On March 23, 2020, the Toronto Stock Exchange (TSX) issued Staff Notice 2020-0002 granting temporary blanket relief from certain provisions of the TSX Company Manual (Manual) and the TSX Venture Exchange (TSXV) issued a “Notice to Issuers” with similar temporary blanket relief, both in response to the COVID-19 pandemic. The TSX and TSXV temporary relief is described below.
Toronto Stock Exchange
- Normal Course Issuer Bid Daily Limits
For TSX issuers with a normal course issuer bid (NCIB) in effect, there is a limit on the number of shares that can be acquired on any trading day, in effect, a maximum equal to 25% of the issuer’s average daily trading volume (ADTV) for the six calendar months preceding the date of acceptance of the notice of the NCIB by the TSX. Under the temporary relief, the maximum has been increased to 50% of the issuer’s ADTV. The relief is effective until June 30, 2020 and applies to any NCIB currently in effect as well as to NCIBs renewed or launched until June 30, 2020. As a result, until June 30, 2020, the maximum number of shares that can be repurchased on any trading day under an NCIB has, in effect, been doubled.
- Annual Meetings
Under the Manual, a TSX issuer must hold an annual meeting within six months of the end of its fiscal year. The TSX will permit listed issuers that must hold an annual meeting during 2020 to hold the meeting no later than December 31, 2020. In other words, if a TSX issuer has a December 31 year end, the date of its annual meeting can be extended by up to six months, from June 30 to December 31. However, TSX issuers should review the requirements of applicable corporate law before setting a meeting date that benefits from the TSX extension. For example, under the Canada Business Corporations Act (CBCA), the Board of Directors of a corporation must call an annual meeting of shareholders not later than 15 months after holding the last preceding annual meeting but no later than six months after the end of the corporation’s preceding financial year. TSX issuers governed by the CBCA must comply with this corporate rule or seek relief from the Director appointed under the CBCA.
- Shareholder Approval for Security Based Compensation Arrangements
For TSX issuers with a security based compensation arrangement (e.g., a stock option plan or other similar plan) which does not have a fixed maximum number of securities issuable, for example, a stock option plan which provides that the maximum number of shares issuable thereunder is equal to 10% of the issuer’s outstanding shares from time-to-time, the Manual requires that all unallocated options, rights or other entitlements under the plan must be approved by shareholders every three years. Under the Manual, if shareholder approval is not obtained by the three-year deadline, any stock options or other securities granted after the three-year deadline must be ratified by shareholders before they can be exercised. Consistent with the relief for annual meetings described above, under the temporary relief a TSX issuer may continue to make grants under a plan until the earlier of its 2020 annual meeting and December 31, 2020; further, stock options and other securities granted during this period may be exercised without ratification by shareholders.
For example, if a TSX issuer has a “rolling 10%” stock option plan which was last ratified by shareholders at an annual meeting held on June 15, 2017, it would normally have to obtain shareholder ratification of all unallocated stock options (i.e., options remaining to be granted) by June 15, 2020, and if shareholder ratification is not obtained by the three-year deadline, any stock options granted after the three-year deadline would have to be ratified by shareholders before being exercised. As a result of the temporary relief, the June 15, 2020 deadline in this example is extended to the later of the date of the issuer’s annual meeting held in 2020 and December 31, 2020. Further, any stock options granted after June 15, 2020 could be exercised prior to the 2020 annual meeting without shareholder ratification.
- Delisting Criteria – Market Value
The Manual sets out that the TSX may delist an issuer if the market value of its listed securities is less than $3 million, or if the market value of its freely-tradeable, publicly-held securities is less than $2 million, in either case over any period of 30 consecutive trading days. Under the temporary relief, the TSX will not apply either of these delisting criteria for the balance of 2020 in determining whether to initiate a delisting review. None of the other TSX delisting criteria are affected by the temporary relief, most importantly those related to the issuer’s financial condition. For example, the TSX can delist an issuer if its financial condition is such that, in the opinion of the TSX, it is questionable whether the listed issuer will be able to continue as a going concern. That rule remains in place.
- Annual and Interim Financial Statements
The Manual requires that a TSX issuer file TSX Form 9 – Request for Extension or Exemption for Financial Reporting/Annual Meeting if it requires an extension of the time limit for filing or mailing its annual financial statements and sets out that an extension will be granted “only under exceptional circumstances”. A similar filing must be made for an extension for filing interim financial statements. Under the temporary relief, during 2020 it will not be necessary for issuers to file TSX Form 9 in connection with a late filing of annual or interim financial statements. This is consistent with the blanket relief recently granted by the Canadian Securities Administrators (CSA), providing a 45-day extension for periodic filings due on or before June 1, 2020, including financial statements. In short, a TSX issuer which makes use of the CSA blanket relief and files its annual or interim financial statements beyond the statutory deadline will not have to file Form 9 with the TSX. The TSX notes that it expects listed issuers to comply with the applicable requirements of securities law regarding the filing of their annual and interim financial statements.
- Definition of “Market Price”
The concept of “market price” is used in several instances in the Manual, for example, for determining a minimum price for shares, and the exercise price of warrants, issued in a private placement (unless shareholder approval is obtained). The Manual defines “market price” as the volume weighted average trading price (or VWAP) on the TSX for the five trading days immediately preceding the relevant date (e.g., the date of filing a notice of private placement with the TSX). In light of current volatile market conditions, on a case-by-case basis the TSX will use a shorter time period for determining “market price” for the purpose of pricing private placements. The temporary relief does not set out the shorter time period or the criteria for determining when a shorter time period will be used. Presumably, a shorter time period, such as three trading days, will be used when the first two days of the usual five-day period are no longer representative of market price in light of significant fluctuations in the price of the stock.
TSX Venture Exchange
- Annual Meetings
Under TSXV Policy 3.2 Filing Requirements and Continuous Disclosure, every TSXV issuer must hold an annual meeting of its shareholders each year not more than 15 months after its last annual meeting (or such earlier date as required by applicable corporate or securities laws). Pursuant to the temporary relief, the TSXV will permit issuers that must hold an annual meeting during 2020 under Policy 3.2 to hold the meeting on any date up to and including December 31, 2020.
The TSXV expects listed issuers to comply with applicable legislation regarding annual meetings (e.g., the CBCA as described above).
- Stock Option Plans
Under TSXV Policy 4.4 Incentive Stock Options, if a listed issuer has a “rolling” stock option plan, that is, one which reserves for issuance a number of shares equal to a fixed percentage of the issuer’s outstanding shares, it must obtain shareholder approval for the “rolling” plan yearly at the issuer’s annual meeting. Similar to the TSX, under the temporary relief the TSXV will permit listed issuers to obtain yearly shareholder approval in 2020 at an annual meeting held in 2020, which can be held up to and including December 31, 2020.
The TSXV notes that it will not be necessary for issuers to apply in order to benefit from the temporary relief – in other words, the relief is automatic.