TSX-listed companies are required to list certain documents on the System for Electronic Document Analysis and Retrieval (SEDAR) system. Investors complain that documents and information they want can be hard to find because of how companies file it on SEDAR. Since SEDAR doesn’t require all documents that investors want, information may not be publicly available to investors without some website disclosure regulations.
TSX proposed to solve these issues by adding amendments requiring disclosure to the TSX Company Manual. TSX published the final amendments on October 9, 2017. Certain TSX issuers must make specific documents available for investor review on their websites by the upcoming April 1, 2018, deadline.
What Prompted the TSX Amendments for Website Disclosure?
In the simplest of terms, the reason behind the amendments is a matter of transparency and good corporate governance. TSX wanted to make governance documents and other information that shareholders wanted more accessible to them.
Shareholders may be tempted to engage in proxy fights or litigious acts against issuers or their boards because of a lack of access to information. The disclosure amendments will make it easier for shareholders to review and retrieve accurate and updated information before they consider any type of legal action.
What Do the New TSX Amendments Require of Listed Companies?
The newly approved amendments apply to Section 473 of the TSX Company Manual. The amendments state what TSX-listed issuers must post on their websites and what information constitutes compliance with the amendments.
The amendments state that TSX-listed issuers must list basic governing documents like the company’s articles of incorporation, amalgamation, and continuation or other establishing documents and the company bylaws on a company website. In addition, boards must post other governance information, including a position description for the board chair and lead director, the board mandate and descriptions of committee charters.
TSX-listed issuers must also disclose majority voting policies and advance notice policies.
Amendments Promote Transparency by Requiring Compensation Arrangement Disclosures
The new amendments also improve transparency related to compensation disclosures. Effective ending the fiscal year on or after October 31, 2017, TSX-listed issuers must publish the annual burn rate for the last three years that pertains to each security-based compensation plan. They must also publish security-based compensation plans that include a multiplier that increases the number of shares that the company issued based on performance and the effect of the multiplier on the burn rate. These new rules include vesting and term requirements for stock option plans as well as security-based compensation plans.
The new rules regarding compensation were designed to be consistent with executive compensation disclosure requirements under securities laws, which account for releasing compensation information at the end of the most recent fiscal year.
Companies that seek shareholder approval for security-based compensation plans at the relevant shareholders’ meeting must be able to view the information by the date the meeting materials were released.
The Manner of Posting Website Disclosures
The disclosure amendments give TSX-issuers some degree of flexibility for posting the required documents on their websites.
In lieu of posting documents separately, issuers may prepare a proxy circular that includes all documents required by the amendments and upload it to a company website.
The information required by the amendments must be easy for shareholders to find. Issuers may post the documents on a separate page designated for investor relations. Alternatively, they can post the documents on a separate website as long as they link it to the issuer’s homepage.
The amendments also specify how to handle the requirements when companies share websites. The regulations require each issuer to have separate dedicated webpages for the disclosures.
Proposed Amendments That Didn’t Make the Final Approval
TSX proposed the original website disclosure rules, which included a much longer list of documents, in 2016. Initially, the proposals also included position descriptions for key officers, in addition to the board chair and the lead director. Early discussions included the potential for including documentation explaining anti-corruption policies, whistleblower policies, and other policies that pertain to social and environmental issues. Of minor importance is that SEDAR requires companies to file codes of conduct, while the new TSX amendments don’t require a similar posting.
Feedback from companies and shareholders pared down the number and type of documents to those described in this article.
What Isn’t Required Under the New Disclosure Requirements?
While many of the new requirements are a move toward transparency and good corporate governance, it’s worth mentioning some notable exceptions based on the classification of issuers.
For the purpose of clarification, companies don’t have to create brand-new policies of any kind. They merely have to post the existing versions of policies.
The new amendments don’t apply to non-corporate issuers. They also don’t apply to exchange-traded funds, closed-end funds or issuers of exchange-traded notes. Another exception includes issuers of certain structured products where investor contingencies are highly sensitive to or contingent on changes in the underlying values.
A couple of other classifications are exempt from the new disclosure requirements. There is an exception for some interlisted issuers that have less than 25% of their overall trading volume of their listed securities on the Canadian marketplace and are listed on another stock exchange, such as the New York Stock Exchange or NASDAQ. This exception applies to data that pertains to the prior 12 months of trading activity.
Eligible international inter-listed issuers are also not required to comply with the new TSX-issuer amendments. This category applies to issuers who are organized in a recognized jurisdiction like Australia, England, Hong Kong and the state of Delaware.
The Final Word on the TSX Handbook Amendments
The final amendments were well-vetted before they were approved. Many companies were already complying with the new requirements before they were approved as a matter of good corporate governance. The rules are clear enough that companies should be able to make changes or modifications to their websites with little time and effort. However, the April 1 deadline is fast approaching, so companies that aren’t currently in compliance will need to place a high priority on making the required changes.