documents to all securityholders.
As we discussed in November of last year, these amendments are intended to help simplify the shareholder communication process and reduce costs. However, some aspects of the amendments are technical in nature and will require certain changes to the processes that reporting issuers may currently use, including the timing and content of various notices and other documents.
In this, the first part of our two-part series on implementing notice-and-access, we provide a summary of how notice-and-access will work, highlighting items that reporting issuers need to prepare for in advance. In the second part we will examine some of the issues and considerations involved with such implementation.
What is notice-and-access?
Notice-and-access refers to the “delivery procedures” set out under NI 54-101 and NI 51-102, which allow for proxy-related and other materials to be “sent” by posting a copy of those materials on a non-SEDAR website.
NI 54-101 governs how materials are to be sent to beneficial owners of securities, including with respect to non-objecting beneficial owners (NOBOs), who may be sent materials directly, and objecting beneficial owners (OBOs), who may receive materials through an intermediary. NI 51-102 governs how materials are to be sent to registered holders by both reporting issuers and others who solicit proxies from registered holders of voting securities of a reporting issuer.
Notice-and-access will be available to reporting issuers in relation to all meetings, including special meetings, other than reporting issuers who are investment funds. The method used by the reporting issuer must also comply with the corporate law governing such reporting issuer, in terms of whether electronic delivery of such materials is permitted.
Content of, and timelines related to sending the "Notice"
To rely on notice-and-access, an issuer’s registered holders and/or beneficial owners must be sent a “Notice” that contains only certain prescribed information. This Notice must be sent by prepaid mail, courier or equivalent, or electronically if prior consent has been obtained, along with the applicable voting instruction form (Form 54-101F6, if sending directly to NOBOs, and 54-101F7, if sending indirectly). This Notice must be sent at least 30 days before the date of the meeting, if directly sending to NOBOs, or at least three or four business days before the 30th day if sending indirectly to beneficial owners of securities (i.e. via Broadridge or other proximate intermediary), depending on how the Notice is to be delivered. In addition, the reporting issuer must comply with, among other things, each of the following requirements:
- Provide public electronic access to the information circular and the Notice on or before the day the Notice is sent (i.e., on or before the 30 or 30 plus three or four day deadline above) by filing the documents on SEDAR and posting the documents on a non- SEDAR website (such as the reporting issuer’s website or a service provider’s website). Each document must remain posted for a period of one year from the date on which the applicable document is originally posted.
- Post on that website, any disclosure material regarding the meeting that the reporting issuer sends to registered holders or beneficial owners of it securities, and any written communications the reporting issuer has made available to the public, (such as press releases) regarding matters to be voted on at the meeting, regardless of whether or not they were sent to registered holders or beneficial owners.
- Provide in the notice package, a plain-language explanation of notice-and-access, including, among other things, how a beneficial owner is to return voting instructions or a registered holder is to return a proxy, and the sections of the information circular where disclosure regarding each matter identified in the Notice can be found.
- Provide a toll-free number for use by beneficial owners to request paper copies of the information circular and the financial statements and related MD&A to be approved at the meeting.
- Ensure that materials are posted in a manner and format that permits a person with a reasonable level of computer skill and knowledge to access, read, search, download and print the documents.
Impact on notification and setting of record dates
In order to use notice-and-access, reporting issuers are required to set their “Record Date for Notice of the Meeting” no fewer than 40 days prior to the date of the meeting. This date is otherwise required to be set between 30 and 60 days prior to the date of the meeting under NI 54-101.
The “Notification of Meeting and Record Dates”, which is required to be sent to intermediaries and others at least 25 days before the Record Date for Notice of the Meeting under NI 54-101, must be filed on SEDAR at the same time that it is sent (i.e. at least 65 days before the meeting). For the first time that an issuer uses notice-and-access this 25 day period cannot be abridged. For subsequent meetings such period can be abridged to three days before the Record Date.
Responding to requests for paper copies
Where a securityholder requests paper copies of an information circular, financial statements and/or MD&A, the reporting issuer must send, free of charge, the items requested within three business days for requests received prior to the date of the meeting, and within 10 calendar days for requests received on or after the date of the meeting but within one year of the information circular being filed. When responding to such requests, reporting issuers are prohibited from asking for any other information about the requestor, other than the name and address to which the requested materials are to be sent. They also cannot disclose that information for any purpose other than sending the requested materials. Similarly, a reporting issuer cannot collect information that may be used to identify a person who accesses proxy-related materials that are posted using notice-and-access.
Under the amendments, management of reporting issuers must include additional disclosure in their information circulars. This includes information as to whether the reporting issuer is sending proxy-related material to registered holders or beneficial owners using notice-and-access, and, if so, whether stratification will be used and the types of registered holders or beneficial owners who will receive paper copies (under the amendments, notice-and-access may be used selectively to send materials to some but not registered holders or beneficial owners and this is referred to as “stratification”). Management must also disclose whether proxy-related materials are being sent directly to NOBOs and whether the issuer intends to pay for an intermediary to deliver materials to OBOs and, if it does not, a statement that OBOs will not receive the materials unless their intermediary assumes those costs. This additional disclosure, other than the statement regarding OBOs not receiving materials, must also be included in the Notification of Meeting and Record Dates. The text of the applicable voting instructions forms has also been amended and will need to be updated.
In addition to providing a new mechanism for sending proxy-related and other materials to registered holders and beneficial owners of securities, the amendments are also intended to simplify the process by which beneficial owners are appointed as proxy holders in order to attend and vote at shareholder meetings.
The amendments result in consequential amendments to NI 51-102 and Form 51-102F5 Information Circular, as well as National Policy 11-201 Delivery of Documents by Electronic Means (NP 11-201) and will generally come into force on February 11, 2013. The notice-and-access provisions, however, can only be used in respect of meetings occurring on or after March 1, 2013, while certain other provisions apply as of February 15, 2013.