TSX Strengthens Security Based Compensation Disclosure Requirements

October 31, 2017

The TSX’s recently finalized Company Manual amendments include amendments to the security based compensation arrangement disclosure required to be included in a listed-issuer’s meeting materials. These changes will be effective for financial years ending on or after October 31, 2017.

Key Changes

The changes, which concern section 613 of the Company Manual, apply both to annual meetings and to meetings held for the purpose of seeking approval of security based compensation arrangements. The details are as follows:

  • Plan Maximum. The TSX has clarified the disclosure required with regard to plan maximums. Issuers will be required to disclose the maximum number of securities issuable under each arrangement as either a fixed number (accompanied by the equivalent percentage of the issuer’s issued and outstanding securities) or as a fixed percentage.
  • Outstanding Securities Awarded and Remaining Securities Available. Issuers will be required to disclose the number of outstanding securities awarded under each arrangement, along with the representative percentage of outstanding securities. The number of securities under each arrangement available for grant will also be disclosed as both a number and a percentage.
  • Burn Rate. As a brand new requirement, issuers will be required to disclose the annual burn rate of each arrangement expressed as a percentage calculated as the number of securities granted under the arrangement during the applicable fiscal year, divided by the weighted average number of securities outstanding for such period. The burn rate must be disclosed for the three most recently completed fiscal years for the relevant arrangement, or if not in existence for the last three fiscal years, for the period in which the arrangement had been adopted. Annual burn rate disclosure will not be required for the first fiscal year of any newly adopted arrangement; however, is required where a new arrangement is adopted in replacement of a similar arrangement.

Security based compensation arrangement disclosure for an issuer’s annual meeting must be provided as at the end of the issuer’s most recently completed fiscal year. In the case of meeting where security holder approval of an arrangement is being sought, the disclosure must be provided as of the date of the meeting materials. As before, materials for approval meetings must be pre-cleared by the TSX.

Background

The TSX initially proposed amendments to the security based compensation disclosure requirements and introduced the proposal for website disclosure in May 2016, as we discussed here. A revised proposal was subsequently published in April 2017 (see here) following comments expressing concern for the increased disclosure burden on issuers. The final amendments were published on October 19, 2017 in the TSX’s Notice of Approval Amendments to Parts IV and VI of the Toronto Stock Exchange Company Manual.

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