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Notice and Access Related Amendments to NI 54-101 and NI 51-102

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Securities and Mergers & Acquisitions Bulletin

The Canadian Securities Administrators (CSA) published notice on November 29, 2012 that they were adopting amendments to National Instrument 54-101 - Communications with Beneficial Owners of Securities of a Reporting Issuer (NI 54-101) and to National Instrument 51-102 - Continuous Disclosure Obligations (NI 51-102). The CSA’s stated intent for adopting the amendments is to improve the process by which reporting issuers, other than investment funds, send proxy-related materials to, and solicit proxies and voting instructions from, registered holders and beneficial holders of their securities.

The most significant features of the amendments are:

  • a new notice-and-access mechanism to send proxy-related materials to registered holders and beneficial owners of securities;
  • simplification of the process by which beneficial owners are appointed as proxy-holders in order to attend and vote at shareholder meetings; and
  • a requirement for issuers to provide enhanced disclosure regarding the beneficial owner voting process.

Due to the requirement for ministerial approval in some jurisdictions, the amendments will not be in force until February 11, 2013. However, the notice-and-access system can only be used in respect of meetings that occur on or after March 1, 2013.

Notice and Access

The most obvious benefit for issuers arising from the amendments is the potential to reduce costs associated with meetings of shareholders. Under the amended NI 54-101, issuers will be able to utilize a notice-and-access system (Notice-and-Access) to provide proxy-related materials electronically.

An issuer using Notice-and-Access can deliver proxy-related materials by posting the relevant information circular and, if applicable, other proxy-related materials, on a website that is not SEDAR.[1] An issuer utilizing Notice-and-Access must send a notice (Notice) informing beneficial owners that the proxy-related materials are available online and explaining how those materials may be accessed. Conceivably, an issuer could post the proxy-related materials to its own website but issuers may wish to use the website of a service provider retained in connection with a shareholder meeting.

The Notice must also be accompanied by the relevant voting document (either a form of proxy or voting instruction form)(Notice Package). Section 2.7.1 of NI 54-101 states that the Notice must contain, among other things:

  • basic information about the meeting (e.g., date, time and location) and matters to be voted on;
  • an explanation of how to obtain a paper copy of the information circular (and if applicable, annual financial statements and annual management’s discussion and analysis (MD&A)); and
  • a plain-language explanation of Notice-and-Access.

Issuers intending to use Notice-and-Access should be aware that the deadline for providing the Notice Package to shareholders is 30 days prior to the meeting. This is a greater amount of time than the 21 days required for providing paper copies of proxy-related materials.

NI 54-101 now requires an issuer using Notice-and-Access to set the record date for notice of the meeting at least 40 days before the date of the meeting. An issuer using Notice-and-Access for the first time must file a form of notification of meeting and record dates (Notification) on SEDAR indicating that it will be using Notice-and-Access at least 25 days before the record date. As a result, the Notification must be filed at least 65 days before the meeting date. For subsequent meetings of shareholders for which an issuer wishes to use Notice-and-Access, the Notification must be filed 3 business days before the record date for notice.

Notice-and-Access is also available in connection with a proxy solicitation that is not a solicitation by management of an issuer.

Simplification of Beneficial Owner Proxy Appointment Process

NI 54-101 has been amended to streamline the process by which beneficial owners may be appointed as proxy-holders in order to vote the securities held by such beneficial owners at shareholder meetings. An issuer (or an intermediary, as applicable) is now required to appoint a beneficial owner, or a nominee of a beneficial owner, as proxy-holder if such beneficial owner has provided written instructions to that effect. The issuer or intermediary, as applicable, must make the arrangements necessary to appoint a beneficial owner, or a nominee of a beneficial owner, as proxy-holder without expense to the beneficial owner.

The Companion Policy to NI 54-101 has also been revised and includes guidance with respect to appointing beneficial owners as proxy-holders. Subject to the basic obligations required by NI 54-101, intermediaries have flexibility as to the specific mechanism or method used to appoint a beneficial owner as proxy-holder. The Companion Policy notes that one method in current use and permitted under NI 54-101 is the “appointee system”. Under the appointee system, a beneficial owner who wishes to be appointed as proxy-holder for the intermediary in respect of securities that he or she beneficially owns can print his or her name, or the name of his or her appointee, in a space provided on the voting instruction form. The name of the beneficial owner, or of his or her appointee, is then recorded on a cumulative proxy, which is provided to the proxy tabulator or meeting scrutineer. When the beneficial owner, or his or her appointee, arrives at the meeting, the scrutineer has all the necessary proxies and information at hand to enable the beneficial owner or other appointees to vote at the meeting.

New Information Circular Disclosure Requirements

NI 51-102 has been amended to require certain disclosure if an issuer is using Notice-and-Access. The information circular prepared by an issuer using Notice-and-Access must include, if applicable:

  • a statement that the issuer is sending proxy-related materials to registered holders or beneficial owners using notice-and-access and, if stratification (discussed below) will be used, a description of the types of registered holders or beneficial owners who will receive paper copies of the information circular and, if applicable, the annual financials and MD&A;
  • a statement that the issuer is sending proxy-related materials directly to NOBOs; and
  • a statement that management of the issuer does not intend to pay for intermediaries to forward to objecting beneficial owners the proxy-related materials and request for voting instructions and that in the case of an objecting beneficial owner, the objecting beneficial owner will not receive the materials unless the objecting beneficial owner’s intermediary assumes the cost of delivery.

The revised Companion Policy to NI 51-102 notes that this disclosure is intended to explain to beneficial owners why they may receive different proxy-related materials than other beneficial owners and why they may not receive proxy-related materials even if they have requested them.

NI 54-101 and NI 51-102 now include “stratification” as a defined term and, where used in relation to an issuer using Notice-and-Access, means the addition of paper copies of the information circular and, if applicable, the annual financial statements and MD&A, to the Notice Package sent to certain beneficial owners.  The Companion Policy to NI 54-101 now includes a discussion regarding the use of stratification and notes that stratification may occur when an issuer or intermediary has standing instructions from a beneficial owner to send that beneficial owner a paper copy of the information circular, financial statements and MD&A even when an issuer is using Notice-and-Access.

[1] Issuers must still make required SEDAR filings.


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