The Canadian Securities Administrators have published responses to frequently asked questions raised in connection with the temporary blanket relief for market participants from certain regulatory filings as previously discussed here.
In light of the COVID-19 pandemic, reporting issuers in Canada have been granted temporary exemptions (Temporary Relief) from certain regulatory filings by way of local blanket orders (Blanket Orders) substantively harmonized across Canada. In CSA Staff Notice 51-360 Frequently asked questions regarding filing extension relief granted by way of a blanket order in response to COVID-19, the CSA responds to frequently asked questions (the FAQ) about the Temporary Relief and Blanket Orders, some of which are highlighted below.
Material business developments
A material business development will be fact specific and issuers should refer to existing CSA rules and policies for guidance in making materiality determinations.
In order to rely on the Temporary Relief, an issuer is required to issue and file a news release in advance of the applicable filing deadline which news release must include, among other things, an update on any material business developments since the issuer’s last financial statements were filed (or confirmation that there have been no material business developments since such date). The determination as to whether a business development is material will depend on facts and circumstances and will vary from issuer to issuer. Existing securities rules and policies will provide guidance as to materiality. In particular, National Policy 51-201 Disclosure Standards (NP 51-201) includes a list of potentially material information and provides additional guidance as to how to make materiality judgments.
If relying on the Temporary Relief, an issuer cannot file any type of prospectus; issuers should cease distribution under best efforts offerings.
Issuers relying on the Temporary Relief are not permitted to file a prospectus unless their continuous disclosure record is current. This prohibition on prospectus filings applies to all forms of prospectus, including preliminary and final prospectuses, as well as base shelf prospectuses, non-offering prospectuses, amended and restated prospectuses, PREP prospectuses, an amendment to a final prospectus or a prospectus supplement under a base shelf prospectus previously filed.
An issuer who has only filed a preliminary prospectus and is in the waiting period, should be careful in relying on the Temporary Relief as the Blanket Orders do not provide an extension for the 90- and 180-day lapse periods for preliminary prospectuses found in National Instrument 41-101 General Prospectus Requirements. Further, the CSA is of the view that an issuer wishing to rely on the Temporary Relief that has obtained a receipt for a prospectus and is currently in the 90-day distribution period of a best efforts offering should cease the distribution.
The Temporary Relief does not impact any proxy circular filings and issuers should review corporate law and stock exchange rules for any timing requirements for annual meetings.
The Blanket Orders do not address any of the requirements related to shareholder meetings or management information circulars. However, as previously discussed here, the Ontario Government has extended the deadline by which OBCA incorporated issuers are required to hold their annual meetings of shareholders and each of the Toronto Stock Exchange (TSX) and the TSX Venture Exchange (TSX-V) have extended meeting deadlines under their respective rules. While Canadian securities laws do not require the sending of a management information circular by any particular deadline, there are other related disclosure and delivery requirements (e.g., executive compensation disclosure, annual meeting request forms and delivery of financial statements) that must generally occur either concurrently with the mailing of a management information circular or within 140 days of an issuer’s year end. A delayed shareholders’ meeting may result in issuers having to comply with these disclosure and delivery requirements on an individual basis rather than concurrently with their annual proxy materials, as is typically the case.
The CSA is considering these issues as a result of inquiries related to possible meeting delays and the Blanket Orders, and urges issuers to review the corporate law requirements applicable to annual shareholders meeting. The CSA further refer issuers to their guidance on virtual shareholder meetings, as we discussed here.
Normal course issuer bids
If relying on the Temporary Relief, the CSA expects issuers to suspend any normal course issuer bids unless an automatic securities purchase plan has previously been established and is operative.
As we previously discussed, in light of the current COVID-19 pandemic, issuers should carefully assess whether they are in possession of material undisclosed information before undertaking a share buy back under a normal course issuer bid (NCIB). Issuers should not make purchases under an NCIB while in possession of material undisclosed information unless such purchases are under an automatic securities purchase plan (ASPP) established in accordance with the applicable guidance.
Exempt market offerings and insider reporting
Filing deadlines for reports of exempt distribution and insider reporting are not extended under the Blanket Orders.
While Temporary Relief is available for certain exempt market filings, for example, financial statement filings in connection with the offering memorandum exemption, the Temporary Relief does not apply to reports of exempt distribution (Form 45-106F1). Issuers who have distributed securities in reliance on a prospectus exemption that requires the filing of a Form 45-106F1 must still file such report within 10 days following the distribution.
Similarly, the Temporary Relief does not extend the filing deadlines for insider reporting. Insiders must keep their reporting up to date throughout the COVID-19 pandemic.
The FAQ confirm that the 45-day extension period starts on the next calendar day following the deadline date. The FAQ also confirm that the Blanket Orders are substantively harmonized across Canada, subject to some minor differences based on the variation in regulation in the provinces and territories.
Issuers who will not be able to meet their original filing deadline or the extended filing deadline should contact their principal regulator as soon as possible and before the extension period and may wish to consider applying for a management cease trade order in such circumstances. The CSA continue to monitor the COVID-19 situation and consider whether further relief or an extension of the Blanket Orders will be required.