TSX grants temporary relief for listed issuers from TSX Company Manual requirements in response to COVID-19 pandemic
On March 23, 2020, the Toronto Stock Exchange (the “TSX”) issued a staff notice in which it announced temporary blanket relief on the following provisions of the TSX Company Manual (the “Manual”):
- Section 442 and Section 451 - Financial Statements
- Section 464 and Section 465 - Annual Meeting
- Section 613 - Security Based Compensation Arrangements
- Section 628 - Normal Course Issuer Bids
- Section 712 - Delisting Criteria – Market Value
Additionally, the TSX stated it will be relaxing its interpretation of “market price” such that shorter periods less than 5 days may be used to determine pricing for securities. The TSX will provide temporary relief in that respect on a case-by-case basis.
An issuer does not need to file Form 9 – Request Extension or Exemption for Financial Reporting/Annual Meeting (“Form 9”) (i) if it requires an extension for filing or mailing of its annual financial statements (required pursuant to section 442); or (ii) for a late filing of its annual financial statements and/or its interim financial statements (required pursuant to section 451).
Issuers can hold their annual general meeting on any date up to and including December 31, 2020. Prior to this temporary relief, an issuer was required to hold its annual general meeting within six months from the end of its fiscal year or at such earlier time as required by applicable legislation pursuant to section 464. Form 9 is not required to rely on this temporary relief. For issuers who may prefer to hold their annual general meeting by electronic means rather than postponing them, we refer you to our previous blog post on the guidelines published by the Canadian Securities Administrators on March 20, 2020 regarding virtual and hybrid annual general meetings.
Importantly, issuers should be mindful of prescribed delays under applicable corporate legislation and their constating documents, and whether relief or a court order would be required to postpone an annual general meeting.
Security Based Compensation Arrangements
The TSX is extending the timeframe within which an issuer must obtain security-holder approval of all unallocated options, rights or other entitlements (“Awards”) under a security-based compensation arrangement (a “Plan”) and modifying the circumstances under which an issuer must obtain security-holder ratification of Awards granted under a Plan.
Section 613(a) requires, every three years after institution, security-holder approval of all unallocated Awards under a Plan that does not have a fixed maximum number of securities issuable. In connection with the annual meeting temporary relief, discussed above, an issuer may continue to grant Awards under a Plan until the earlier of (i) the issuer’s annual general meeting or (ii) December 31, 2020 and Awards issued during this timeframe may be exercised absent security-holder ratification.
Normal Course Issuer Bids
Section 628(a)(ix)(a) permits an issuer to acquire listed securities pursuant to a normal course issuer bid (“NCIB”) if the purchases do not, when aggregated, with all other purchases by the issuer during the same trading day on the TSX, aggregate more than the greater of (i) 25% of the average daily trading volume of the listed securities of that class, and (ii) 1,000 securities.
The TSX is modifying the volume of the purchase condition in section 628(a)(ix)(a) such that from March 23, 2020 until June 30, 2020 (the “Effective Period”), an NCIB purchase must not exceed 50% of the average daily trading volume of the listed securities of that class. This applies to any relevant NCIB purchase made during the Effective Period including NCIBs renewed or launched during the Effective Period.
Other than the changes mentioned above, the TSX notes that this temporary relief does not alter any other general or specific rules applying to NCIBs as set out in sections 628 or 629 or Part 6 of the Manual, including rules pertaining to ongoing delays and notice periods.
Delisting Criteria – Market Value
From the period of March 23, 2020 until December 31, 2020, the TSX will not apply the delisting criteria in either section 712(a) or 712(b) when determining whether to initiate a delisting review of an issuer’s securities.
For reference, section 712(a) enables the TSX to delist securities if the market value of an issuer’s securities is less than $3,000,000 over any period of 30 consecutive trading days. Section 712(b) enables the TSX to delist securities if the market value of the issuer’s freely-tradeable, publicly held securities is less than $2,000,000 over any period of 30 consecutive trading days.
“Market Price” Definition
Lastly, the TSX will not be applying the definition of “market price” in Part 1 of the Manual. The TSX recognizes that due to current market volatility the definition of “market price”, which requires a 5 day volume weighted average trading price of listed securities, may not produce accurate market prices. Therefore the TSX will, on a case-by-case basis, use shorter periods to determine prices for securities (including warrants) for private placements.
For further information regarding these temporary blanket reliefs, please contact your McCarthy Tétrault relationship partner or Andrew Parker, Patrick Boucher, Sonia Struthers or Wendi Locke.