Revised Proposed Amendments to National Instrument 54-101 – Communication with Beneficial Owners of Securities of a Reporting Issuer
June 23, 2011
On June 17, 2011, the Canadian Securities Administrators (CSA) published for comment revised Proposed Amendments to National Instrument 54-101 – Communications with Beneficial Owners of Securities of a Reporting Issuer (NI 54-101), National Instrument 51-102 – Continuous Disclosure Obligations and other related policies that are designed to further enhance the shareholder voting communication process (collectively, Revised Proposed Amendments). The original proposed amendments to NI 54-101 were first published on April 9, 2010 and as a result of the 27 comments received, the CSA released the Revised Proposed Amendments. See our previous articles,"CSA Proposes Amendments to Streamline Communication with Beneficial Owners" and "Reaction to CSA’s Proposed Amendments to the Beneficial Owner Communication Process" on the initial proposed amendments to NI 54-101 regarding the comments thereto for more information.
The most significant features of the Revised Proposed Amendments are changes to the availability of and the standardization to the "notice-and-access" mechanism to send proxy-related materials to shareholders, in connection with either annual or special meetings. In conjunction with this mechanism, shareholders will be provided with access to information circulars in connection with shareholder meetings either online or, upon request, by paper copy. In addition, the Revised Proposed Amendments simplify the process by which beneficial owners are appointed as proxy holders in order to attend and vote at shareholder meetings and require enhanced disclosure regarding the beneficial owner voting process.
Impact of Revised Proposed Amendments on Notice-and-Access Procedures
The "notice-and-access" procedure provides a reporting issuer the ability to deliver proxy-related materials by sending a notice package to all shareholders informing them that proxy-related materials are filed on SEDAR under the reporting issuer’s profile and enclosing the relevant voting document. The Revised Proposed Amendments now: (i) allow issuers to use: "notice-and-access" for all meetings; and (ii) require that the notice package be sent to all shareholders and contain the foregoing items, accompanied only by a plain-language explanation of the notice-and-access mechanism, which explanation is also required to be posted on the reporting issuer’s website. In the event a reporting issuer wishes to include additional materials in the notice package sent to shareholders, a hard copy of the information circular would also need to be included.
Pursuant to the Revised Proposed Amendments, management of a reporting issuer that wishes to use notice-and-access for the first time will be required to post a document on a website explaining notice-and-access in plain language, and to issue a news release with respect to such anticipated use not more than six months nor less than three months before the expected date of the first meeting for which notice-and-access will be used. The Revised Proposed Amendments permit reporting issuers to obtain standing instructions from registered holders (and intermediaries from beneficial owners) with respect to receiving paper copies of the information circular in the notice package. To facilitate effective integration of the Revised Proposed Amendments, annual instructions to receive annual reports will constitute instructions to include a paper copy of the information circular in the notice package where the reporting issuer uses notice-and-access.
For SEC issuers that comply with the notice-and-access procedures in the U.S., the Revised Proposed Amendments provide an exemption from complying with the Canadian requirements to such SEC issuers only if they have a limited Canadian presence.
The Revised Proposed Amendments also discuss:
- additional guidance in the companion policy to NI 54-101 on factors reporting issuers should take into account when deciding when and how to use "notice-and-access" ;
- certain other changes to the technical aspects of the beneficial owner communication procedures including for example:
- where a reporting issuer uses notice-and-access, permitting a reporting issuer to abridge the date for determining shareholders entitled to vote and receive notice to not less than 30 days before the meeting date, and the sending of the notification of meeting and record dates under Section 2.2 of NI 54-101 to not less than 30 days before the meeting date in order to enable shareholders to have sufficient time to request and receive a paper copy of the information circular if they so desire in advance of the meeting;
- limiting delivery of the notice package to shareholders to prepaid mail or courier; and
- introducing a deadline of three of four business days before the 30th day before the meeting date by which a reporting issuer must provide materials for forwarding to intermediaries.
- enhanced disclosure of the voting process by requiring reporting issuers to disclose use of "notice-and-access".
Other Changes to Beneficial Owner Proxy Appointment Process
The Revised Proposed Amendments suggest that unless a beneficial owner has instructed otherwise, where an intermediary appoints a beneficial owner or nominee as a proxy holder, such person also be given the authority to attend, vote and otherwise act for and on behalf of the intermediary in respect of all matters that come before the applicable meeting (and not just those on the voting form).
Deadline for Comments
The deadline for the submission of comments on the Revised Proposed Amendments is August 16, 2011. We would be pleased to raise with the CSA, on your or your company’s behalf, any comments you may have on the Revised Proposed Amendments or on the proxy voting system as a whole.