Andrew MacDougall, John M. Valley, Kevin Feng
Mar 24, 2020
Corporations listed on the Toronto Stock Exchange (TSX) have been concerned about their ability to comply with TSX listing requirements in light of COVID-19. In an effort to alleviate some of their concerns, yesterday the Toronto Stock Exchange issued a Staff Notice (see Staff Notice 2020-0002) providing blanket relief with respect to
- Annual meetings — permitting issuers to delay holding their 2020 annual meeting up to December 31, 2020
- Ratification of security-based compensation arrangements — permitting a corresponding delay in the deadline for those issuers required this year to seek their three-year ratification
- Waiving market value thresholds for delisting
- Increasing the daily limit on normal course issuer bid purchases
The Staff Notice allows all issuers to delay their 2020 annual meetings until December 31, 2020, subject to compliance with applicable corporate and securities laws. Paragraph 464 of the TSX Company Manual would otherwise require each TSX-listed issuer to hold an annual meeting within six months from the end of its fiscal year, or at such earlier time as is required by the issuer’s governing corporate statute.
However, there are requirements under corporate law statutes that issuers will need to consider in determining the time by which they must hold their annual meetings (including whether any exemptive relief is required or available), including the following requirements:
- Under most business corporation statutes in Canada, an annual meeting must be called (and, in some cases, held) within 15 months of the previous annual meeting.
- Under some corporate statutes, the meeting must be called within six months of the end of the company’s preceding financial year.
- Under section 155 of the Canada Business Corporations Act (CBCA) (and corresponding provisions in the corporate statutes of certain other jurisdictions in Canada), directors of the corporation must place before their shareholders at any annual meeting comparative audited financial statements relating to a period ended not more than six months before the annual meeting. However, the Director under the CBCA is empowered to grant an exemption from the requirements of section 155 if the Director reasonably believes that the detriment that may be caused to the corporation by the requirement outweighs its benefit to the public.
Securities-based compensation arrangements
TSX-listed issuers with stock option, restricted share unit, performance share unit and other securities-based compensation plans are required to seek ratification of their plans by securityholders every three years unless the plan contains a fixed number limit that has been approved by shareholders. For those issuers that are required to seek shareholder ratification this year, the deadline for obtaining ratification has also been extended until the earlier of its 2020 annual meeting and December 31, 2020. Awards granted during this timeframe do not require ratification by securityholders to be exercised.
Delisting criteria – Market value
The extraordinary drop in stock prices resulting from the COVID-19 pandemic has caused a sudden drop in the market capitalizations of TSX-listed issuers, in some cases resulting in issuers no longer satisfying the minimum market value tests required under TSX continued listing requirements. The Staff Notice states that the TSX will not apply the minimum market value tests (the market value of the issuer’s securities is less than $3,000,000 over any period of 30 consecutive trading days, or 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) in the context of a delisting review until December 31, 2020.
Last week, the Canadian Securities Administrators announced that most filing deadlines for filings required by June 1, 2020, including annual financial statements, interim financial statements and management’s discussion and analysis, would be automatically extended for 45 days. Among other relief granted, the TSX is providing relief from TSX requirements to notify the TSX if issuers require an extension of time to file annual and interim financial statements. Accordingly, late filings of annual and interim financial statements may be made without notice to the TSX in the form of a Form 9.
Normal course issuer bids
Issuers with normal course issuer bid programs are required to limit the number of shares purchased on the same trading day, to 25% of their average daily trading volume. Until June 30, 2020, the 25% threshold is increased to 50%.
Market price definition
In light of current market volatility, on a case-by-case basis, the TSX will permit market price for purposes of pricing securities (including warrants) for private placements to be determined on the basis of a shorter period than the usual five-day period used to calculate the volume weighted average trading price.
 See Business Corporations Act (British Columbia), s. 182(1); Business Corporations Act (Québec), s. 163; Companies Act (Nova Scotia), s. 83(1).
 See Canada Business Corporations Act, s. 133(1)(b) and Business Corporations Act (PEI), s. 102(1), which, in addition to the 15-month requirement, require that an annual meeting to be called not later than six months after the end of the corporation’s preceding financial year.
 See Canada Business Corporations Act, s. 155(1); Business Corporations Act (Ontario), s. 154(1); The Corporations Act (Manitoba), s. 149(1); Business Corporations Act (Québec), s. 255; Business Corporations Act (New Brunswick), s. 100(1); Corporations Act (Newfoundland and Labrador), s. 258(1); Companies Act (Nova Scotia), s. 121(1); Business Corporations Act (PEI), s. 125(1).