In this constantly evolving situation, companies must on an ongoing basis consider the actual and potential
impacts to the business and take all reasonable steps to protect stakeholders including staff, customers and securityholders.
Items for consideration include:
Timely and accurate communication to stakeholders is critical.
- The board of directors needs to be kept apprised of the actions taken by the company and provide necessary guidance and oversight.
- For public companies there are additional considerations including disclosure of material changes to the business (National Instrument 51-102) and whether to impose trading restrictions, e.g. blackouts on insiders and others. See below for commentary on exemptions issued by the Canadian Securities Administrators and The Manitoba Securities Commission.
- On May 14, 2020, an Order was made under The Emergency Measures Act (Manitoba) regarding the holding of meetings for corporations under The Corporations Act, condominiums under The Condominium Act, cooperatives under The Cooperatives Act and credit unions under The Credit Unions and Caisses Populaires Act. The Order permits meetings to be held “virtually” through electronic means even if the organization’s by-laws do not provide for “virtual” meetings or explicitly excludes them. There are various requirements that must be met including provision of notice to everyone entitled to attend the meeting and facilitating their participation at the meeting. The Order also permits an organization that is required to hold an annual meeting between March 31, 2020 and September 1, 2020 to extend the time for the holding of that annual meeting to no later than September 30, 2020. This Order is in effect until September 30, 2020 unless it is revoked sooner.
- For organizations that are not subject to the Order referred to in the previous paragraph, reference should be made to the by-laws or other organizational documents and corporate law with respect to the conduct of regular business, e.g. the holding of annual, special or board meetings, presentation of financial statements, etc. The current State of Emergency in Manitoba places restrictions on public gatherings and there are rules to maintain “social distancing”. For organizations that have scheduled meetings, it may be advisable that they be either postponed or held by way of electronic means. In the circumstances and in the absence of clear authority (i.e. the Order referenced above) to enable these actions, it is recommended that organizations proceed on a “good faith” basis to meet their various obligations such as:
- Postpone the meeting until such time as normal operations resume.
- If the meeting cannot be postponed for whatever reason, conduct the meeting remotely through use of electronic communications provided that everyone entitled to attend and vote at the meeting is given appropriate notice and means to participate and vote at the meeting.
- Consider providing timely disclosure of significant matters.
Seek external advice as necessary or advisable to assist with decision-making or implementation.
In terms of mitigating losses, businesses should determine if they have insurance in place that might cover the loss, such as business interruption insurance, please refer to COVID-19 and Business Interruptions.The Pitblado Law Covid-19 Resource Page has a number of articles specifically addressing issues relating to business transactions and contracts.
While primary risk mitigation resources need to be applied to the current situation, consideration also needs to be given to any new, continuing or longer-term risks that may have been created or exacerbated for the business and how they might be addressed. It is important that business continuity plans are evaluated and updated as a result of this experience.
Summary of interim measures adopted by key corporate and financial regulators:
The Companies Office (Manitoba) among other things registers business/trade names, corporations and partnerships/limited partnerships. Although the Companies Office closed to the public on March 19, it continues to provide service to the public. It is recommended to use Online Services https://companiesoffice.gov.mb.ca/online.html although documents may still be mailed or faxed.
The Manitoba Financial Services Agency (“MFSA”) regulates securities, real estate, cooperatives, credit unions, and insurance in Manitoba.
On April 23rd, the MFSA issued a further press release concerning the continuity of its services: http://mbsecurities.ca/news/current/msc_covid.html
The key points are:
- All “essential and core operations will continue” although many will be delivered remotely.
- The MFSA states it “will be flexible in [its] regulatory expectations at this time.”
- Registrants who have implemented Business Continuity Plans or are working remotely are to advise The Manitoba Securities Commission (“MSC”) at [email protected].
- No on-site compliance reviews until further notice but normal course compliance and oversight activities will continue.
- In person hearings are not currently being held although hearings may be conducted by teleconference if possible.
- MSC Real Estate Division is operating and encourages the use of mail, email and fax for renewal and transfer documents.
The MSC also issued an exemption order dated April 14, 2020 dispensing with the need for physical signatures for certain real estate listings, offers and acceptances: https://www.pitblado.com/exemption-physical-signature-requirement-real-estate-listings-offers-and-acceptances.
The Canadian Securities Administrators (“CSA”) is the umbrella organization of all of Canada’s provincial and territorial securities regulators.
On March 20, the CSA issued guidance https://www.securities-administrators.ca/aboutcsa.aspx?id=1879 respecting the conduct of an Annual General Meeting (“AGM”).
The key points are:
- The conduct of AGMs is subject to corporate law and the issuer’s constating documents (e.g. by-laws) which must be considered in addition to any securities regulatory matters.
- Where a Reporting Issuer has already sent AGM material to securityholders and has decided to change the date, time or location of the AGM, the Reporting Issuer can notify securityholder of the change by:
- Issuing a news release announcing the change.
- Filing the news release on SEDAR.
- Taking all reasonable steps to inform parties involved in the proxy process (e.g. intermediaries, transfer agents, proxy service providers etc.) of the change.
- Where a Reporting Issuer has not sent AGM material to securityholders, it should consider adding disclosures about the possibility of having to change the date, time or location of the AGM.
- A “virtual” AGM is where the meeting is held entirely through electronic means; a “hybrid” AGM is where the meeting is held in-person but also permits securityholder attendance through electronic means.
- Where a Reporting Issuer intends to hold a virtual or hybrid AGM, it must notify securityholders, parties involved in the proxy process and market participants and provide logistical information to allow access, participation in and voting at the AGM.
- If a Reporting Issuer has decided to conduct a virtual or hybrid AGM and has already sent out AGM material to securityholders, it can provide notification to securityholders in the same way as if it were changing the date, time or location of the AGM; if material has not yet been sent, the Reporting Issuer should include and provide the same disclosure regarding the logistics of holding a virtual or hybrid AGM.
- National Instrument 54-101 Communication with Beneficial Owners of Securities of a Reporting Issuer requires, in part, that notice of an adjournment or change related to an AGM must be sent to beneficial owners however CSA’s view is that no exemptive relief is required provided that registered and beneficial securityholders receive the same information and are treated equally.
- If an AGM or Special Meeting involves a proxy contest, consideration of M&A transactions or obtaining securityholder approval under Multilateral Instrument 61-101 Protection of Minority Securityholders in Special Transactions then the Principal Regulator of the Reporting Issuer must be contacted. Additional relief was provided May 1, 2020 by extending the deadlines for filing various documents by public companies that had postponed their AGM. https://www.securities-administrators.ca/aboutcsa.aspx?id=1907
On March 18, the CSA issued a notice https://www.securities-administrators.ca/aboutcsa.aspx?id=1877 providing blanket relief (Blanket Order issued March 23) to market participants.
The key points are:
- For regulatory filings due on or before June 1, 2020, a 45-day filing extension is provided for periodic filings including financial statements, management’s discussion and analysis, management reports of fund performance, annual information forms, technical reports and certain other filings.
- All CSA proposals out for comment will have their comment periods extended by 45 days.
The Investment Industry Regulatory Organization of Canada (“IIROC”) is the self-regulatory organization for IIROC regulated investment dealers and their registered/approved staff.
All IIROC offices closed on March 20 with staff now working remotely. Core and critical regulatory responsibilities continue to be carried our including real-time oversight of all equity trading.
IIROC has responded to the challenges presented by COVID-19 by issuing a Notice on March 31st outlining various rule exemptions that they are prepared to consider granting :
Here is a summary of the key exemptions IIROC is prepared to consider and which must be applied for:
- Requirement for client signature where client cannot provide an original or electronic signature
- Approved Person and Notice of Termination filings may be extended beyond 10 days with coordination of CSA jurisdictions
- Pre-Approval of certain documents by alternative means if HR or systems constraints prevent firm from following normal process(e.g. pre-approvals of advertising and sales literature and pre-clearance of trades by certain staff)
- Additional time allowed for supervisory functions of daily and monthly trade reviews and branch office reviews
- Suspension of late filing fees
- Margin-related matters including from the requirement to obtain margin from client in a hardship position and where firm has adequate capital to provide for the margin
- Relief from timing of pre- and post-approval proficiency requirements
- Identity verification – relief for situations where individual controls or directs 10% or more of a corporation or similar entity (this would not eliminate compliance with federal anti-money laundering thresholds and requirements)
Applications for exemptive relief must:
1) Identify the relief sought;
2) Indicate why the effects of Covid-19 have necessitated the relief request; and
3) Set out the alternative approach the firm is proposing that will meet the spirit and intent of the rules
Applications should be e-mailed to: [email protected]
On May 6, 2020, IIROC issued a press release disclosing the types of exemption that had been granted.
Please do not hesitate to contact your relationship partner or lawyer if you have any questions or if we can be of assistance in guiding you through these new challenges.
This article was prepared by:
This article represents general information and is not legal advice. Please contact us if you would like legal advice that is tailored to your particular circumstances. We would be happy to help.