On March 23, 2020, both the Canadian Securities Administrators (CSA) and the Toronto Stock Exchange (TSX) published temporary blanket relief measures under Canadian securities laws and the provisions of the TSX Company Manual (Manual), respectively, as a result of the ongoing COVID-19 pandemic.
Further to its announcement on March 18, 2020, the CSA published temporary blanket relief (CSA Blanket Relief) on March 23, 2020, for market participants facing challenges meeting certain obligations under applicable Canadian securities laws in light of the COVID-19 pandemic. The CSA has implemented the CSA Blanket Relief through local blanket orders that are substantially harmonized across the provinces and territories of Canada. In Ontario, the local blanket order implementing the CSA Blanket Relief with respect to reporting issuers is Ontario Instrument 51-502 Temporary Exemption from Certain Corporate Finance Requirements (Instrument), which came into effect on March 23, 2020, for a period of 120 days, while the CSA Blanket Relief has been implemented in each of British Columbia, Alberta and Quebec, pursuant to their own respective local rules.
The following article focuses on the relief granted to reporting issuers. Similar relief has been granted to investment funds and similar issuers, registrants and unregistered capital market participants and other regulated entities, including stock exchanges and clearing agencies.
Similarly, the TSX issued Bulletin 2020-0002 – Covid-19 Measures (Bulletin) on March 23, 2020, to align certain TSX rules with the CSA Blanket Relief and to provide certain additional relief for issuers on account of the ongoing volatility in the trading of securities on the TSX as result of the ongoing COVID-19 pandemic.
CSA BLANKET RELIEF
The CSA granted the CSA Blanket Relief in acknowledgement of the challenges the COVID-19 pandemic may pose to market participants in satisfying certain filing and document delivery obligations under continuous disclosure and prospectus requirements, including under provisions relating to the use of exemptions from the prospectus requirements.
The CSA Blanket Relief provides a 45-day extension for periodic filings normally required to be made by issuers, investment funds, registrants, certain regulated entities and designated rating organizations on or before June 1, 2020, and for certain other requirements.
Local Blanket Orders
Summarized below are the key points for reporting issuers from the Instrument effective in Ontario, which is substantially similar to relief granted in each of British Columbia, Alberta and Quebec:
- Annual and Interim Filings Requirements: Issuers required to make specified annual or interim filings, including, among others, annual financial statements (as well as the delivery thereof), interim financial reports, management’s discussion & analysis, annual information forms, statements of executive compensation and technical reports, or any similar documents required pursuant to an exemption granted to an issuer by the securities regulators, during the period from March 23, 2020, to June 1, 2020, have an additional 45 days from the deadline, otherwise applicable under Ontario securities law, to make the filing or to send or deliver the document, provided that certain conditions set out in the Instrument are satisfied;
- The conditions include the requirement to issue and file on the System for Electronic Document Analysis and Retrieval (SEDAR), as soon as reasonably practicable, a news release in advance of the applicable filing deadline disclosing (i) each requirement for which the issuer is relying on the exemption, (ii) that its management and other insiders are subject to an insider trading black-out substantially similar to a management cease trade order, (iii) the estimated date by which the issuer expects to file the relevant filing, and (iv) an update of any material business developments since the date of the last annual financial statements or interim financial reports, or confirmation that there have been none. Issuers are required to issue a further news release within 30 days of the beginning of the extension period, and subsequently within 30 days after the first news release if the filings have not been made at such time that provides an update of an update of any material business developments since the date of the last news release issued pursuant to the Instrument, or confirmation that there have been none;
- Issuers are also advised that they may not file a preliminary prospectus or final prospectus for an offering of securities until they have filed all documents for which they are relying on the exemption granted pursuant to the Instrument.
- Other Filings: Issuers also have a 45-day extension with respect to (i) filings of business acquisition reports, change of auditor reporting and notices of changes in year end or corporate structure, and (ii) reports required pursuant to the offering memorandum and crowdfunding prospectus exemptions during the period from March 23, 2020, to June 1, 2020, provided that a news release is issued in advance of the filing deadline announcing the issuer is relying on the exemption;
- Lapse Date for a Base Shelf Prospectus: An issuer subject to a lapse date for a final base shelf prospectus that occurs during the period from March 23, 2020, to June 1, 2020, may add an additional 45 days to that lapse date, provided that the issuer issues a news release disclosing that it is relying on the Instrument in order to do so, and is not also relying on an exemption from any annual or interim filing requirements described above.
Issuers will need to weigh the practical benefits provided by the CSA Blanket Relief against other obligations to which they may be subject, including the following:
- Laws, Rules and Regulations of other Jurisdictions: The CSA Blanket Relief provides relief only from certain Canadian securities laws. Issuers subject to the securities laws of jurisdictions outside of Canada must consider the applicable requirements under such laws, as well as any relief granted. For example, U.S. Securities and Exchange Commission (SEC) issuers and inter-listed issuers will need to consider the requirements applicable to them under U.S. securities laws and the applicable exchange rules, such as the New York Stock Exchange rules.
- Contractual Obligations: Issuers relying on the CSA Blanket Relief must also consider their obligations under trust indentures, credit agreements and other loan documentation, and other commercial arrangements. While such obligations may simply require that an issuer deliver to the trustee, debt securityholders, lenders or other contractual counterparty, required disclosure documents concurrent with their filing with securities regulatory authorities or as required by applicable Canadian securities laws, they could also require the delivery of disclosure documents within specific timeframes following the completion of fiscal periods, resulting in contractual obligations being more restrictive than the requirements of Canadian securities laws as modified by the CSA Blanket Relief.
- French Translation Requirement: Separate relief from l’Autorité des marchés financiers with respect to French translation requirements for certain documents pursuant to the Securities Act (Quebec), Règlement 41-101 sur les obligations générales relatives au prospectus or any other applicable Quebec securities laws has not yet been issued, and until otherwise advised by the CSA and the Autorité des marchés financiers, issuers will continue to be subject to the existing French translation requirements.
TSX BLANKET RELIEF
On March 23, 2020, the TSX issued the Bulletin which provides relief to issuers from certain provisions of the Manual as result of the ongoing COVID-19 pandemic. As more particularly described below, in parallel with the CSA Blanket Relief, the TSX is providing relief from certain TSX rules regarding deadlines for filing financial statements and holding annual meetings of securityholders. In addition, the TSX is providing relief from the requirement to obtain securityholder approval of certain security-based compensation arrangements (Plans) within a prescribed timeframe. Further, due to ongoing volatility in the trading of securities on the TSX, the TSX is temporarily amending its normal course issuer bid (NCIB) rules, as well as temporarily waiving the application of certain minimum listing requirements. Finally, on a discretionary basis, the TSX may grant relief in respect of the market price used to price securities issued in private placements.
The TSX is providing temporary blanket relief from the following requirements of the Manual:
- Financial Statements (section 442 of the Manual): The TSX is providing relief from the requirement for issuers to notify the TSX if it requires an extension of time to file annual or interim financial statements.
- Annual Meeting (section 464 of the Manual): The TSX is providing relief from the requirement for an issuer to hold its annual meeting of securityholders within six months of the end of its fiscal year. The TSX is permitting issuers to hold their 2020 annual meeting at any time during 2020, up to and including December 31, 2020.
- Security Based Compensation Arrangements (section 613(a) of the Manual): In connection with the extension of the annual meeting requirement, described above, the TSX is also extending the typical three-year timeframe within which an issuer must obtain securityholder approval of unallocated awards under an issuer’s Plan, and permitting the exercise of awards under Plans prior to securityholder approval. The TSX is permitting issuers with ‘rolling’ Plans that must receive securityholder approval at their 2020 annual meeting to continue to grant awards under their Plans until the earlier of such annual meeting and December 31, 2020. In addition, awards granted during this period may be exercised absent ratification by securityholders.
- Normal Course Issuer Bids (section 628 of the Manual): Issuers conducting an NCIB through the facilities of the TSX will now be able to purchase up to 50 per cent of the average daily trading volume of the listed securities of the class subject to the NCIB, rather than the typical limit of the greater of 25 per cent of the average trading daily volume and 1,000 securities. The TSX is also providing a corresponding amendment to TSX Rule 6-101 for “participating organizations” to permit the increase in volume of purchases permitted under an NCIB to 50 per cent of the average daily trading volume of the listed securities of that class.
- Delisting Criteria – Market Value (section 712 of the Manual): The TSX is providing relief from the delisting criteria set out in section 712 of the Manual up to and including December 31, 2020. Pursuant to section 712(a) of the Manual, the TSX may delist securities if the market value of the issuer’s securities is less than C$3-million over any period of 30 consecutive trading days. Pursuant to section 712(b) of the Manual, the TSX may delist securities if the market value of the issuer’s freely-tradeable, publicly held securities is less than C$2-million over any period of 30 consecutive trading days.
The TSX is not requiring that issuers apply for, or make any filings in connection with, the temporary blanket relief.
With respect to the TSX relief from the requirement to hold an annual meeting within six months of the end of an issuer’s fiscal year, issuers are reminded that they must continue to comply with the corporate law requirements of their jurisdiction of incorporation and/or constating documents. At the time of this article, no blanket exemptive relief has been issued with respect to the corporate law requirements regarding holding of annual meetings, including the requirement under the Canada Business Corporations Act to hold an annual meeting not later than 15 months after holding the last preceding annual meeting, but no later than six months after the fiscal year end, and the requirement under the Business Corporations Act (Ontario) to hold an annual meeting no later than 15 months after holding the last preceding annual meeting.
Discretionary Relief: “Market Price” for Private Placements
The TSX has also indicated that it may grant discretionary relief, on a case-by-case basis, in respect of the definition of “market price” used to determine pricing for private placements. In the ordinary course, the TSX uses the five-day volume weighted average trading price of the listed securities to determine market price. However, due to the ongoing volatility in trading of securities on the TSX, the TSX will, at its discretion, use a shorter time period for the determination of market price for the purposes of pricing securities (including warrants) for private placements.
The TSX Venture Exchange (TSXV) has also given notice to issuers that it is extending the timeframe in which an issuer must hold its annual meeting to match the TSX, such that issuers can hold their 2020 annual meeting at any time during 2020, up to and including December 31, 2020, and the annual approval of a ‘rolling’ stock option plan under the TSXV rules may take place at any such meeting.
The Canadian Securities Exchange (CSE) has also issued a notice indicating that issuers listed on the CSE are required to file their interim and annual financial statements and related CSE forms with the CSE when filed on SEDAR or in accordance with securities legislation. Consequently, the relief granted by the CSA will apply to any filings required by the CSE.
ONGOING DISCLOSURE OF MATERIAL CHANGES AND MATERIAL INFORMATION
Issuers are further reminded that notwithstanding the relief granted by the CSA and stock exchanges regarding certain filing obligations, issuers remain subject to the requirement to provide disclosure of material changes and material information. Please see our March 2020 Blakes Bulletin: Coronavirus Disclosure: It’s Contagious and Could Be Dangerous regarding the requirement to update the market in respect of material changes and material information, as applicable.
For further information, please contact:
Christopher Jones 416-863-2704
Jeremy Ozier 416-863-5824
Patrick Daley 416-863-2450
Kelsey Park 416-863-3255
or any other member of our Capital Markets group.
Please visit our COVID-19 Resource Centre to learn more about how COVID-19 may impact your business.
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