Further to our firm’s update of March 19, 2020 – “The CSA to Grant Temporary (45-day) Relief for Some Regulatory Filings Due to COVID-19” – on March 23, 2020 the Canadian Securities Administrators (“CSA”) announced the implementation of its previously announced temporary blanket relief for certain regulatory filings (“Temporary Relief”).
Concurrently, the Toronto Stock Exchange (“TSX”) and TSX Venture Exchange (“TSXV”) announced their own relief for certain filing requirements. In addition, on March 30, 2020, the Government of Ontario issued an order temporarily suspending and replacing provisions of the Business Corporations Act (Ontario) (“OBCA”) to extend the deadline for shareholder meetings and allowing virtual-only director and shareholder meetings. Below is a summary of the implemented measures.
The Temporary Relief from securities regulators is comprised of a 45-day extension from the applicable deadline for certain documents otherwise required to be filed by a person or company between March 23, 2020 and June 1, 2020. The Temporary Relief has been implemented through a series of orders by provincial securities regulators. Although they are substantially harmonized, the orders may vary slightly between the provinces.
The Temporary Relief covers certain documents required to be filed by reporting issuers, including annual financial statements (“Annual Financials”), interim financial reports (“Interim Financials”), management discussion and analysis (“MD&A”), annual information forms (“AIF”), and business acquisition reports (“BAR”). Additionally, if a lapse date for a final base shelf prospectus falls within the period March 23, 2020 to June 1, 2020, an additional 45 days may be added to such lapse date. The Temporary Relief also covers other minor types of filings such as change of auditor reporting packages and notices of change in year end.
The Temporary Relief does not cover information circulars and other materials in connection with shareholder meetings.
The provincial blanket orders include a wide variety of regulatory filings in addition to the ones described above. There is also relief available for filings required by investment funds, registrants, certain regulated entities and designated rating organizations. For further information, please contact any of the authors of this article.
Qualification for Relief
In order to qualify, the reporting issuer must follow certain requirements. For Annual Financials, Interim Financials, MD&A, and AIF, the reporting issuer must:
- Issue a news release, as soon as reasonably practicable ahead of the filing deadline, that discloses:
- each filing requirement for which the issuer is relying on Temporary Relief;
- that its management and insiders are subject to an insider trading black-out policy that reflects the principles in section 9 of National Policy 11-207 Failure-to-File Cease Trade Orders and Revocations in Multiple Jurisdictions;
- the estimated date by which the regulatory filing is expected to be filed; and
- either (i) an update of any material business developments since the date that the last Annual Financials or Interim Financials were filed, or (ii) confirmation that there have been no material business developments since that date.
- Issue another news release as soon as reasonably practicable and no later than 30 days after the first day of the extension period. If the issuer has not yet filed the applicable document, a subsequent news release must also be issued no later than 30 days following the date of the previously-mentioned news release. Each such news release must provide either (i) an update of any material business developments since the date of the previous news release or (ii) confirmation that there have been no material business developments since that date.
The reporting issuer cannot file a preliminary or final prospectus for an offering of securities until it has filed all documents in respect of which it is relying on Temporary Relief.
If the Temporary Relief is in relation to the election form for shareholders to elect to receive the Annual Financials and annual MD&A, pursuant to subsection 4.6(1) of National Instrument 51-102 – Continuous Disclosure Obligations, such form must be sent prior to the record date for the reporting issuer’s next annual shareholder meeting.
If the Temporary Relief is in relation to Annual Financials or annual MD&A, these documents must be delivered before, or in conjunction with, the management information circular for the reporting issuer’s next annual shareholder meeting.
To qualify for Temporary Relief with regard to a lapse date for a final base shelf prospectus or the filing of a BAR, the reporting issuer must issue, as soon as reasonably practicable, a news release indicating that the reporting issuer is relying on such Temporary Relief. For the extension of the lapse date for a final base shelf prospectus, the reporting issuer cannot also rely on Temporary Relief for the other filing requirements described above.
TSX and TSXV Relief
On March 23, 2020, in parallel and in addition to the measures taken by the securities regulators, the TSX and TSXV published their own relief measures with immediate effect. These measures do not require any further action from the issuer in order for such issuer to qualify for the exemption. The TSXV has granted the following relief to its listed issuers:
- Annual Meeting – An issuer that must hold an annual shareholder meeting during 2020 may hold such annual shareholder meeting on any date in 2020 up to an including December 31, 2020. However, the TSXV noted that issuers must still comply with applicable legislation regarding the timing of their annual shareholder meeting.
- Stock Option Plans – For rolling stock option plans, which require annual shareholder approval, the TSXV is permitting an issuer to obtain such approval at its 2020 annual shareholder meeting which may be held on any date in 2020 up to and including December 31, 2020.
The TSX has granted the following relief to its listed issuers:
- Financial Statements – Issuers do not need to file a Form 9 – Request for Extension or Exemption for Financial Reporting/Annual Meeting if they require an extension for the time limit for the filing of Annual Financials and/or Interim Financials.
- Annual Meeting – Under TSX rules, an issuer must hold its annual shareholder meeting within six months from the end of its fiscal year. Pursuant to the temporary relief, an issuer that is required to hold an annual shareholder meeting during 2020 may hold it on any date up to and including December 31, 2020.
- Security Based Compensation Arrangements – Under TSX rules, every three years after implementing a security based compensation plan, an issuer must obtain security holder approval for all unallocated options, rights, or other entitlements under such plan (“Awards”). Pursuant to the temporary relief, an issuer may continue to grant Awards under such plan until the earlier of the annual shareholder meeting for 2020 and December 31, 2020. Awards granted during this period may be exercised without ratification by security holders.
- Normal Course Issuer Bids – From March 23, 2020 to June 1, 2020, normal course issuer bid purchases must not exceed 50% of the average daily trading volume of the listed securities of that class. This is an increase from the usual 25% threshold.
- Delisting Criteria – From March 23, 2020 to December 31, 2020, the TSX will not apply the delisting criteria that would otherwise permit the delisting of an issuer’s securities in circumstances where the market value of an issuer’s securities is less than $3,000,000 and/or the market value of its freely-tradable, publicly-held securities is less than $2,000,000.
- “Market Price” Definition – Under TSX policies, the definition of “market price” provides that the 5 day volume weighted average trading price be used to determine market price. The TSX acknowledged that this definition may not be appropriate given the volatility of the markets. The TSX will, on a case-by-case basis, use a shorter time period for the determination of market price for the purpose of pricing securities for private placements.
On March 30, 2020 the Government of Ontario issued an order retroactive to March 17, 2020 to temporarily extend the applicable deadlines for an OBCA corporation to hold its annual shareholder meeting. The amendments also clarify that OBCA corporations may hold virtual shareholder and director meetings.
The Government of Ontario declared an emergency on March 17, 2020 which will last for an initial period of 90 days and may thereafter be extended. Ordinarily, the OBCA requires that annual shareholder meetings be held no later than 18 months after the company is incorporated, and subsequently no later than 15 months after the corporation’s last annual meeting. Under the new temporary OBCA provisions, there is an approximately 90-day extension for annual shareholder meetings during the emergency declaration, as follows:
- If the last date on which a meeting is required to be held falls within the period of the declared emergency, the last date is extended no later than 90 days after the day the emergency is terminated.
- If the last date on which the meeting is required to be held is within 30 days after the declaration of emergency is terminated, the last date is extended no later than 120 days after the day the emergency is terminated.
In addition to our firm’s March 23, 2020 article “COVID-19 and Shareholder Meetings: Now What?“, the order also temporarily amends the OBCA to allow for virtual shareholder and director meetings. These provisions override the articles and by-laws of the corporation. The new provisions allow for shareholder meetings to be held by “telephonic or electronic means”. Shareholders who establish a communication link to such meeting are deemed to be present. The amendments include parallel provisions for director meetings. These new provisions bring clarity that corporations governed by the OBCA may hold virtual meetings despite provisions in their articles or by-laws. We will continue to monitor any further measures and provide updates in our COVID-19 Resource Centre.