At the end of May 2016, the TSX published for comment proposed amendments to the TSX Company Manual (Company Manual) 1) introducing website disclosure requirements for TSX-listed issuers; and 2) amending disclosure requirements regarding securities-based compensation arrangements (Arrangement) including the introduction of Form 15 – Disclosure of Security-Based Compensation Arrangements.
The TSX is proposing that listed issuers will be required to maintain a publicly accessible website posting current copies of:
- Constating documents
- Corporate policies that impact meetings of securityholders and voting (e.g., maj voting policy, advanced notice bylaw)
- Securityholder rights plans
- Security-based compensation arrangements
- Certain corporate governance documents (e.g., codes of conduct and ethics, whistleblower policies, governance policies, enviro policies, board mandates, position descriptions)
Although the majority of these documents can be (or at least should be) found on SEDAR, as the TSX points out, it is not always obviously apparent where these documents are under an issuer’s SEDAR profile, and categorization may differ from issuer to issuer. Moreover, the TSX has further noted that not all of an issuer’s corporate governance policies would need to be on SEDAR under securities law requirements.
As for the webpage itself, the only requirement of the TSX is that the website containing the documents be “easily identifiable and accessible from the issuer’s home page or investor relations page”. Note to issuers that share a webpage with other issuers: each issuer should have a separate, dedicated webpage on the website.
The TSX notes that the amendments reduce an issuer’s annual disclosure obligations for majority voting policies, as annual disclosure of this policy in a circular will no longer be required. However, query whether in practice this will really reduce disclosure obligations, as issuers will still likely need to provide shareholders with full voting particulars in the circular; the TSX itself acknowledges this reality.
Lastly, and importantly for any issuers who are foreign issuers or listed on multiple exchanges, there is no carve out currently proposed for foreign issuers or deferral to the requirements of another exchange for inter-listed issuers.
Proposed amendments to Part 6 of the Company Manual re security based compensation arrangements and introduction of form 15
The disclosure requirements regarding securities-based compensation arrangements are currently found in various sub-sections of section 613 of the Company Manual and, until now, a comprehensive list of such requirements has not been available.
Enter the proposed Form 15 – Disclosure of Security-Based Compensation Arrangements. Essentially, the Form 15 provides a checklist of disclosure required in circulars in respect of securities-based compensation arrangements in one place. This should be helpful for issuers who would like to assess in the most efficient manner whether their disclosure meets TSX requirements.
Note, however, that the Form 15 is not just a straight ‘cut-and-paste’ of the existing requirements . As the TSX has expressed, the proposed modified requirements seek to 1) modernize disclosure rules to account for the fact that securities-based compensation arrangements have moved past the traditional form of ‘common stock option plan’; and 2) remove requirements that were duplicative, i.e., those that already exist under securities law disclosure rules.
For example, in respect of 1), the proposed amendments require the continued disclosure of the number of awards currently outstanding under an Arrangement; however, the disclosure requirement has been modified to further require that if the award includes a multiplier, the maximum payout under the multiplier must be used to calculate the number of listed securities issuable under the award. In respect of 2), the following disclosure will be no longer be required under the proposed amendments: (i) maximum securities available to insiders; (ii) maximum securities available to one person or company; (iii) method for determining exercise price; (iv) method for determining purchase price; (v) formula for calculating market appreciation of stock appreciation rights (SARs); (vi) ability to transform stock options into SARs involving issuance of securities from treasury; (vii) term; (viii) causes of cessation of entitlement and effect of employee termination; (ix) assignability; (x) procedure for amending; (xi) financial assistance; and (xii) entitlements previously granted but subject to security holder ratification.
Note also that most (but not all) of the proposed circular disclosure requirements are applicable both in cases of plan renewal (generally every three years for a rolling plan), and in years when shareholders will not be voting on the plan.
The TSX has posed a (very helpful) chart summarizing the current disclosure vis a vis the proposed disclosure (scroll about a third of the way down the page to access):
The comment period on both of these proposed amendments is open until June 27, 2016.