Industry Canada Announces Availability of Exemption for CBCA Issuers Seeking to Adopt New Notice-And-Access System
|Lawyer||Jonathan Feldman, Neill May, Michael Partridge|
|Area||Corporate Finance and Securities, Shareholder Rights and Activism|
In December 2012, we reported that the Canadian Securities Administrators (CSA) adopted new notice-and-access rules. The new rules, which came into force on February 13, 2013, allow issuers to send proxy-related materials to registered and beneficial shareholders by:
- posting the relevant materials on a website other than SEDAR; and
- sending a package to each shareholder containing:
- the relevant voting document;
- a notice informing beneficial owners that theproxy-related materials are available online (along with an explanation of how to access the materials); and
- instructions on how to receive a paper copy of such materials.
For more details on the notice-and-access system, see our December 3, 2012 Update, CSA Adopts ‘Notice-and-Access’ Rules and other Amendments to Improve Issuer Communications with Investors.
Notice and Access Issues under the CBCA – Industry Canada Relief
Unfortunately, the notice-and-access rules are not entirely consistent with rules for the delivery of shareholder materials under certain corporate legislation. For example, the Canada Business Corporations Act (the “CBCA”), which governs federally incorporated companies, requires corporations to send certain proxy-related materials and annual financial statements to registered shareholders. The language of the CBCA suggests that federally incorporated companies may only use notice-and-access to distribute proxy materials and/or annual financial statements to a shareholder if that shareholder expressly agreed to accept delivery in that manner.
On February 15, 2013, Industry Canada announced that Corporations Canada will grant certain exemptions to CBCA corporations wishing to use the notice-and-access system for the delivery of proxy-related materials. The relief to be granted under such exemption would not be blanket relief, but instead would apply only in respect of the specific meeting to which such materials relate.
To apply for an exemption, a corporation must pay a fee of $250 and, for the initial application, submit certain materials, including:
- a cover letter, which must provide a description and details of the exemption being sought;
- a statement of facts that includes all material information, which may affect the Director’s decision; and
- arguments setting out the reasons for the type of exemption being sought.
Guidance on the content of such materials is available in the Exemption Kit Management Exemption Proxy Solicitation Requirements published by Industry Canada and available online at: http://www.ic.gc.ca/eic/site/cd-dgc.nsf/eng/cs02652.html
Notably, the exemption does not extend to CBCA provisions requiring:
- issuers to deliver financial statements to shareholders; or
- intermediaries who hold shares of the issuer on behalf of a beneficial shareholder forward those proxy-related materials to the beneficial owners.
Corporations Canada does not take a position on how an exemption from the requirements to send proxy related materials would affect the duties of an intermediary.
Although most provincial corporate statutes do not, on their face, have the same inconsistencies with the notice-and-access system as does the CBCA, some commentators are concerned that the notice-and-access system may be inconsistent with the legal framework for electronic delivery of documents under applicable commerce legislation, including (in Ontario) the Electronic Commerce Act, 2000, which is incorporated by reference under the Business Corporations Act (Ontario) (the “OBCA”).
Ontario Securities Commission staff indicated that they are in the process of preparing further guidance on the interaction of notice-and-access rules with existing rules for the delivery of proxy-related materials under the OBCA and under National Policy 11-201 – Electronic Delivery of Documents. Until such guidance is released, it remains unclear whether OBCA corporations will be entitled to rely on the notice-and-access system in fulfilling their obligations to send certain proxy-related materials to registered shareholders.
For more information on notice-and-access, or to determine whether notice-and-access is appropriate for your company at this time, please contact any member of our Corporate Securities Group.