Last week, the Ontario Securities Commission released a report based on a review of related party transaction disclosure in which it identified disclosure issues and provided guidance to issuers preparing required related party disclosure.
Generally, a related party transaction is a transaction between an issuer and a person that is a related party of the issuer at the time the transaction is agreed to, as a consequence of which the issuer directly or indirectly enters into certain specified transactions. Such transactions include where the issuer purchases an asset from or sells an asset to the related party, assumes or becomes subject to a liability of the related party, or issues securities to the related party. Related parties of an issuer include shareholders holding more than 10% of voting securities, directors, senior officers and each of their affiliates.
In Canada, related party transaction disclosure is required pursuant to financial statement disclosure requirements under IFRS (IAS 24), Form 51-102F1 Management's Discussion & Analysis and MI 61-101 Protection of Minority Security Holders in Special Transactions.
Specifically, OSC staff reviewed 100 issuers to assess compliance with disclosure requirements with a view to understanding the range of practice in respect of issuers' approval and disclosure of related party transactions. Ultimately, the report found that while financial and MD&A disclosure met most key disclosure requirements, a number of deficiencies were identified.Continue Reading...