On January 14, 2021, Laurel Hill Advisory Group (“Laurel Hill”) and Fasken hosted a webinar on ESG (environmental, social and governance) considerations of which companies should be aware for the upcoming 2021 proxy season. The webinar’s panelists were David Salmon of Laurel Hill and Emilie Bundock, Stephen Erlichman and Grant McGlaughlin of Fasken and was moderated by Gordon Raman of Fasken. Set out below are some of the comments made by the speakers on the webinar.


The importance of ESG considerations in today’s corporate governance model has developed over the past 50 years.  In the early 1970’s the Milton Friedman view of corporations was the dominant business mindset.  In a forceful New York Times article he said that business leaders that “believed business is not concerned ‘merely’ with profit but also with promoting desirable ‘social’ ends …[were]… preaching pure and unadulterated socialism”.  Since that time, certainly in North America,  corporations have assumed a central role in the growth of economies.  With that central role has come the recognition that corporations play a greater role in society, as noted in 2017 by Larry Fink, the head of Blackrock.  In his annual letter to CEOs he wrote: “ To prosper over time, every company must not only deliver financial performance, but also show how it makes a positive contribution to society. Companies must benefit all of their stakeholders, including shareholders, employees, customers, and the communities in which they operate.” Continue Reading Proxy Season Preview 2021: ESG Considerations

On January 14, 2021, the Toronto Stock Exchange (“TSX”), Laurel Hill Advisory Group (“Laurel Hill”) and Fasken hosted a conversation on important disclosure and corporate governance considerations for issuers leading into the 2021 proxy season. The panel discussed four discrete areas of recent developments in corporate governance which companies should be aware of before this upcoming 2021 proxy season:

  1. An Update from Proxy Advisory Firms
  2. An Update from the TSX
  3. Diversity Disclosure
  4. COVID-19: Lasting Repercussions

The webinar discussion featured Bill Zawada of Laurel Hill, Valérie Douville of the TSX, and Sarah Gingrich and Neil Kravitz of Fasken and was moderated by Gordon Raman of Fasken. Continue Reading Proxy Season Preview 2021

Proxy advisory firms Institutional Shareholder Services (ISS) and Glass, Lewis & Co. (Glass Lewis) recently published updated guidelines governing shareholder meetings for the 2021 proxy season. The ISS Benchmark Policies for Canadian issuers and Glass Lewis Guidelines focused on key issues, including gender diversity, environmental and social risk oversight, board refreshment, and other corporate governance matters.

These updates come in addition to the recent guidelines by ISS and Glass Lewis published in response to the COVID-19 pandemic.

Board Diversity

Glass Lewis has provided that board of directors with less than two female directors would be noted as a concern in 2021; and in 2022, Glass Lewis will recommend withholding a vote for the nominating committee chair when a board of directors has less than two female directors (for a board with six or fewer members, this changes to only one female director).

With a similar approach, currently ISS will generally recommend withholding a vote for a chair of a nominating committee, or other directors responsible for board nominations, of “widely-held” companies where the company has either (i) no formal gender diversity policy; or (ii) zero women on its board of directors. Beginning in February 2022, ISS will recommend withholding a vote for the chair of the nominating committee, or other directors responsible for board nominations,  where either: (i) women comprise less than 30% of the board and the company has not disclosed a formal written gender diversity policy; or (ii) the company’s formal policy does not include a commitment to achieve at least 30% women on the board over a reasonable timeframe. The existing policy will continue to apply to TSX-listed, non-TSX Composite Index companies which are considered “widely-held” by the ISS.[1]

Environmental and Social Risk Oversight

Glass Lewis will note as a concern when board of directors of companies in the S&P/TSX 60 index do not provide clear disclosure concerning the board-level oversight afforded to environmental and/or social issues. Further, beginning with shareholder meetings held in 2022, Glass Lewis will recommend withholding a vote for the governance committee chair of a company in such the S&P/TSX 60 Index which fails to provide explicit disclosure concerning the board of directors’ role in overseeing these issues.

Current ISS policy recommends withholding votes for individual directors, committee members and entire boards due to, among other things, material failures of governance, stewardship, risk oversight or fiduciary responsibilities at the company. Commencing 2021, ISS policy guidelines expand risk oversight failure examples to expressly include failures relating to environmental and social factors, including climate change.

Exclusive Forum

Glass Lewis and ISS have made updates to their policies in response to an increasing number of Canadian companies adopting exclusive forum bylaws, which designate and require corporate litigation to be conducted in a single jurisdiction.

Glass Lewis recommends that shareholders vote against any amendments to the bylaws or articles seeking to adopt an exclusive forum provision unless the company: (i) provides a compelling argument on why the provision would directly benefit shareholders; (ii) provides evidence of abuse of legal process in other, non-favored jurisdictions; (iii) narrowly tailors such provision to the risks involved; and (iv) maintains a strong record of good corporate governance practices.

Beginning February 2021, ISS will recommend voting on a case-by-case to proposals adopting exclusive forum bylaws or amending bylaws. Case-by-case determinations will take into account: (i) the company’s jurisdiction of incorporation; (ii) board rationale for adopting the bylaw provision; (iii) legal actions subject to the bylaw provision; (iv) evidence of past harm as a result of shareholder action against the company originating outside of the jurisdiction of incorporation; (v) the company’s governance provisions and shareholder rights; and (vi) any other problematic provisions that raise concerns regarding shareholder rights.

Additional key updates include the following:

Glass Lewis

  • Board Refreshment: Glass Lewis will note instances where the average tenure of a non-executive directors is 10 years or more and no new independent directors have joined the board in the past five years as a potential concern.
  • Financial Expertise: Glass Lewis will increase scrutiny on the level of professional expertise on audit committees, which should have members with sufficient professional experience to fit the role.
  • Director Attendance / Committee Meeting Disclosure: Glass Lewis will recommend against voting for the governance committee chair when records for board and committee meeting attendance are not disclosed and the number of audit committee meetings that took place are not disclosed. Additionally, Glass Lewis will recommend against voting for the audit committee chair if the committee did not meet at least four times during the year.
  • Change of Continuance: Proposals requesting a continuance to another jurisdiction will be evaluated on a case-by-case basis to determine if they are in the best interests of the company and its shareholders.
  • Poor Disclosure: Additional scrutiny will be given to companies with disclosure standards that are unclear, poor, contradictory, or outdated.
  • Clarifying Amendments: Glass Lewis made some additional clarifying amendments to its independence classification, provided additional factors for compensation committee performance, provided additional factors for evaluation of a company’s short-term and long-term incentive plans, added language regarding option exchanges and repricing proposals, and announced a change of its peer group data provider.


  • Equity-Based Evergreen Compensation Plans: ISS will recommend against voting for the compensation committee members (or the board chair, as applicable) for Canadian Securities Exchange listed companies, if the company maintains an evergreen equity compensation plan but has not sought shareholder approval in the past two years and is not seeking approval at the upcoming meeting.

For a discussion on these topics, as well as other considerations for issuers as they prepare for the 2021 proxy season, Fasken will be hosting its annual Proxy Season Preview, this year titled “Recent Developments in Corporate Governance and the Importance of ESG Considerations” through a webinar to be held on January 14,, 2021 at noon (EST).

[1] Note: “widely-held” companies is defined as S&P/TSX Composite Index companies and other companies designated as such by ISS based on the number of ISS clients holding securities of the company.

Several months ago we asked whether a COVID-19-related impact on a business might constitute a “Material Adverse Change” (referred to as a “MAC,” or a material adverse effect, “MAE”) under merger agreements, and we noted the near complete absence of case law on the issue in Canada (see: “COVID-19 and Material Adverse Change Provisions in M&A Agreements”). Fortunately, we now have some Canadian case law to provide guidance. A recent decision of the Ontario Superior Court of Justice relating to the impact of COVID-19 suggests that MAC/MAE clauses will be interpreted narrowly in Canada, which follows the trend in the case law from Delaware courts.

The Decision: Fairstone Financial Holdings Inc. v Duo Bank of Canada

In February 2020, Duo Bank of Canada (Duo) announced that it would acquire consumer finance company Fairstone Financial Holdings Inc. (Fairstone) by way of a share purchase agreement (SPA). The transaction was expected to be completed on June 1, 2020. In the intervening time, the COVID-19 pandemic hit North America and Fairstone’s business was significantly affected. In May 2020, year-over-year new loan origination had decreased by 56%, and it was clear that Fairstone would have to reduce lending and tighten lending requirements, thus reducing its earnings potential.

In late May, Duo informed Fairstone that it did not intend to complete the transaction on the basis that, among other things, there had been a material adverse effect on Fairstone’s business and various steps Fairstone took to manage its business through  the pandemic violated its covenant to operate its business in the ordinary course.  Duo was careful, however, not to terminate the SPA.  As the court noted, Duo was the successful and aggressive bidder in an auction and it knew that if it terminated the SPA, Fairstone would not be able to sell the business for the same price that Duo had offered.  If Duo turned out to be wrong about its right to terminate, it would be responsible for damages potentially in the hundreds of millions of dollars.

In response to Duo’s notice, Fairstone sought to compel Duo to complete the transaction by way of a court application for specific performance.  Fairstone sought damages for breach of the SPA as an alternative to specific performance, although Duo made clear that it would prefer to complete the transaction rather than pay damages.

Was there an MAE?

In its decision, the court acknowledged that “at first blush,” it appeared that an MAE had occurred as a result of COVID-19. However, the MAE clause in the SPA contained a number of carveouts which excluded material effects caused by (i) worldwide, national, provincial or local conditions or circumstances, including emergencies; (ii) changes to the markets or industry in which Fairstone operates; and (iii) the failure of Fairstone to meet any financial projections.  The first two carveouts included the further requirement that only an MAE caused by emergencies or market changes which had a “materially disproportionate adverse impact” on Fairstone would relieve Duo of its obligation to complete the transaction.  The court concluded that COVID-19 fell into the definition of the first carveout, and also that the changes to Fairstone’s business were changes to the entire market and industry in which Fairstone operates and Fairstone had not been disproportionately affected.

There are several important takeaways from the court’s analysis of the parties’ arguments regarding an MAE:

  1. Burden of Proof: The party alleging the MAE (in this case, Duo) bears the burden of proving it. However, the court also found that the burden shifted back to Fairstone to establish that one of the carveouts to the definition of MAE is present.
  2. Standard of Proof: The court considered whether the parties’ use of the phrase “has (or would reasonably be expected to have)…a material adverse effect on the business” in the SPA signalled an intention that something lower than the civil burden of proof (i.e. a balance of probabilities) was required to establish an MAE. After surveying the case law on the interpretation of similar language in both Canada and the United States, the court confirmed that the ordinary civil burden of proof applied, such that Duo needed to demonstrate on a balance of probabilities that the conditions of the COVID-19 pandemic would reasonably be expected to have a material adverse effect on Fairstone’s business.
  3. The Role of Expert Evidence: The determination of whether there had been a disproportionate effect on Fairstone turned on expert evidence.  Fairstone’s experts addressed directly the issue by comparing Fairstone to its direct competitor and others in the industry across a broad range of qualitative and quantitative factors, including net income, expenses, impairment charges, operational expenses and history of managing problems. The court preferred this evidence to that of Duo’s expert, who compared Fairstone’s results against results derived from analysts’ projections for public companies for a similar period.
  4. Definition of MAE: The court adopted the widely used definition of MAE from Delaware case law: “…the occurrence of unknown events that substantially threaten the overall earnings potential of the target in a durationally-significant manner.”

Had Fairstone Conducted its Business in the Ordinary Course?

As mentioned above, Duo also alleged that Fairstone, in responding to the pandemic, had breached its covenant to conduct its business in the ordinary course.  The term “ordinary course” was defined in the SPA as “consistent with past practices”.  In effect, Duo argued that nothing done by Fairstone in response to the pandemic could be ordinary course because the pandemic is an extraordinary event.  In rejecting Duo’s position, the court noted that such a conclusion would make the pandemic a reason for not closing the transaction even though emergencies in the nature of the pandemic were excluded from the definition of MAE.  The court found that in reading the SPA as a whole and not as a series of unrelated, standalone provisions, precedence ought to be given to the specific emergency exclusion in the MAE clause over the more general ordinary course provision.

The court noted that the “fundamental purpose” of the ordinary course covenant is “to protect the purchaser against company specific risks and the moral hazard of management acting in a self-interested, opportunistic manner detrimental to the purchaser’s interests.  Without purporting to set out a universal rule, the court set out a number of principles to assist in the consideration of what actions can be said to be taken in the “ordinary course”:

  1. As a general rule, the purchaser of a business accepts systemic economic risks associated with the ownership of a business, including the risk of economic contractions and the detrimental effect they have on a business.
  2. It is part of the ordinary course of any business to encounter local or national recessions and to take steps in response to those sorts of systemic economic changes. Whether these steps are taken in the ordinary course will involve a comparison of (a) what the business has done in similar economic circumstances to what it is doing now, or (b) what the business is doing now to what other businesses are doing.
  3. If a business takes prudent steps in response to an economic contraction, that have no long-lasting effects and do not impose any obligations on the purchaser, it should not be seen to be operating outside of the ordinary course.

Recent Delaware Decision

The Fairstone decision aligns with the American approach to determining when a MAC/MAE has occurred. As noted above, the Ontario court adopted the definition of MAE used in Delaware case law.

It is also noteworthy that in a decision released just two days before Fairstone, the Delaware Court of Chancery reached a similar conclusion on the issue of whether COVID-19 constituted an MAE. The Delaware court found that the consequences of the COVID-19 pandemic fell within an exception to the MAE clause for effects resulting from “natural disasters and calamities.”

However, the Delaware court found a breach of the ordinary course covenant.  Significantly, the court found that the actions of the seller “departed radically from the normal and routine operation of the [business] and were wholly inconsistent with past practice.”  This result was driven by very different facts than were present in the Fairstone decision, but it is noteworthy that the Delaware court declined to consider the MAE clause in its interpretation of the ordinary course covenant.  As discussed above, the Ontario court adopted an approach that considered the SPA as a whole and not as a series of unrelated, standalone provisions.


The Fairstone decision provides valuable guidance as to how Canadian courts will interpret MAE carveouts and ordinary course covenants, which makes it a must-read for participants in Canadian M&A.

On December 1, 2020, the TSX Venture Exchange (Exchange) issued a news release to announce changes to its Capital Pool Company (CPC) program that will come into force on January 1, 2021.  The CPC program is a way for private companies to go public in Canada. The CPC program enables seasoned directors and officers to form a CPC, raise a pool of capital and list the CPC on the Exchange with no assets other than cash and no commercial operations. The CPC then uses the capital raised to identify a private operating company to complete a qualifying transaction with the CPC (Qualifying Transaction). After the CPC has completed its Qualifying Transaction, the resulting issuer’s shares trade as a regular listing on the Exchange.

The Exchange advised that the changes are aimed at providing increased flexibility by included additional jurisdictions, easing the residency requirements and simplifying spending restriction.  The changes are also aimed at reducing regulatory burden by relaxing the requirements on shareholder distribution and shareholder approvals. Continue Reading TSX Venture Exchange Adopts Changes to Capital Pool Company Policies

The Canadian Securities Administrators (“CSA”) recently published a Staff Notice (the “Notice”) to report on the results of the reviews conducted  by the CSA within the scope of its Continuous Disclosure Review Program. The goal of this program is to improve the completeness, quality and timeliness of continuous disclosure provided by reporting issuers.

The focus on this post is mainly aimed towards the Notice’s guidance for continuous disclosure in the context of the coronavirus pandemic. In order to support investors in making informed investment decisions, CSA reminds reporting issuers to provide transparent disclosure, including information about the impact of COVID-19 on their operating performance, financial position, liquidity and future prospects. The guidance builds on information disseminated by the CSA earlier this year, as we have discussed in this previous blog post. Continue Reading Canadian Securities Administrators publish Guidance on Continuous Disclosure in Time of COVID-19

The Ontario Securities Commission, like several other regulatory investigators, has extensive power to compel testimony and require the disclosure of documents and information.  A recent decision of the OSC, B (Re) (2020 ONSEC 21), has highlighted a gap in the Commission’s power to compel testimony from a witness where such testimony may constitute a breach of the witness’s contractual obligations to a third party.

The Case

Staff of the Commission is conducting an investigation pursuant to an investigation order issued by the OSC under section 11 of the Securities Act.  Investigation orders empower Staff to issue a summons pursuant to section 13 of the Act, to compel an individual to provide oral testimony under oath and to provide documentary evidence.  Section 16 of the Act prohibits the recipient of a summons from disclosing information relating to the summons or the investigation, subject to narrow exceptions.

Staff served upon an individual, identified only as “B”, a summons under section 13 of the Act.  Although B was prepared to cooperate with Staff, B was concerned that doing so would violate B’s employment contract, which imposes confidentiality over all matters relating to B’s employment without an exception that is relevant to a regulatory investigation. Continue Reading Recent OSC Decision Raises Uncertainty for Witnesses Responding to a Summons

Further to our earlier post discussing COVID-19 and Material Adverse Change (“MAC”) provisions in merger and acquisition agreements, and the procedural ruling in respect of the dispute involving Rifco Inc. (“Rifco”), ACC Holdings Inc. (“Purchaser”), and the Purchaser’s parent company, CanCap Management Inc. (“CanCap”), each of Rifco, the Purchaser and CanCap, (collectively, the “Parties”) settled their claims against each other for a payment by CanCap and the Purchaser to Rifco of an aggregate of $1.5 million. Further, the Parties entered into a full and final mutual release settlement agreement dated July 29, 2020 (the “Settlement Agreement”) in connection with the arrangement agreement dated February 2, 2020.

As a result of this Settlement Agreement, the interpretation of MAC provisions in Canada remains uncertain due to the continued lack of court decisions. We will continue to follow future court proceedings relating to the interpretation of MAC provisions, including with respect to the COVID-19 pandemic.


On June 25, 2020 the Canadian Securities Administrators (“CSA”) released their Consultation Paper 25-402 – Consultation on the Self-Regulation Organization Framework (“Consultation Paper”). The Consultation Paper discusses seven key issues of the existing framework for self-regulatory organizations (“SROs”) and is seeking feedback from industry representatives, investor advocates, and the public on how the innovation and development of the financial services industry has impacted the current regulatory regime.

CSA announced its plan to undertake this review in December 2019. In anticipation of CSA’s Consultation Paper, the Investment Industry Regulatory Organization (“IIROC”) and the Mutual Fund Dealers Association of Canada (“MFDA”) released papers outlining their proposed new framework for SROs.

MFDA -­ Proposal for a Modern SRO

MFDA released its special report titled A Proposal for a Modern SRO on February 3, 2020. MFDA recommended creating an entirely new SRO referred to as “NewCo”. NewCo would be a Canadian business conduct and securities regulator and its mandate would include registration, business conduct standards, prudential matters, policy and rule development and enforcement. However, its mandate would not include market surveillance and regulation. Regulation of markets and exchanges would be integrated with the CSA Statutory Regulators (e.g., OSC, BCSC, etc.,).

IIROC – Improving Self-Regulation for Canadians

IIROC released its proposal titled Improving Self-Regulation for Canadians on June 9, 2020. The proposal recommends bringing together IIROC and MFDA as divisions of a consolidated SRO. IIROC believes that the consolidation would save hundreds of millions of dollars over the next decade from reduced duplicative regulatory costs. The proposal highlights the burdensome and lengthy process of trying to develop a new rule book from scratch and emphasizes that a consolidation of IIROC and MFDA would allow dealers and representatives to continue performing under their existing regulatory regime or consolidate their regulatory oversight under one division of the combined SRO.

CSA – Consultation Paper

CSA’s Consultation Paper discusses seven key issues of the existing SRO framework that were identified during informal consultations. The issues were grouped into three broad categories: structural inefficiencies, investor confidence, and market surveillance. With respect to each issue, the Consultation Paper provides a targeted outcome for consideration. The following summarizes each issue and states the CSA’s targeted outcome.

Issue 1 – Duplicative Operating Costs for Dual Platform Dealers

Dual platform dealers often experience higher operating costs and difficulty achieving economies of scale. This inhibits dealers’ ability to minimize costs for investors and innovate product and service offerings. In addition, dual platform dealers are faced with maintaining separate compliance functions and, as a result, are saddled with separate information technology systems. Lastly, dual platform dealers incur both IIROC and MFDA fees.

CSA’s targeted outcome is a “regulatory framework that minimizes redundancies that do not provide corresponding regulatory value.”

Issue 2 – Product-Based Regulation

Different rules or different interpretations of similar rules between IIROC and MFDA exist at a time where there is a convergence of similar products and services between registrants of each SRO. The inconsistent application of rules and compliance between the SROs creates an opportunity for some registrants to take advantage of these differences.

CSA’s targeted outcome is a “regulatory framework that minimizes opportunity for regulatory arbitrage, including the consistent development and application of rules.”

Issue 3 – Regulatory Inefficiencies

There is inefficient access to certain products and services for some registration categories. For example, mutual fund dealers under the MFDA are unable to easily distribute exchange traded funds. The current framework also makes it difficult for any one of the SROs or even the CSA to effectively resolve issues that span multiple registration categories.

CSA’s targeted outcome is a “regulatory framework that provides consistent access, where appropriate, to similar products and services for registrants and investors.”

Issue 4 – Structural Inflexibility

Evolving business models are restricted by the current framework. The structural inflexibility is posing challenges for dealers to accommodate changing investor preferences and to access to a wider range of products and services from a single registrant. Additionally, the current regulatory structure places unnecessary barriers on professional advancement. For example, the higher IIROC proficiency standard makes the transition from mutual fund dealer to investment dealer challenging.

CSA’s targeted outcome is a “flexible regulatory framework that accommodates innovation and adapts to change while protecting investors.”

Issue 5 – Investor Confusion

Investors are generally confused by the existing regulatory framework. There is investor confusion surrounding the number of SROs and their roles and jurisdictions, accessing the complaint resolution processes, and why an investor cannot access similar investment products from a single source.

CSA’s targeted outcome is a “regulatory framework that is easily understood by investors and provides appropriate investor protection.”

Issue 6 – Public Confidence in the Regulatory Framework

There is a possible lack of public confidence in the existing SRO framework. Inadequacies in the SRO governance structure (industry-focused boards and a lack of formal investor feedback mechanisms) fail to provide enough support for SRO’s public interest mandate. Further, there is concern regarding ineffective SRO compliance and enforcement practices.

CSA’s targeted outcome is a “regulatory framework that promotes a clear, transparent public interest mandate with an effective governance structure and robust enforcement and compliance processes.”

Issue 7 – The Separation of Market Surveillance from Statutory Regulators (CSA)

IIROC continues to conduct the surveillance of trading activity on the debt and equity marketplaces in Canada. Statutory Regulators that regulate marketplace operations require IIROC to provide the necessary information. There is concern over possible information gaps and lack of market transparency resulting from this separation of market surveillance away from Statutory Regulators.

CSA’s targeted outcome is an “integrated regulatory framework that fosters timely, efficient access to market data and effective market surveillance to ensure appropriate policy development, enforcement, and management of systemic risk.”

Going Forward

CSA is collecting feedback on the Consultation Paper for a 120-day comment period ending October 23, 2020. The consultation process will result in a CSA paper outlining a proposed regulatory framework for SROs whereby the CSA will seek further public comment.


In an effort to reduce the regulatory burden for issuers who wish to conduct “at-the-market” (“ATM”) offerings in Canada and facilitate capital raising by public companies, the Canadian Securities Administrators (the “CSA”) announced significant amendments (the “Amendments”) to the ATM distribution regime under National Instrument 44-102 – Shelf Distributions (“NI 44-102”) and Companion Policy 44-102CP. Notably, the Amendments, which will become effective on August 31, 2020, will streamline the process for ATM offerings in Canada.  Going forward, issuers commencing an ATM offering will no longer have to apply for and obtain exemptive regulatory relief or be subject to the limitations on (i) overall ATM offering size under a single prospectus supplement (which the current regime limits to 10% of an issuer’s market capitalization at the time of the ATM launch (the “10% Aggregate Cap”)), or (ii) the aggregate number of a class of securities that can be distributed on any trading day (which the current regime restricts to 25% of an issuer’s average daily trading volume of that class (the “25% Daily Cap”)).

ATMs – An Overview

An ATM offering is a distribution of equity securities (typically common shares) at variable market prices that is qualified by a base shelf prospectus and prospectus supplement under the shelf offering procedures of NI 44-102. Through an ATM offering, an issuer may, from time to time, on an as-needed basis, sell its securities at the prevailing market price into a pre-existing trading market in which securities of the same class are traded. Sales of securities under an ATM offering are effected by one or more registered securities dealer(s) engaged by the issuer to act as its agent(s).

ATM offerings can be an effective capital raising alternative for issuers, as they: (i) allow issuers to sell securities into an existing market, typically at no discount to the current market price; (ii) offer quick access to capital, on an ongoing basis, in line with an issuer’s financing needs; (iii) allow issuers to capitalize on favourable market conditions; (iv) are typically subject to lower commissions, fees and expenses than traditional offerings; (v) do not require road shows or marketing, thereby allow management to continue to focus on the business; and (vi) give issuers more discretion as to the size, price, timing and terms of the offering.

Although the current regime under NI 44-102 permits ATM distributions, in order to conduct an ATM offering in Canada issuers first needed to apply (on a case-by-case basis) for exemptive relief from the Canadian securities regulators as it is impracticable for issuers and dealers to comply with certain requirements under applicable securities laws, including:

  • the requirement to deliver a prospectus to purchasers (the “Delivery Requirement”);
  • disclosure of certain modified withdrawal and rescission rights and certification requirements (the “Form Requirements”); and
  • the requirement to publicly disclose the number and average price of the securities distributed under the ATM offering and the aggregate gross and net proceeds raised and aggregate commissions paid or payable on a monthly basis (the “Monthly Reporting Requirement”).

ATM offerings have historically required French translations of the base shelf prospectus, applicable ATM offering prospectus supplement and all documents incorporated by reference.  The Amendments do not provide issuers relief from the French translation requirement, however, an application to the Autorité des marchés financiers can be made to obtain exemptive relief from the French translation requirements in connection with an ATM offering.

The Amendments

When the Amendments take effect on August 31, 2020 they will, among other things, codify certain standard terms that are typically included in ATM exemptive relief orders. As a result, issuers will not have to apply for exemptive relief to conduct ATM offerings in Canada.

In particular, the Amendments will make the following changes to the Canadian ATM offering regime:

  • Delivery Requirement – The Delivery Requirement will not apply in connection with a distribution of securities under an ATM offering.
  • Form Requirements – The Form Requirements for ATM offerings to include: (i) specified “forward-looking” certificates, to be included in the base shelf prospectus or applicable prospectus supplement and (ii) modified form of statement of rights
  • Reporting Obligations – The Monthly Reporting Requirement is replaced with a new quarterly reporting requirement, pursuant to which issuers conducting an ATM offering must disclose the number and average price of the securities distributed under the ATM offering and the aggregate gross and net proceeds raised and aggregate commissions paid or payable by either: (i) filing a standalone report within 60 days after the end of each applicable interim period or 120 days after the end of each applicable annual period; or (ii) including such disclosure in their interim and annual financial statements and related management discussion and analysis.
  • Limits on Offering Size and Trading Volume – ATM offerings will not be subject to the 25% Daily Cap and 10% Aggregate Cap. Notwithstanding the removal of these limitations, the CSA has advised that they will continue monitoring ATM offerings, focusing on distributions that may have had a material impact on the price of the issuer’s securities where prior public disclosure of the distribution was made, and expect issuers and dealers to conduct ATM offerings in a manner that limits any negative impact on market integrity.
  • Additional Disclosure Obligations – To ensure the applicable prospectus contains full, true and plain disclosure of all material facts relating to the securities distributed under the ATM offering, issuers may incorporate new material facts into the prospectus by disseminating a news release disclosing information that, in the issuer’s determination constitutes a “material fact”, provided that such news release is identified on its face page as a “designated news release”. Similarly, a prospectus for an ATM offering should disclose that any such designated news release will be deemed to be incorporated by reference therein.
  • Investment Funds – All (i) non-redeemable investment funds and exchange traded mutual funds that are not in continuous distribution, and (ii) all mutual funds that are traded on an exchange that are in continuous distribution and meet the definition of an “ETF” in National Instrument 41-101 – General Prospectus Requirements, will now be permitted to conduct ATM offerings.

Anticipated Impact

By reducing the time and cost required to implement an ATM offering in Canada, the Amendments stand to make ATM offerings a more accessible and attractive capital raising alternative for Canadian issuers. As such, we expect to see more Canadian issuers using ATM offerings as a way to raise supplemental capital once the Amendments come into effect.

Historically, ATM offerings have been more popular in the United States than Canada and cross listed issuers typically relied on the United States markets to complete ATM programs. This is attributable, in part, to the more favourable regulatory framework that exists in the United States. The Amendments help align the Canadian and United States’ regimes which should facilitate cross-border ATM offerings, allowing issuers to capitalize on favourable market conditions and access capital in both markets.


Issuers with a base shelf prospectus filed prior August 31, 2020 under which the issuer is qualified to make an ATM distribution pursuant to an exemptive relief order will not have to re-file their base shelf prospectus to comply with the Amendments.  Issuers will be permitted to rely upon the more lenient framework prescribed by the Amendments through the filing of an ATM prospectus supplement or an amended and restated ATM prospectus supplement (in the case of an existing ATM offering).  If you have any questions regarding the Amendments or ATM offerings in general, please feel free to contact either of the authors.