Canadian securities regulators are eyeing updates to their rules governing issuer communications with beneficial owners who hold securities through intermediaries, including their own version of e-proxy.
The Canadian Securities Administrators are
seeking comment on proposed rule changes that, among other things, would allow a new "notice-and-access" model similar to the e-proxy rules in place in the United States. However, unlike the U.S. model, the proposed Canadian version of e-proxy would be voluntary. Canadian reporting issuers would be allowed (but not required) to send investors a notice informing them that their annual proxy-related materials are available online instead of sending them by mail. Web posting of proxy-related materials would only be required only if the issuer chooses to use notice-and-access, and the voting instruction form would be required to be sent with the initial notice.
"This is significant as it is the first major proposal to allow [Canadian] companies to provide required documents over the Internet," says Leslie McCallum, an attorney in the law firm Torys LLP. "It's really opening the door to moving from hard copies to electronic copies."
Under the
proposed changes to National Instrument 54-101 Communication With Beneficial Owners of Securities of a Reporting Issuer, issuers opting to use notice-and-access would have to publish a news release and send a notice to beneficial owners at least 30 days before the meeting date providing certain information, including details about the meeting and a summary of the matters to be voted on, and an explanation of how to access the proxy-related materials electronically and how to execute and return the voting instruction form.
As proposed, the notice-and-access proposal wouldn't be available for "special meetings." CSA wants to monitor the implementation of N&A before extending it to such meetings.
Since Canadian companies currently are required each year to mail a hard copy of their annual financial statements and management's discussion and analysis, either to all security holders or to those who request them, McCallum notes that, "For some companies, it might be more efficient to continue their current practice of mailing their proxy materials along with their financial statements and MD&A in a single delivery to all security holders."
"It won't be a slam dunk in favor of Internet posting, since the hard copy requirement for the annual financials and MD&A doesn't go away," McCallum says. "Companies would still have to work out what combination of methods will work best and most efficiently for them, given the available options."
However, she notes that regulators are seeking comment on whether the requirement to ask registered holders and beneficial owners if they want financial statements and MD&A mailed to them is adequately integrated with the requirements to send proxy-related materials; so it remains to be seen what any final rule might look like.
Among other things, regulators are also seeking comment on whether to expand notice-and-access to include special meetings; whether there should be restrictions on when a reporting issuer can use notice-and-access selectively; whether the proposal can be made more user-friendly for retail shareholders; whether it will result in meaningful costs savings that make proxy voting more efficient, and whether there should be restrictions the types of materials that can be included with the notice and voting instruction form.
As noted in this
Torys alert, reporting issuers that opt to use notice-and-access for some but not all beneficial owners would be required to explain the reasons for the disparate treatment in a news release and management information circular. Under the proposal, Canadian issuers that are registered with the SEC issuers would also be allowed comply with the U.S. notice-and-access model.
Other proposed changes would simplify the beneficial owner proxy appointment process and require enhance disclosures about the beneficial owner voting process. Comments on the proposals are open until Aug. 31.