New TSX rules: issuer websites and security-based compensation

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Publication October 2017

Introduction

The TSX has published amendments to the TSX Company Manual that:

  • require a listed issuer to maintain a public website and post prescribed documents to the site; and
  • amend the disclosure requirements for security-based compensation arrangements (the Amendments).

The Amendments follow two earlier public consultations by the TSX in May 2016 and April 2017 on the same topic. The TSX remains of the view that investors will benefit from a centralized location for an issuer’s documents outside SEDAR despite the fact that the Amendments duplicate and in some instances exceed securities law requirements and may result in an increased regulatory burden for some issuers.

Publicly accessible website

Effective April 1, 2018, each TSX-listed issuer, other than eligible interlisted issuers, eligible international interlisted issuers and non-corporate issuers, will be required to maintain a publicly accessible website. Issuers will be required to post the following documents:

  • articles of incorporation, amalgamation, continuation or any other constating or establishing documents of the issuer and its by-laws; and
  • 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. The previously proposed requirement to post job descriptions of key officers has been removed;
    • board mandate; and
    • board committee charters.
SEC “foreign issuers” and “designated foreign issuers” (other than eligible international interlisted issuers) will be required to comply with the new rule though the TSX has indicated it will consider providing an exemption for such issuers in the future. Security holder rights plans and security-based compensation arrangements will not be required to be posted as originally proposed. Environmental and social issue policies are also not required to be posted though the TSX will monitor whether to extend the rule in the future to include such policies

The webpages where documents are posted must be easily accessible from the issuer’s home page. If a document required to be posted is contained within a larger document, the requirements will be satisfied by the posting of the larger document.

Security-based compensation arrangements 

Issuers will be required to make enhanced disclosure regarding their security-based compensation arrangements for financial years ending on or after October 31, 2017. The Amendments:

  • require shareholder meeting materials to include a description of any multiplier used in a security-based compensation arrangement (e.g., performance target);
  • require disclosure of an annual burn rate for each security-based compensation arrangement. The burn rate will be the percentage calculated by dividing:
    • the number of securities granted during the applicable fiscal year by
    • the weighted average number of outstanding securities of the issuer at the beginning of the applicable fiscal year adjusted by securities bought back or issued under the arrangement during the period
  • require issuers to disclose the annual burn rate for each of the listed issuer’s three most recently completed fiscal years, regardless of whether shareholder approval of the security-based compensation arrangement is sought at the meeting or not. Where an arrangement has not existed for at least three fiscal years, issuers must disclose the annual burn rate for each year completed since its adoption or the most recent security holder approval. No annual burn rate disclosure is required for the first fiscal year of newly adopted arrangements (other than replacement arrangements). The prior proposal to only require disclosure of a one-year burn rate in shareholders’ meeting materials where approval of the arrangement was not being sought has been abandoned;
  • provide that disclosure regarding the security-based compensation arrangements for a meeting (other than an annual meeting) where shareholder approval is sought for the arrangement must be presented as of the date of the meeting materials; and
  • clarify that disclosure prepared for an annual meeting must be presented as at the last day of the issuer’s fiscal year.

Issuers are reminded that materials for meetings where shareholder approval for a security-based compensation arrangement is sought must be pre-cleared with the TSX.

The Amendments can be accessed here.


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