TSX proposes amendments to listing rules: websites and security-based compensation

The Toronto Stock Exchange has published for comment proposed amendments to the TSX Company Manual (the Proposed Amendments). The Proposed Amendments, if enacted, would:

  • require an issuer to maintain a public website and post prescribed documents on the site; and
  • amend the disclosure requirements for security-based compensation arrangements by, among other things,
    introducing a simplified user-friendly disclosure form.

Written comments on the Proposed Amendments will be accepted until June 27, 2016.

Publicly accessible website

Requiring a TSX-listed issuer to maintain its own website will bring the TSX in line with certain other exchanges,
including NYSE and AIM. The TSX Venture Exchange does not have issuer website requirements. The TSX is
concerned that market participants may encounter difficulty locating documents on SEDAR (the Canadian Securities Administrators’ public depository for continuous disclosure documents) as issuers do not necessarily use the same filing practices. The Proposed Amendments will require TSX-listed issuers to post current copies of the following documents on their website:

  • constating documents, including articles, trust indentures, partnership agreements, by-laws and other similar documents;
  • corporate policies that impact shareholders’ meetings and voting, including advance notice by-laws or policies and majority voting policies;
  • security holder rights plans (poison pills);
  • security-based compensation arrangements; and
  • corporate governance documents, including board mandates, committee charters, business codes of conduct, position descriptions and anti-corruption, environmental, social and whistle-blowing policies.

Some but not all of these documents are required to be filed on SEDAR. The TSX is soliciting comments on the
appropriateness of the website requirements. Specifically, the TSX is soliciting feedback on whether additional
documentation should be required to be filed or excluded from filing, the material costs to comply with the new
requirements, possible concerns that shareholders may rely on less than current documentation on a website, and the appropriate time period to allow issuers to satisfy the new requirements if adopted.

It is likely many issuers will be able to easily comply with the website requirements and may in fact already have
protocols in place regarding website postings. Such procedures will need to be put in place or reviewed to ensure the correct documents are posted and kept current.

New disclosure for security-based compensation arrangements

The Proposed Amendments both simplify and enhance disclosure regarding security-based compensation
arrangements of TSX-listed issuers. The Proposed Amendments are updated to reflect more recent compensation arrangements, including those taking the form of a plan that set out the terms and conditions pursuant to which options, performance stock units, deferred stock units or other awards (collectively awards) are granted. The highlights of the Proposed Amendments relating to security-based compensation arrangements are:

  • New Form 15. The introduction of a user-friendly table where security-based compensation disclosure will be presented. The disclosure rules apply to meetings where shareholder approval of a security-based
    compensation arrangement is proposed (Shareholder Approval Meeting) and other annual meetings unless
    noted. Pre-clearance by the TSX of materials for a Shareholder Approval Meeting is still required.
  • Use of Multipliers in Calculating Outstanding Awards. An issuer will continue to be required to disclose the number of awards outstanding under any security-based compensation arrangement. If any award includes a multiplier, the maximum payout, after giving effect to the multiplier, must be used to calculate the outstanding awards.
  • Burn Rates. An issuer will be required to disclose the rate at which it uses up the securities under a securitybased compensation arrangement (the burn rate). The burn rate will be the percentage calculated by dividing
    (i) the number of awards granted in the prior fiscal year (net of cancellations) times any applicable multiplier by
    (ii) the number of issued and outstanding securities of the issuer at the beginning of the year. For Shareholder Approval Meetings three-year burn rates must be disclosed. For other annual meetings, disclosure of the oneyear burn rate will be sufficient.
  • Vesting. The disclosure related to the vesting of a security-based compensation arrangement has been
    enhanced to include specific disclosure regarding default vesting provisions and whether vesting is time and/or performance based.
  • Key Terms. If disclosure is for a Shareholder Approval Meeting the other key terms of the security-based
    compensation arrangement that may reasonably be required by a shareholder must be included.
  • Website. All security-based compensation arrangements will be required to be posted on an issuer’s website and disclosure made of where such arrangements are located.
  • Disclosure no longer required. The TSX proposes removing the following disclosure requirements relating to security-based compensation arrangements:
     maximum number of securities available to insiders or one particular person;

     methods for determining purchase price and exercise price;

     formula for calculating market appreciation of SARs;

     ability to transform stock options to SARs through treasury issuances;

     causes of cessation of entitlement and effect of employee termination;

     assignability and amendment; and

     prior granted entitlements subject to security holder ratification.

If the Proposed Amendments come into effect, TSX-listed issuers still need to comply with the rules relating to
executive compensation imposed by Canadian securities legislation.

A copy of the Proposed Amendments can be accessed here.

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