Toronto Stock Exchange and TSX Venture Exchange provide temporary blanket relief due to COVID-19 pandemic

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Toronto Stock Exchange and TSX Venture Exchange provide temporary blanket relief due to COVID-19 pandemic

Toronto Stock Exchange and TSX Venture Exchange provide temporary blanket relief due to COVID-19 pandemic

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April 1, 2020

On March 23, 2020, the Toronto Stock Exchange (TSX) published TSX Staff Notice 2020-0002, providing temporary blanket relief (TSX Relief) from certain requirements contained in the TSX Company Manual in response to the COVID-19 pandemic (Emergency). Concurrently, the TSX Venture Exchange (TSXV) published a corporate finance bulletin providing temporary blanket relief (TSXV Relief) from certain requirements contained in the TSXV Corporate Finance Manual. Issuers do not need to apply to take advantage of the TSX Relief or the TSXV Relief (collectively, Stock Exchange Relief); the Stock Exchange Relief automatically applies to TSX- and TSXV-listed issuers.

A summary of the TSX Relief is provided in the chart below.

Item	Usual requirement(s)	TSX Relief
Financial statements	An issuer must file a Form 9 – Request for Extension or Exemption for Financial Reporting / Annual Meeting (Form 9): (i) if it requires an extension of the time limit for filing or mailing its annual financial statements; and (ii) for an exemption from the TSX's requirements for interim financial statements.	A Form 9 filing is not required during 2020 for a late filing of an issuer’s annual financial statements and/or interim financial statements.
Annual meetings of shareholders (AGM)	An issuer must hold its AGM within six months from the end of its fiscal year, or at such earlier time as is required by applicable legislation.	An issuer that must hold an AGM in 2020 is permitted to hold such meeting on any date in 2020, up to and including December 31, 2020, regardless of its fiscal year-end.
Security-based compensation arrangements	Every three years after institution, an issuer must obtain security holder approval for all unallocated awards under its security-based compensation arrangement, such as a stock option plan or other similar plan, that does not have a fixed maximum number of securities issuable. For example, a stock option plan that provides that the maximum number of shares issuable thereunder is equal to 10 percent of the issuer’s outstanding shares from time-to-time.	An issuer may continue to grant awards under its security-based compensation plan until the earlier of: (i) the issuer's 2020 AGM, and (ii) December 31, 2020. Awards granted during this timeframe may be exercised, absent ratification by security holders.
Normal course issuer bids (NCIB)	An issuer is permitted to acquire listed securities pursuant to an NCIB, provided that the purchases, on an aggregated basis for the applicable trading day, do not exceed the greater of: (i) 25 percent of the average daily trading volume (ADTV) of the listed securities of that class, and (ii) 1,000 securities.	From March 23, 2020 until June 30, 2020, the daily purchase limit is being increased so that the amount of NCIB purchases cannot exceed 50 percent of the ADTV of the listed securities of that class. The TSX Relief also includes relief for participating organizations of the TSX acting on behalf of issuers to permit the increase in volume of purchases permitted under the NCIB purchases.
Delisting criteria – market value	The TSX may delist an issuer's securities if: (i) the market value of the issuer's securities is less than $3 million over any period of 30 consecutive trading days; or (ii) the market value of the issuer's freely-tradeable, publicly held securities is less than $2 million over any period of 30 consecutive trading days.	From March 23, 2020 until December 31, 2020, the TSX will not apply such delisting criteria when determining whether to initiate a delisting review of an issuer’s securities.
“Market price” definition	“Market price” is generally determined based on the five-day volume weighted average trading price of the listed securities.	While the TSX is not providing temporary blanket relief in this regard, the TSX will, on a case-by-case basis, consider using a shorter period of time to determine “market price” for the purposes of pricing securities for private placements.

A summary of the TSXV Relief is provided in the chart below.

Item	Usual requirement(s)	TSXV Relief
AGM	An issuer must hold its AGM not more than 18 months after its date of incorporation, and subsequently, not more than 15 months after its last preceding AGM, or such earlier date as required by applicable corporate or securities laws.	An issuer that must hold an AGM in 2020 is permitted to hold such meeting on any date in 2020, up to and including December 31, 2020.
“Rolling” stock option plans	“Rolling” stock option plans (i.e., those that reserve for issuance a number of shares equal to a fixed percentage of the issuer’s outstanding shares) must generally receive shareholder approval at the time the plan is to be implemented and yearly, at the issuer's AGM.	Issuers are permitted to obtain their 2020 yearly shareholder approval of “rolling” stock option plans at their 2020 AGMs, which, pursuant to the TSXV Relief, may be held at any time in 2020, subject to compliance with applicable legislation.

Dentons’ insight

The Stock Exchange Relief is being provided in response to the ongoing challenges currently faced by TSX- and TSXV-listed issuers as a result of the Emergency. However, issuers should keep in mind the following if they are planning to rely on same:

Securities law considerations

Issuers remain subject to Canadian securities laws, which place obligations on issuers in addition to those found in the TSX Company Manual. For example, while the TSX Relief removes the requirement for TSX-listed issuers to formally request an extension for late financial statement filings, applicable securities laws generally require that such issuers file annual financial statements within 90 days of their financial year-end, and interim financial statements within 45 days of the end of each interim period. As discussed in our recent Dentons Insight, the Canadian Securities Administrators have granted temporary blanket relief (CSA Relief) to reporting issuers with respect to filing deadlines. Specifically, the CSA Relief provides a 45-day extension for periodic filings, including financial statements, due on or before June 30, 2020, provided that certain conditions are met.

Therefore, while the TSX Relief reduces the administrative burden of requiring an issuer to file a Form 9 for late filings of financial statements, pursuant to Canadian securities laws, issuers will continue to remain obligated to file annual and interim financial statements within 45 days of their initial deadline, unless an additional extension is available.

Corporate law and other considerations

In addition to compliance with securities laws, issuers must continue to adhere to the requirements of corporate laws, their constating documents and contracts to which they are a party.

1) AGMs

Certain Canadian corporate statutes, such as the Canada Business Corporations Act, require an issuer to call its AGM no later than 15 months after the holding of its last preceding AGM, and no later than six months after the end of its financial year. The Business Corporations Act (Ontario) (OBCA) requires that an issuer call its AGM no later than 15 months after the holding of its last preceding AGM. On March 30, 2020, the Government of Ontario issued an emergency order retroactive to the date of declaration of the Emergency, being March 17, 2020, (Ontario Order) to provide flexibility for AGMs. The Ontario Order enables an issuer governed by the OBCA that would otherwise be required to call its AGM during the Emergency or within 30 days of the date the Emergency is terminated, to now hold its AGM by the 90th or 120th day, respectively, after the Emergency is terminated. At this time, no orders have been issued with respect to Canadian corporate law requirements surrounding AGMs outside of Ontario. As a result, unless and until any such additional orders are issued, issuers governed by Canadian corporate laws outside of Ontario seeking to benefit from the Stock Exchange Relief as it relates to the deadline by which they must hold their 2020 AGMs will be required to apply for a court order under their governing corporate statutes.

An issuer's constating documents will also often prescribe timing requirements for the holding of AGMs. An issuer will need to carefully examine its constating documents to determine if a delayed AGM would result in a breach of same and potentially expose the issuer to legal action. In the event that the issuer’s constating documents prescribe a deadline by which it must hold an AGM, the issuer will continue to be bound by those provisions. In addition, certain contracts may include positive covenants that require an issuer to conduct its business in accordance with its constating documents. A failure to comply with such provisions could provide the counterparty with grounds to terminate or claim a default under the agreement.

Therefore, notwithstanding the Stock Exchange Relief, which permits the holding of an AGM at any time in 2020, issuers will continue to have the timing of their AGMs dictated by other factors. As noted in our recent Dentons Insight, Canadian issuers often have the ability to conduct AGMs electronically (through a virtual or a hybrid (virtual and in-person) meeting), which is a helpful option, especially to deal with the public health impact of the Emergency. In addition, the Ontario Order enables an issuer governed by the OBCA to hold its AGM by telephonic or electronic means, notwithstanding any provision in the issuer's constating documents that may prevent such form of meeting. However, the risks noted above regarding potential legal action and contractual considerations continue to apply.

2) Financial statements

Canadian corporate statutes require annual financial statements (relating to a period ended not more than six months before the AGM) to be sent to shareholders and presented at an issuer's AGM. As noted above, corporate laws often require such AGM to be called no later than six months after the end of an issuer's financial year and/or not more than 15 months after holding the last preceding AGM. Therefore, issuers will continue to be required to deliver financial statements to shareholders within such timeframes, notwithstanding the Stock Exchange Relief or any relief available under applicable securities laws.

Conclusion

While the Stock Exchange Relief is a welcome aid for issuers in light of the challenges that have come to light as a result of the Emergency, its efficacy is limited as a result of requirements that will continue to apply to issuers under corporate laws, securities laws, their constating documents and contracts to which they are a party. The Ontario Order is a positive first step in enhancing the effectiveness of the Stock Exchange Relief and we expect that other Canadian jurisdictions will follow suit.

For further information on the Stock Exchange Relief, or the timing or procedural requirements for the matters discussed herein, please contact Ora Wexler, Matthew Imrie or any of our other key contacts.