COVID-19 Resource

Recap Of The Osc’s Seminar: Covid-19 – Continuous Disclosure Obligations And Considerations For SMEs

May 13, 2020


The Ontario Securities Commission (the “OSC”) hosted a presentation entitled “Continuous Disclosure Obligations and Considerations for Small and Medium Enterprises” (“SMEs”) on May 6, 2020 (the “Presentation”). The purpose of this article is to summarize some of the key points discussed during the Presentation, with a particular focus on management’s discussion and analysis (“MD&A”), financial information, material change reports (“MCRs”) and temporary relief for executive compensation disclosure.


COVID-19 disclosure should explain the past and present circumstances of the issuer and the SME’s future expectations based on recent developments stemming from COVID-19.

Discussion of Operations

SMEs should discuss the impact of COVID-19 on their operations for the most recently completed reporting period, including any impact on: changes in total revenue, cost of sales or gross profit, risks or uncertainties that management reasonably believes will materially affect future performance, including total revenue and profit or loss from continuing operations, and how the SME was going to use proceeds (other than working capital) from any prior financing, and including the impact of the variances, if any, on the SME’s ability to achieve its business objectives and milestones.

SMEs should also include a discussion of any of their operational response(s) to COVID-19. For example, some issuers might include mention of adjustments they have made to adhere to physical distancing guidelines for employees and customers, changes to salaries/workforce, operational changes/shutdowns, deferrals of planned projects/capital expenditures, deferrals of dividends, and applications to government for support measures. The following are a few questions that issuers might consider when preparing the discussion of operations portion of their MD&A:

  • How has demand for products and services been impacted?
  • How have costs, including changes in prices, been impacted? How have sanitation costs increased?
  • What is the overall strategy or changes to strategies, including cost saving measures, restructuring initiatives or a realignment of operational and financial resources?
  • How has the issuer addressed workplace health and safety?
  • Have the issuer’s customers, supply chain or distribution channels, or constraints on supply been affected?
  • How have the SME’s human resources, operating expenses and internal controls been impacted?
  • How has the status, timing, and budget for planned projects been impacted?
  • What is the impact of any government support and insurance recoveries?
  • Have there been any breaches or potential breaches of material contracts by the issuer or its counterparties?

Liquidity and capital resources

The OSC Staff expects that an SME will address the following in its liquidity and capital resources discussion of the MD&A: (1) how the issuer will respond to COVID-19 to satisfy short-term and long-term liquidity needs and capital expenditure commitments; and (2) the circumstances that could affect their ability to secure sources of financing. Additionally, issuers should address any risks of default on distribution/dividend payments, lease payments, payments on debt and non-compliance with other debt covenants, as well as how the issuer intends to remedy the default or otherwise address the risk.

Related to the foregoing, the following are some questions that SMEs might consider when preparing this portion of the MD&A:

  • How has COVID-19 impacted the issuer’s liquidity position (short-term and long-term)?
  • What is the impact on accounts receivable collection? Has the SME modified credit terms?
  • Is the issuer eligible for subsidies and/or funding from government programs?
  • Has the cost of, or access to, capital changed for the issuer?
  • Will the issuer be able to satisfy contractual liabilities?
  • What is the impact on expenditures required to maintain capacity, for planned growth or development activities?
  • Has the issuer’s dividend policy changed as a result of its new liquidity position?
  • Does the issuer expect that it will be able to satisfy covenants in credit facility agreements?
  • What remedies has the SME considered to address any liquidity concerns or uncertainties?

Forward-looking information (“FLI”)

Given the impacts of COVID-19, issuers may be required to update and/or withdraw previous published guidance and financial outlooks in the event that these outlooks can no longer be supported by reasonable assumptions and if there is no longer a reasonable basis for the achievement (or accurate updating of) conclusions, forecasts or projections in the FLI. If issuers withdraw previously disclosed material FLI, they must disclose this decision in their MD&A and discuss the events and circumstances that led to that decision (including a discussion of the assumptions underlying the FLI that are no longer valid).

The following are some key questions issuers should consider when assessing impacts of COVID-19 on its FLI:

  • Is there still a reasonable basis for previously disclosed FLI?
  • Are the assumptions reasonable and entity-specific? Are they disclosed?
  • Have risk factors that could cause actual results to vary been identified?
  • Have stakeholders been cautioned that actual results may vary from FLI?
  • How has COVID-19 impacted the issuer’s overall outlook for its future operations and liquidity position?
  • Has previously issued FLI been updated?
  • Have decisions to update or withdraw material FLI been adequately and promptly communicated to the market?

Risk Factors

Risks factors presented by the COVID-19 pandemic will differ by industry, geography and by reporting issuer. In turn, there is no “one size fits all” model of risk factor disclosure. Despite this, the following are some examples of risk factors that affect a number of issuers:

  • disruptions to day-to-day operations resulting from health and safety measures or government-imposed closures;
  • disruptions and volatility in the global capital markets, increasing the cost of capital and adversely impacting access to capital;
  • disruptions to supply chains as a result of mass quarantines or lockdowns in the issuer’s home jurisdiction or abroad;
  • interruptions to, or restrictions on, the export or shipment of products to other countries;
  • limitations on the ability of an issuer’s customers to perform, including in making timely payments;
  • reliance on major customers that have stopped or decreased operations as a result of shutdown of non-essential services; and
  • trends, risks and uncertainties that affect future operations, capital and liquidity.


Significant judgements and estimation uncertainty

The following items continue to present confusion with respect to significant judgments and estimation uncertainty: cash flow projections, impairment assessments (including developing probability-weighted cash flow projections for measuring the non-recoverable amount of non-financial assets or estimating expected credit losses for A/R), fair value calculations (i.e. FV inputs), government assistance (i.e. nature and amount of government assistance and tax amounts) and deferred tax recoverability.

The OSC reminds issuers to consider whether its judgments and estimates need to be updated and/or prospectively reflected in their financial statements as new information becomes available.

Impairment considerations for non-financial assets

Issuers are encouraged to consider whether there are any triggers for impairment present for non-financial assets (e.g., intangible assets, PP&E, goodwill, etc.). Additionally, SMEs should test goodwill and indefinite-lived intangible assets for impairment on at least an annual basis or more frequently if/when there is an indicator of impairment. Other non-financial assets (e.g., PP&E and non-indefinite life intangible assets) should be tested whenever there is an indicator of impairment. Examples of impairment triggers resulting from COVID-19 may include:

  • market value declines;
  • negative changes in markets, the economy, or laws;
  • net assets of the company higher than market capitalization;
  • asset is idle, part of a restructuring or held for disposal; and 
  • worse economic performance than expected.

If an issuer incurs an impairment charge, the MD&A should also discuss the financial impact of the charge and provide meaningful insight into the reasons and business circumstances surrounding the impairment as required by Item 1.2 of Form 51-102F1.

The OSC Staff indicated that they may request that issuers publicly disclose underlying facts and circumstances throughout its analysis if they believe that further disclosure would be beneficial to users. Additionally, and given the current economic climate, there may be indicators of impairment at the interim reporting date which may trigger the need to test for impairment again.

Non-GAAP financial measures

The OSC expects that given the uncertainty in the present circumstances, there may be a limited basis for management to conclude that a loss or expense is non-recurring, infrequent or unusual. Staff are of the opinion that it would be misleading to describe an adjustment as COVID-19 related if management does not explain how the adjustment amount was specifically associated with COVID-19. Furthermore, the OSC cautions issuers from characterizing an impairment as COVID-19 related, where indicators of impairment existed prior to the pandemic that are unrelated to COVID-19.


Issuers should gather as much information as reasonably available concerning the evolving status of COVID-19 to understand the risks and consider any material impacts (or anticipated material impacts) of COVID-19 to their business. Additionally, SMEs are encouraged to assess whether their current disclosure adequately provides securityholders with a clear, plain understanding of the impacts. If COVID-19 has an equal effect throughout an issuer’s industry, a material change report may not be required. However, COVID-19 may result in material, issuer-specific implications, including, with respect to the following:

  • significant disruptions to an issuer’s workforce or operations;
  • negative changes in markets, the economy, or laws;
  • supply chain delays or disruptions that are critical to an issuer’s business;
  • changes in credit arrangements;
  • increased cost of goods or services; and
  • suspension of exports.

As with all other areas of continuous disclosure, each issuer should consider its reporting and disclosure obligations specific to its circumstances in the current economic environment. SMEs are also reminded that the Blanket Relief Order[1]  does not provide an exemption for MCRs.


On May 1, 2020 the OSC circulated Ontario Instrument 51-504 – Temporary Exemption from Certain Requirements to File or Send Securityholder Materials (the “Order”). This Order gives issuers until December 31, 2020 to file their executive compensation disclosure and temporarily relieves issuers from the requirements to send, or send upon request, copies of annual or interim financial statements and MD&A to investors within certain time periods up to December 31, 2020.

An issuer can rely on the exemption from the executive compensation disclosure requirement provided that:

  1. the reporting issuer issues and files on SEDAR, in advance of the deadline that would otherwise apply under subsection 9.3.1(2.2) of NI 51-102 – Continuous Disclosure Obligations (“NI 51-102”) or as soon as reasonably practicable thereafter, a news release that discloses that it is relying on this exemption;
  2. on or before December 31, 2020, the reporting issuer either:
  1. sends to its securityholders and files its next AGM management information circular containing the executive compensation disclosure required under subsection 9.3.1(1) of NI 51-102, or
  2. files a document containing the executive compensation disclosure required under subsection 9.3.1(1) of NI 51-102;
  1. it has filed annual financial statements and the issuer’s MD&A for its most recently completed financial year before it:
  1. sends to its securityholders and files its next AGM information circular, or
  2. files the documents referred to in (2)(b); and
  1. if it files the document referred to in (2)(b), it includes the executive compensation disclosure in that document in its next AGM information circular that it subsequently sends to its securityholders and files.

A reference made in a news release to an equivalent exemption granted by a securities regulatory authority or regulator in another jurisdiction of Canada that is the reporting issuer’s principal regulator, as defined in National Policy 11-207 – Failure-to-File Cease Trade Orders and Revocations in Multiple Jurisdictions, will be deemed to constitute a reference to the relevant exemption in the Order.


It will be very important for issuers to monitor developments in light of the COVID-19 pandemic, and to consider (on an ongoing basis) how it has impacted, or may impact, its business and continuous disclosure obligations. This article highlighted some of the key points discussed during the recent OSC Presentation, with a particular focus on MD&A, financial information, MCRs and temporary relief for executive compensation disclosure. We encourage you to contact any member of the securities law group if you have any questions about how COVID-19 impacts your company’s continuous disclosure obligations

[1] See the following articles previously published by Fogler, Rubinoff LLP for additional information relating to the Blanket Relief Order:

(1) “Update on Relief Measures: Canadian Securities Regulators and TSX Publish Details of Blanket Relief; Extension of AGM Deadlines Under Business Corporations Act (Ontario)” accessible here; or

(2) “The CSA to Grant Temporary (45-Day) Relief For Some Regulatory Filings Due to COVID-19” accessible here