As reported in our Recent Developments with Respect to Notice-and-Access Procedure, Notice and Access Related Amendments to NI 54-101 and NI 51-102, and Implementing Notice-and-Access: What You Need to Know bulletins, the Canadian Securities Administrators (CSA) implemented a Notice and Access methodology for the electronic delivery of proxy materials by reporting issuers beginning with shareholder meetings held on or after March 1, 2013. The identified benefits of this new regime include speed and convenience in communication between reporting issuers and their shareholders, a reduction in printing and mailing costs and a reduction in the environmental impact of distributing paper copies of documents in large quantities.
Fasken Martineau has been monitoring the adoption of Notice and Access by reporting issuers in Canada during the 2013 proxy season and we are pleased to present our findings below. We report that 172 reporting issuers have adopted Notice and Access.
Commentators, including Fasken Martineau, identified potential corporate law hurdles to be overcome in connection with the adoption of Notice and Access by reporting issuers incorporated federally and in certain Canadian provinces. In two jurisdictions, namely, Canada and the Province of Ontario, regulators intervened to address those hurdles.
Canada and Alberta
On February 15, 2013, Corporations Canada confirmed that Notice and Access provided shareholders of corporations incorporated under the Canada Business Corporations Act (CBCA) with sufficient disclosure to support an application for an exemption from the requirement to send the prescribed management proxy circular to each registered shareholder whose proxy is solicited. Corporations Canada has reported that three CBCA corporations have been granted this exemption, while our table below reports that 18 CBCA corporations have adopted Notice and Access. However, as Corporations Canada noted, its statutory authority to grant exemptions under the CBCA does not extend to the requirement to send financial statements to registered shareholders. The fact that only three of the 18 reporting issuers who adopted Notice and Access applied for and received exemptions from the Director under the CBCA with respect to the proxy solicitation requirements suggests that the 15 other CBCA corporations that adopted Notice and Access determined that relief from the proxy solicitation requirements would not have facilitated their process in a material way.
The Business Corporations Act (Alberta) has provisions similar to those of the CBCA but Alberta did not intervene with respect to Notice and Access. Notwithstanding that, 21 ABCA corporations adopted Notice and Access.
Among the CBCA and ABCA corporations which adopted Notice and Access, six CBCA corporations and eight ABCA corporations stated expressly in their meeting materials that financial statements were available by Notice and Access only to beneficial shareholders.
Ontario
The Ontario Securities Commission also intervened and, by its Staff Notice 54-702 published on February 28, 2013, it provided its staff opinion that it is not necessary for reporting issuers incorporated under the Business Corporations Act (Ontario) (OBCA) to obtain exemptive relief from the OSC under Section 113 of the OBCA with respect to the requirement of sending a management information circular to shareholders. The OSC staff noted that the definition of “send” in the OBCA reads “includes deliver or mail” and, accordingly, the definition is broad enough, in the view of OSC staff, to permit electronic delivery, including the electronic delivery procedures contemplated by Notice and Access. The OSC further observed that a document may be sent by mail, by personal delivery or by electronic means in accordance with the Electronic Commerce Act, 2000 (ECA) and that, again in the view of the OSC staff, the provision of a document by electronic means does not breach the requirement of the ECA that a recipient cannot be required to use or accept a document in electronic form without his or her consent. In short, the recipient is not required to use or accept the electronic form of the management information circular (or related materials) since shareholders, as the recipients, have the option of requesting a paper copy at no cost to the shareholder. In addition, the OSC staff noted that reporting issuers are also required to mail a notice package to shareholders in addition to posting the documents to a website. The table below reports that 45 OBCA corporations have adopted Notice and Access.
Findings
The following table lists by jurisdiction of incorporation the breakdown of adoption of Notice and Access by the 172 reporting issuers that we have identified as having adopted Notice and Access as reported in proxy materials filed on SEDAR through July 31, 2013:
ADOPTION OF NOTICE AND ACCESS
|
Jurisdiction of Incorporation |
Number of Reporting Issuers |
| Canada |
18 |
| Newfoundland and Labrador |
– |
| Prince Edward Island |
– |
| Nova Scotia |
1 |
| New Brunswick |
1 |
| Quebec |
6 |
| Ontario |
47 |
| Manitoba |
1 |
| Saskatchewan |
– |
| Alberta |
21 |
| British Columbia |
57 |
| Yukon |
1 |
| Other (Trusts) – Alberta 3, BC 1, ON 6 |
10 |
| Foreign: US – Delaware – 5, US – Nevada – 2, US – Texas – 1, US – Massachusetts – 1 |
9 |
We have also captured information with respect to the asset size of these reporting issuers and the stock exchanges on which they have listed their securities. These results are shown below by the total number of reporting issuers in each category:
ASSET SIZE
|
<$5 million |
$5-$25 million |
$25-$100 million |
$100 million – $500 million |
$500 million- |
> 1 billion |
|
47 |
32 |
26 |
31 |
4 |
32 |
STOCK EXCHANGE LISTING
|
TSX |
TSX-V |
CNSX |
AMEX |
NYSE |
Nasdaq |
OTCBB |
Other |
N/A |
|
84 |
66 |
6 |
11 |
12 |
6 |
1 |
14 |
8 |
Note: This stock exchange listing table includes dual and multiple listings for some reporting issuers, so the total is greater than 172.
Miscellaneous
Some reporting issuers which adopted Notice and Access submitted amended by-laws to their annual shareholders meeting to facilitate the use of Notice and Access. The amended by-law became effective when passed by the directors of the reporting issuers prior to the mailing of meeting materials such that the corporations were able to rely on it to use Notice and Access for the 2013 meeting.
Other reporting issuers submitted amended by-laws to their annual shareholders meeting to provide for the use of Notice and Access at future shareholders meetings, but did not rely on the amendments for the purpose of using Notice and Access for this year’s meeting.
Some reporting issuers submitted amendments to their articles to ensure that they would be able to use Notice and Access for future shareholders meetings.
One reporting issuer incorporated under the Business Corporations Act (Yukon) (YBCA) submitted a proposal to its annual shareholders meeting to continue under the Business Corporations Act (British Columbia) and cited that in doing so it would benefit from being able to take advantage of Notice and Access which was not available to it as a YBCA corporation because the YBCA requires communications to be physically mailed to shareholders.