Update re. Communication with Beneficial Owners of Securities of a Reporting Issuer

April 4, 2013

Corporate and securities legislation require reporting issuers to send to their registered holders information and material that allow the holders to exercise their right to vote. National Instrument 54-101 addresses concerns that beneficial owners who hold their securities through intermediaries or their nominees may not receive their information or materials. On November 29, 2012, the CSA published a notice advising of amendments (the “Amendments”) to NI 54-101 to improve the process through which reporting issuers (except investment fund reporting issuers) may send proxy materials to and solicit proxies and voting instructions from registered holders and beneficial owners of securities. The Amendments came into force on February 11, 2013. A summary is set out below.

The main features of the Amendments are to (1) implement changes to the “notice-and-access” mechanism for sending proxy-related materials in connection with meetings to the registered and beneficial holders of securities of a reporting issuer; (2) simplify the process by which beneficial owners are appointed as proxy holders in order to attend and vote at shareholder meetings; and (3) require enhanced disclosure by reporting issuers regarding the beneficial owner voting process.

1. Notice-and-Access

The notice-and-access mechanism allows reporting issuers to deliver the proxy-related materials to its security holders by sending a notice package informing them that the proxy-related materials have been filed on SEDAR and a non-SEDAR website (i.e. the reporting issuer’s website) and enclosing both a notice and the relevant voting document.

The notice must contain a plain-language explanation of the notice-and-access procedure as well as basic information about the meeting, a description of the matters to be voted on, the website addresses where the proxy-related materials are posted, and an explanation of how the security holder may obtain a paper copy of the information circular and other applicable documents. In the previous version of the Amendments published in June 2011, the explanation was to be contained in a separate document rather than form part of the notice.

The notice package must be sent by mail or, if the security holder has previously provided consent, electronically. A beneficial owner may provide standing instructions to receive a paper copy of the information circular and other related documents rather than the notice package.

When a reporting issuer receives a request for a paper copy of the information circular before the meeting, it must send the documents free of charge by first class mail or courier within three business days after receiving the request. If the security holder requests copies on or after the date of meeting, and within one year of the information circular being filed, the reporting issuer must send the paper copy by prepaid mail or courier within 10 calendar days after receiving the request.

A reporting issuer who wishes to use the notice-and-access mechanism must set the record date for notice of the meeting to be at least 40 days before the meeting. Notification of the meeting and the record dates and the reporting issuer’s use of notice-and-access must also be filed on SEDAR. When using notice-and-access for the first time, the reporting issuer must file on SEDAR the notification of meeting and record dates at least 25 days before the record date for notice. The previous 2011 proposal contemplated advance notice being provided through a news release and website posting three to six months before the anticipated meeting. However, the CSA believes this revised notice period is sufficient advance notice to the shareholders and will provide issuers with efficient implementation of notice-and-access.

2. Simplified Process for Appointing Beneficial Owners As Proxy Holders

An intermediary who is the registered holder of securities owned by a beneficial owner must, at its own cost, appoint the beneficial owner or its nominee as a proxyholder if the beneficial owner has provided such instructions. Subject to any corporate laws, the proxyholder will have the authority to attend, vote and otherwise act in respect of those securities for all matters that come before the applicable meeting, and at any adjournment or continuance.

3. Enhanced Disclosure Regarding Beneficial Owner Voting Process

The Amendments provide that a reporting issuer who sends proxy-related materials to a beneficial owner must explain in plain language how the beneficial owner can exercise its voting rights as well as how to attend and vote the securities at the meeting. The information circular must disclose whether the reporting issuer is sending proxy-related materials using notice-and-access and the types of security holders who will receive paper copies and whether it is sending proxy-related materials directly to non-objecting beneficial owners (“NOBO”). In addition, the reporting issuer must indicate whether it intends to pay for an intermediary to deliver materials to objecting beneficial owners (“OBO”) and, if not, state that the OBO will not receive proxy-related materials unless the OBO’s intermediary assumes the delivery cost.

Other Changes

The Amendments have also introduced the following:

  1. the creation of a “self-certification” process for a reporting issuer or other person who wishes to request a NOBO list without using a transfer agent. The requester must now certify that it has the technological capacity to receive the list.
  2. a person other than the reporting issuer who wishes to use the NOBO list may only do so in acting reasonably and in good faith in connection with an effort to influence voting or an offer to acquire securities. Any other use will constitute a breach of securities legislation and penalties may be applied.
  3. changes to Form 54-101F2 to improve the process for obtaining beneficial ownership information.

For more information with respect to the Amendments, please go to: http://www.bcsc.bc.ca/release.aspx?id=16116


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