August 2008

Fewer restrictions imposed by CSA

Effective July 4, 2008, the Canadian Securities Administrators (CSA) relaxed the rules relating to proxy solicitation by individuals or groups other than the reporting issuer and its agents. An amendment to National Instrument 51-102 (NI 51-102) - Continuous Disclosure Obligations - now permits dissident shareholders to solicit proxies, without the requirement of an information circular being issued, if the solicitation is made to the public by broadcast, speech or publication.

The CSA has been specific about what constitutes a public broadcast, outlining its requirements in the companion policy (CP 51-102). The companion policy emphasizes that the solicitation must be "disseminated in a manner calculated to effectively reach the marketplace." Examples of acceptable public solicitation include:

• A speech in a public forum
• A press release
• A statement delivered on a broadcast medium
• An advertisement in a generally available magazine or newspaper

Any solicitation over the Internet must include a filing on the System for Electronic Document Analysis and Retrieval (SEDAR). Proxy solicitation to a select group of shareholders by telephone, mail or e-mail is not considered public.

The amendment to NI 51-102 also extends the existing exemption (section 9.5) beyond the reporting issuer, to individuals and groups. This exemption states that the requirements under the "Proxy Solicitation and Information Circular" section do not apply to those issuers who already "comply with the requirements of the laws of the jurisdiction in which it is incorporated, organized or continued, if the requirements are substantially similar to the requirements" listed in the National Instrument. Under the amendment, the exemption has been broadened to include individuals or groups who meet the same criteria.

With the introduction of these changes, CSA has brought securities legislation in line with corporate law, which has moved toward a greater recognition of shareholder rights.

By John Fish, supervisor, transfer controls

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