The Canadian Securities Administrators yesterday announced the adoption of regulatory changes to improve the communications process between reporting issuers and shareholders. Specifically, the amendments would introduce a notice-and-access mechanism for reporting issuers to send proxy-related and other materials to shareholders, simplify the process of appointing beneficial owners as proxy holders and require reporting issuers to provide enhanced disclosure regarding the beneficial owner voting process.
The amendments, which include changes to NI 54-101 Communication with Beneficial Owners of Securities of a Reporting Issuers, NI 51-102 Continuous Disclosure Obligations, and related forms and companion policies, were initially proposed in 2010 and republished in 2011. While the final amendments announced yesterday include changes to the 2011 proposals, the CSA have deemed the changes immaterial and are, thus, not republishing the amendments for further comment.
Under the notice-and-access provisions, reporting issuers will now be permitted to deliver proxy-related materials by (i) posting the relevant information circular and other materials on a non-SEDAR website and (ii) sending a notice advising shareholders that proxy-related materials have been posted and explaining how to access the material. The “notice package” sent to shareholders must contain certain basic information about the meeting and matters to be voted on, explain how to obtain paper copies of the information circular (and if applicable, financial statements and MD&A) and explain the notice-and-access process in plain language. The notice package may be sent by mail or electronic delivery, provided prior consent has been obtained, and the method used complies with securities legislation.
If using notice-and-access, a reporting issuer must set a record date (“record date”) for notice of the meeting date at least 40 days before the date of the meeting (the 2011 proposals required the record date to be set between 30 and 60 days before the meeting date). Where notice-and-access is being used for the first time by an issuer, a notification of the meeting and record dates must also be filed on SEDAR at least 25 days before the record date and, in all other cases, at least three business days before the record date.
Other technical requirements for using the notice-and-access method are set out in NI 54-101 in respect of beneficial owners and NI 51-102 in respect of registered holders. The CSA have also clarified that this method may be used to deliver proxy-related materials in connection with a solicitation of proxies that is not a management solicitation. As we discussed in June of 2011, while notice-and-access will be available for both annual and special meetings, it will not be available for investment funds, which is a matter the CSA say is subject to further study.
Financial Statements and MD&A
Through amendments to NI 51-102, notice-and-access will also be an acceptable method for sending annual financial statements and annual MD&A, such that reporting issuers will now be able to choose between sending these documents pursuant to the annual request mechanism currently available under NI 51-102, or by sending to all securityholders within 140 days after the issuer’s financial-year end, which will now include via notice-and-access.
Beneficial owner appointment process
Under the amendments, the beneficial owner proxy appointment process would be simplified by giving intermediaries and issuers greater flexibility to determine the specific arrangements pursuant to which appointments may be made. Changes to the 2011 proposal include clarifying that the required grant of authority is subject to any prohibitions under corporate law, as well as removing the part of the proposal that would have permitted beneficial owners to instruct the intermediary or reporting issuer management to limit voting authority.
Enhanced disclosure of voting process
Under current rules, proxy-related materials for a meeting must explain in plain language how a beneficial owner may exercise voting rights. Under the amendments, management of reporting issuers must now also disclose certain additional information in the information circular including whether the reporting issuer is sending proxy-related materials to registered holders or beneficial owners using notice-and-access, whether the reporting issuer is sending proxy-related materials directly to non-objecting beneficial owners, and whether the reporting issuer intends to pay for an intermediary to deliver to objecting beneficial owners the proxy-related materials and voting instruction form.
While these amendments will ease delivery requirements for securities law purposes, issuers still need to comply with relevant corporate law requirements which may or may not be consistent with these changes. The amendments 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.