On October 19, 2017, the Toronto Stock Exchange (TSX) announced that it has adopted, and the Ontario Securities Commission has approved, the following amendments to the TSX Company Manual: (i) the introduction of website disclosure requirements for certain TSX listed issuers (Part IV Amendments), which become effective April 1, 2018; and (ii) amendments to the disclosure requirements regarding security based compensation arrangements (Part VI Amendments), effective for financial years ending on or after October 31, 2017.
For a summary of the original proposed amendments (Original Proposal) and the revised proposed amendments (Revised Proposal), please see our June 2016 Blakes Bulletin: TSX Proposes New Website and Equity Compensation Plan Disclosure and April 2017 Blakes Bulletin: TSX Amends Proposal for New Website and Equity Compensation Plan Disclosure.
PART IV AMENDMENTS
The Part IV Amendments introduce section 473, which requires TSX listed issuers (subject to certain exceptions discussed below) to maintain a publicly accessible website and make available on the website current copies of the following documents, as applicable:
- Articles of incorporation, amalgamation, continuation or any other constating or establishing documents of the issuer and its bylaws
- If adopted, copies of the issuer’s:
- Majority voting policy
- Advance notice policy
- Position descriptions for the chairman of the board and the lead director
- Board mandate
- Board committee charters.
The Part IV Amendments do not require position descriptions for “key officers” to be posted on a TSX listed issuer’s website, as was contemplated in the Revised Proposal. They also do not require posting of security holder rights plans, security based compensation arrangements and anti-corruption policies and other environmental and social policies, as had been part of the Original Proposal. These items were omitted as a result of the TSX’s consideration of comments received.
The TSX states in the notice of approval that it continues to believe that there is value in providing investors with a centralized location for a TSX listed issuer’s corporate governance information and that the modest increase in a TSX listed issuer’s disclosure obligations is outweighed by the benefits to investors.
Section 473 states that the webpage(s) containing the required documents should be easily identifiable and accessible from the listed issuer’s home page or investor relations page and that if a listed issuer’s website is shared with other issuers, each listed issuer should have a separate, dedicated webpage on the website for the purposes of complying with section 473.
Exemption for Eligible Interlisted Issuers, Eligible International Interlisted Issuers and Non-Corporate Issuers
The new section 473 disclosure requirements do not apply to “Eligible Interlisted Issuers”, “Eligible International Interlisted Issuers” or “Non-Corporate Issuers”.
Eligible Interlisted Issuers are TSX listed issuers that are also listed on the New York Stock Exchange, NYSE MKT, NASDAQ, London Stock Exchange Main Board, AIM, Australian Securities Exchange, Hong Kong Stock Exchange Main Board or other exchanges as may be determined by TSX from time to time, and that had less than 25 per cent of the overall trading volume of their listed securities occurring on all Canadian marketplaces in the preceding 12 months.
Eligible International Interlisted Issuers are Eligible Interlisted Issuers that are incorporated or organized in Australia, England, Hong Kong or the State of Delaware and other jurisdictions with corporate statutes substantially modelled after these jurisdictions. Other jurisdictions may also be acceptable, as may be determined by TSX from time to time.
Non-Corporate Issuers include certain exchange-traded funds, issuers of exchange-traded notes, closed-end funds and issuers of certain structured products where an investor’s return is contingent on, or highly sensitive to, changes in the value of underlying assets, indices, interest rates or cash flows.
While the exemption for Non-Corporate Issuers was proposed in the Amended Proposal, the exemption for Eligible Interlisted Issuers and Eligible International Interlisted Issuers was added to the final amendments as a result of the comment process.
PART VI AMENDMENTS
The existing disclosure requirements for security based compensation arrangements in section 613 remain largely in their current form, but with new requirements for burn rate disclosure and amended disclosure for the maximum number of awards issuable, outstanding awards and awards available for grant. Sections 613(d)(x) and (xi) were also amended so that the disclosure requirements (i.e., vesting and term) apply to all security based compensation arrangements and are not limited to stock option plans.
Amended section 613(d) requires the disclosure of an annual burn rate for each security based compensation arrangement maintained by a TSX listed issuer. Under new section 613(p), the burn rate is to be expressed as a percentage and calculated by dividing the number of awards granted under the arrangement during the applicable fiscal year, by the weighted average number of securities outstanding for the applicable fiscal year (calculated in accordance with the CPA Canada Handbook).
If the award includes a multiplier, TSX listed issuers are required to provide details about the multiplier.
TSX listed issuers are required to disclose, on an annual basis, in their information circulars or other annual disclosure document distributed to all security holders, the annual burn rate for each of the TSX listed issuer’s three most recently completed fiscal years for the relevant arrangement. Where the arrangement has not existed for a TSX listed issuer’s last three fiscal years (including predecessor security based compensation arrangements that were similar) or where the arrangement was approved by security holders within a TSX listed issuer’s last three fiscal years, TSX listed issuers would be expected to disclose the annual burn rate for each of the TSX listed issuer’s fiscal years completed since adoption or the most recent security holder approval.
This is a change from the Revised Proposal, which contemplated that TSX listed issuers would only be required to disclose the annual burn rate for the listed issuer’s most recently completed fiscal year, except in the case of security holder meetings where security holder approval would be sought for a matter relating to a security based compensation arrangement, in which case the annual burn rate for each of the TSX listed issuer’s three most recently completed fiscal years would have been required to be disclosed. The final Part VI Amendments require burn rate disclosure for the TSX listed issuer’s three most recently completed fiscal years for all security holder meetings.
Disclosure of Awards Issuable, Outstanding and Available for Grant
The Part VI Amendments revise section 613(d) to clarify the type of disclosure required in respect of the maximum number of awards issuable, the number of outstanding awards and the number of awards available for grant. Specifically, amended section 613(d) requires disclosure in shareholder meeting materials of:
- Plan Maximum: The maximum number of securities issuable under each security based compensation arrangement expressed as a fixed number (together with the percentage this number represents relative to the number of issued and outstanding securities of the listed issuer) or fixed percentage of the number of issued and outstanding securities of the listed issuer
- Outstanding Securities Awarded: The number of outstanding securities awarded under each security based compensation arrangement, together with the percentage this number represents relative to the number of issued and outstanding securities of the listed issuer
- Remaining Securities Available for Grant: The number of securities under each security based compensation arrangement that is available for grant, together with the percentage this number represents relative to the number of issued and outstanding securities of the listed issuer.
Timing of Disclosure
The disclosure for security based compensation arrangements is required to be prepared as at the end of the TSX listed issuer’s most recently completed fiscal year (other than the disclosure regarding the annual burn rate, which is required to be disclosed for the TSX listed issuer’s three most recently completed fiscal years, as discussed above).
The Part IV Amendments will become effective for TSX listed issuers on April 1, 2018.
The Part VI Amendments will become effective for TSX listed issuers for financial years ending on or after October 31, 2017.