Business Law Blog

The Toronto Stock Exchange (the "TSX") has recently adopted final amendments to Parts IV and VI of the TSX Company Manual, following an initial proposal in 2016, that provide for new website disclosure requirements for certain TSX listed issuers and additional disclosure requirements relating to security based compensation arrangements (the "Plans"). The TSX has also recently issued a staff notice clarifying the extent of information that must be disclosed by listed issuers under the TSX Form 11 - Notice of Private Placement (the "Form 11").

New Website Disclosure Requirements

The amendments require that by April 1, 2018, all TSX listed issuers, subject to certain exceptions, maintain a website on which the public can access the following documents in a clearly identifiable way:

• articles and bylaws, or equivalent constating documents;
• majority voting policy;
• advance notice policy;
• position descriptions for the chairman of the board and the lead director;
• board mandate; and
• board committee charters.

The TSX believes that the new website disclosure requirements will create value for investors by establishing a centralized location for accessing key corporate governance documents. While certain of the documents identified above must already be disclosed on SEDAR, the TSX recognized that these documents may be difficult to locate or access on SEDAR. Accordingly, the TSX believes that the enhanced accessibility of these governance documents will outweigh the additional obligations they impose on issuers.

New Security Based Compensation Arrangements Disclosure Requirements

Under the amendments to Part VI of the TSX Company Manual, all TSX listed issuers must, for financial years ending on or after October 31, 2017, disclose in their management information circular (or other annual disclosure document distributed to all security holders) the annual burn rate for each of the issuer's three most recently completed fiscal years for each relevant Plan. The burn rate for a Plan must be expressed as a percentage by dividing the number of securities granted under the Plan during the applicable fiscal year by the weighted average number of securities outstanding for the applicable fiscal year. If securities awarded under a Plan include a multiplier, the details of such multiplier must also be disclosed.

In light of these new disclosure requirements, TSX listed issuers should assess their disclosure policies and practices to ensure burn rates are properly recorded, calculated and disclosed. For issuers that are already voluntarily disclosing burn rates, there may be discrepancies between current disclosure practices and the new requirements. For instance, these issuers may be using a formula that differs from the one prescribed under the amendments.

The amendments to Part VI of the TSX Company Manual also clarified the type of disclosure required in respect of the maximum number of awards issuable, the number of outstanding awards and the number of awards available for grant under each Plan. Additionally, the amendments clarified that the Plan disclosure requirements with respect to vesting and term apply to all Plans, not only to stock option plans.

Overall, the final amendments adopted by the TSX represent a pared down version of the initial proposal, issued in May of 2016, which included a proposed new form for certain disclosure and the disclosure of a longer list of governance policies and documents. In light of comments from market participants, the additional form was removed, the extent of disclosure was reduced to the governance documents deemed most relevant to investors, and the burn rate formula was revised.

 Clarification of Disclosure Obligations Under Form 11

Following the Ontario Securities Commission's (the "OSC") decision In the Matter of Eco Oro Minerals Corp. (in which the OSC overturned the TSX’s approval of the issuance of shares in a tactical private placement completed in the face of a takeover bid), the TSX clarified that under Form 11, TSX-listed issuers must disclose any significant information regarding a proposed private placement not otherwise disclosed in the form, including such matters as:

• any upcoming shareholders meetings for which a record date has been or is shortly expected to be determined;
• any pending mergers, acquisitions, take-over bids, changes to capital structure or other significant transactions; and
• any details regarding potential dissident shareholders and/or anticipated proxy contests.

 Additionally, the TSX reiterated that an officer or director of the issuer must certify that the Form 11 is complete and accurate, and that it contains no untrue statement of a material fact and does not omit to state a material fact that is required to be stated or that is necessary to make a statement not misleading in the light of the circumstances in which it is made.

Given these requirements, the TSX expects issuers to carefully and thoroughly review the Form 11 in order to ensure that all relevant information has been provided and properly disclosed.