Against the backdrop of the COVID-19 pandemic and the novel challenges with which public companies around the world have been faced, Glass Lewis & Co. (“Glass Lewis”) and Institutional Shareholder Services Inc. (“ISS”), two established proxy advisory firms, have released updates in connection with how their voting policies will be applied in the course of the 2020 proxy season. The central themes from both advisors are that the COVID-19 pandemic is creating exceptional and difficult circumstances for Boards to navigate, and that the firms will have an increased flexibility in their approach to proxy contest reviews, with an emphasis on the quality of companies’ decision-making, disclosure and reasoning in respect of any changes to governance, compensation and capital structure.

Continue Reading Proxy Voting Guidelines in the COVID-19 Context

On March 23, 2020, the Canadian Securities Administrators published local blanket orders for market participants that provide a 45-day extension for periodic filings normally required to be made by market participants on or before June 1, 2020.

As of April 21, 2020, our research indicates that at least 86 reporting issuers have announced their intention to rely on the exemption in order to delay a filing or delivery.

We note that among the issuers we identified, most are listed on the Toronto Stock Exchange, have a relatively small market capitalization (less than CAD$300 million for 94.2 % of the issuers), and operate in various industries.

The high percentage of TSX-listed issuers might be explained by the longer deadlines applicable to venture issuers, which allow, for example, venture issuers with a December 31 year-end to report annual results at the end of April (as opposed to the end of March for TSX-listed issuers). It will be interesting to see in the coming days and weeks if a significant number of venture issuers indicate their intention to rely on the exemption in advance of the upcoming filing deadline.

Issuers mostly relied on the exemption with respect to filing requirements, although we noted that one issuer with a market capitalization in excess of $1 billion used the exemption to make certain annual documents available electronically only until its printing supplier resumed its operations. Based on our research, we note the largest issuer to use the exemption so far had a market capitalization of approximately $4 billion.

Additional information regarding the blanket orders may be found in our blog post on the matter.

The author wishes to thank Jean-Michel Lapierre, Jean-Pierre Chamberland and Gilles Leclerc for their advice and contributions.

Everything has changed. Not so long ago, we were continuing the longest winning streak in market history -11 years of bull market. Now, things normally taken for granted are no longer possible: planes no longer fly, cars no longer circulate, supply chains no longer manufacture goods, and entire cities are shut down around the world.

Every day, the public is overwhelmed with information regarding COVID-19. Companies are actively monitoring the situation and are constantly assessing the impact of the pandemic on their businesses. With business conditions, epidemiological forecasts, and rules of conduct in near-perpetual flux, the need for frequent and transparent communication with investors and shareholders—now mostly digital—has only intensified in the last weeks.

On March 20, 2020, Fasken published an article relating to disclosure considerations in Annual Information Forms, Management’s Discussion & Analysis, and other public documents. In light of the rapidly evolving circumstances, we would like to provide an update regarding recent developments concerning the disclosure of risk factors. Continue Reading Update – Public Disclosure in the Time of COVID-19

With the 2020 proxy season well underway, the COVID-19 pandemic has forced many issuers to consider changing their annual shareholders’ meeting format from a customary in-person meeting to a virtual setting. Since the beginning of the COVID-19 crisis, specifically between March 1, 2020 and April 14, 2020, we monitored issuers listed on the Toronto Stock Exchange (“TSX”) and the TSX Venture Exchange (“TSX-V”) with regards to their 2020 annual shareholders’ meetings. Our key takeaways are summarized below.

Continue Reading 2020 Virtual AGM Proxy Season : Key Takeaways to Date

At the time of previous financial crises, the TSX Venture Exchange (TSXV) granted blanket relief to listed issuers from its $0.05 per share minimum pricing requirement for various share issuances. In response to the COVID-19 pandemic, with many TSXV issuers trading at less than $0.05, the TSXV issued a Bulletin on April 8, 2020 providing important relief (Temporary Relief) from certain requirements of the TSXV Corporate Finance Manual. In particular, the Temporary Relief removes in the specific cases set out below the TSXV’s $0.05 minimum price for share issuances by issuers whose “Market Price” is $0.05 or less, subject to a new minimum of $0.01, until September 30, 2020.

By way of background, a number of TSXV Policies, including Policy 4.1 Private Placements, incorporate the concepts of “Market Price” and “Discounted Market Price”. The terms are defined in TSXV Policy 1.1 Interpretation; “Market Price” is the last closing price of an issuer’s shares prior to the issuance of a news release or filing with the TSXV of Form 4A – Price Reservation Form for a share issuance, while “Discounted Market Price” is “Market Price” less maximum permitted discounts (for example, 25% if the closing price is up to $0.50), but subject in all cases to a minimum price per share of $0.05. This reflects a long-standing, fundamental rule of the TSXV – the TSXV does not permit shares to be issued from treasury at less than $0.05, so as to prevent excessive dilution. Continue Reading Shades of Crises Past – The TSX Venture Exchange Provides Temporary Relief from the $0.05 Minimum Pricing Requirement

Timely Disclosure recently reported on the CSA’s previously announced and published local blanket orders (Blanket Orders) that provide a 45-day extension for periodic filings normally required to be made by market participants between March 23, 2020 and June 1, 2020. On April 3, 2020, the Canadian Securities Administrators (CSA) released CSA Staff Notice 51-360 (Staff Notice) which includes useful guidance for market participants wishing to avail themselves of the relief provided by the Blanket Orders.

The following is a summary of certain of the guidance in the Staff Notice. It is important for issuers to review the local Blanket Orders in their jurisdiction. Issuers who intend to rely on the exemptions in the Blanket Orders should consider their applicable corporate statute, stock exchange requirements and other obligations to provide disclosure materials, including financial statements under any existing contractual obligations, as well as the events of default, covenants and other terms of any contracts including debt instruments. Issuers should also review their ongoing corporate finance activities when considering reliance on the Blanket Orders.

Continue Reading CSA Provides Guidance on Previously Announced Blanket Orders in Response to COVID-19


The COVID-19 pandemic has raised a fundamental question for M&A participants: does the outbreak of COVID-19 and the impact on a business constitute a “Material Adverse Change” (referred to as a “MAC”) under merger agreements? The answer is important because if the pandemic is a MAC, then buyers can typically walk away from a deal without penalty or legal exposure. On the other hand, if it is not a MAC and buyers try to walk the seller can seek damages and/or seek specific performance of the agreement to force the buyer to close.

The law on MACs

In Canada there is virtually no case law on what constitutes a MAC, so most M&A practitioners look to the jurisprudence from Delaware for assistance (where there are several thoughtful and well-articulated decisions). Not wanting to empower buyer’s remorse at the expense of public shareholders, Delaware courts have been extremely reluctant to find a MAC to have occurred. In fact, there is only one case in which a Delaware court has found a MAC and allowed a buyer to walk from a merger agreement. See our previous blog post for reference.

Although difficult to establish, the case law has focused on two key elements: that the adverse change is “material” and “durationally significant.” Put differently, a MAC needs to be much more than a short-term drop and essentially reflect a fundamental change in the business to be acquired. Continue Reading COVID-19 and Material Adverse Change Provisions in M&A Agreements

On March 30, 2020, in connection with its state of emergency declared on March 17, 2020 (Declared Emergency), the Ontario government issued an order (Order) under the Emergency Management and Civil Protection Act (Ontario) to temporarily suspend and replace, among other things, certain provisions of the Business Corporations Act (Ontario) (OBCA) in respect of shareholder meetings.

The Order provides for two types of “temporary amendments” to the OBCA relating to shareholder meetings:

  • time extensions for holding annual meetings; and
  • provision for virtual shareholder meetings for all OBCA corporations.

Time Extensions

The Order permits an OBCA corporation to delay holding its annual shareholder meeting for a specified number of days following the termination of the Declared Emergency, namely:

  • 90 days, when such meeting would otherwise need to be held during the Declared Emergency; or
  • 120 days, when such meeting would otherwise need to be held during the 30 days following the termination of the Declared Emergency.

When reviewing the Order, we noted that while the OBCA requires a corporation to “call” an annual meeting within 15 months of the corporation’s previous annual meeting (or, with respect to the corporation’s first shareholder meeting, within 18 months of the corporation coming into existence), the Order purports to alter the last day on which an annual shareholder meeting can be “held”. The analogous requirement in the federal business corporations statute also obliges a corporation’s board to “call” the annual meeting within a certain time period, while the Alberta and British Columbia statutes require that it be “held” within a certain time period. Until further clarification is available, it may be prudent to read the Order conservatively as generally requiring the board to “hold” the annual meeting within the 15- (or 18-) month period, as applicable.

We also noted that the Order does not relieve corporations from the OBCA’s provisions regarding the preparation of financial statements. Unless the audit requirement is unanimously waived by a corporation’s shareholders, a corporation is required to place audited financial statements before its annual shareholder meeting for a period that would exceed twelve months in the event that a corporation’s financial year end is, for example, December 31 and the annual shareholder meeting is held after June 30. We have requested clarification from the Ontario government and will provide an update as appropriate.

Timely Disclosure recently reported that the Toronto Stock Exchange (TSX) and TSX Venture Exchange (TSXV) have granted temporary blanket relief to listed issuers in response to the COVID-19 pandemic, allowing them to, among other things, delay their annual shareholder meetings to as late as December 31, 2020. The general TSX requirement is that an annual meeting be held within six months of financial year end, while the requirement of the TSXV is that a listed issuer hold an annual meeting not more than 15 months after its last annual meeting. Reporting issuers listed on either the TSX, TSXV or another recognized exchange will need to ensure that they meet their obligations under stock exchange rules and policies, in addition to corporate law obligations.

Virtual Meetings

Under the OBCA, meetings of shareholders may be held virtually unless the corporation’s articles or by-laws provide otherwise. Specifically, the OBCA provides that a meeting of shareholders may be held by telephonic or electronic means, and a shareholder who, through those means, either votes at the meeting or establishes a communications link to the meeting is deemed to be present. Any such “virtual” meeting is deemed to be held at the corporation’s registered office. An OBCA corporation could also host an in-person gathering where, for example, the board and senior management would attend at a conference centre and could invite others to join them, but the meeting would nonetheless be deemed to be virtually held (although such meetings may be impractical during the current pandemic). There is no formal mechanism in the OBCA for a formal “hybrid” meeting held in-person in which shareholders can participate electronically as there is under other corporate statutes.

The Order provides for a slightly different regime for the duration of the Declared Emergency. Under the Order, such virtual meetings can be held even if the corporation’s articles or by-laws would otherwise prohibit such meetings. The virtual meeting regime is otherwise the same.

While virtual-only meetings are generally frowned upon by proxy advisory firms, we have noted flexibility on this point in light of the COVID-19 pandemic. For example, Glass Lewis generally recommends voting against the members of the governance committee where the board has called a virtual-only shareholder meeting and the issuer has not provided appropriate disclosure. Due to the COVID-19 pandemic, Glass Lewis has now relaxed this policy until June 30, 2020, but will note if companies state their intention to resume holding in-person or hybrid meetings under normal circumstances. As of writing, we are not aware of any formal guidance on hybrid or virtual-only meetings from ISS stemming from the COVID-19 pandemic.

Timely Disclosure has dealt extensively with virtual meetings, hybrid meetings and livestreamed annual meetings in the following articles:

On March 26, 2020, Corporations Canada issued a notice (Notice) entitled “Annual meetings of federal corporations during the COVID-19 outbreak”.  The Notice acknowledges that hosting in-person annual meetings during the COVID-19 outbreak would contradict public health advice to practice physical distancing and self-isolation to prevent the spread of COVID-19, and outlines options for federal corporations to consider in order to remain compliant with the Canada Business Corporations Act (CBCA).

Continue Reading 2020 Annual Meetings – Notice from Corporations Canada

The Co-Directors of the U.S. Securities and Exchange Commission (SEC) Division of Enforcement recently issued a Public Statement emphasizing the importance of maintaining market integrity and following corporate controls and procedures in the context of the COVID-19 pandemic. According to them, in the current circumstances, corporate insiders are regularly learning new material non-public information that may hold an even greater value than under normal circumstances, and a greater number of people may have access to material non-public information than in less challenging times, and those with such access – including, for example, directors, officers, employees, and consultants and other outside professionals – should be mindful of their obligations to keep this information confidential and to comply with the prohibitions on illegal securities trading.

This statement from the SEC Division of Enforcement comes at a time when, according to the Wall Street Journal, senior executives and directors are buying their company’s shares at a pace not seen in years, in a signal of corporate optimism after a coronavirus-induced rout.

Even though the Canadian Securities Administrators have not yet published a similar statement, insiders of Canadian reporting issuers should also be mindful of the insider trading and tipping prohibitions under applicable securities legislation and should conduct a proper analysis to satisfy themselves that they do not have any privileged information or material undisclosed information, including any material information regarding the impacts of the COVID-19 pandemic on the issuer’s business, operations or capital, prior to trading in securities or changing an economic interest in a related financial instrument.

The same degree of caution should be used when buying back shares under the issuer’s normal course issuer bid, as certain issuers may be interested in capitalizing on the temporary relief granted by the Toronto Stock Exchange enabling an increased maximum of shares to be repurchased on any trading day under a normal course issuer bid.

It is also crucial that issuers intending to take advantage of CSA’s blanket relief orders to provide relief from reporting deadline during COVID-19 observe the conditions thereof, including the need for the issuer’s management and other insiders to be subject to an insider trading black-out policy that reflects the principles in section 9 of National Policy 11-207 Failure-to-File.