Industry


Continuous Disclosure


Companies that are reporting issuers in Ontario must regularly make certain information about their activities and financial status available to the public. Many of these requirements are set out in the following rules:

  • National Instrument 51-102 Continuous Disclosure Obligations sets out the obligations for ongoing filing and disclosure requirements.
  • National Instrument 52-107 Acceptable Accounting Principles, Auditing Standards and Reporting Currency sets out the accounting principles and auditing standards that apply to financial statements filed.
  • National Instrument 52-109 Certification of Disclosure in Issuers' Annual and Interim Filings sets out certification requirements for reporting issuers other than investment funds.
  • National Instrument 71-102 Continuous Disclosure and Other Exemptions Relating to Foreign Issuers outlines exemptions for certain foreign issuers from most continuous disclosure requirements and certain other requirements.
The disclosure requirements for venture issuers differ from those of other issuers. The definition of a venture issuer can be found in National Instrument 51-102 Continuous Disclosure Obligations The most significant difference is that venture issuers have longer filing deadlines for annual and interim financial statements and business acquisition reports. In addition, a venture issuer is not required to file an Annual Information Form under Form 51-102F2, and can file a basic certificate under National Instrument 52-109 Certification of Disclosure in Issuers' Annual and Interim Filings.

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Continuous Disclosure Requirements

The following are brief summaries of some of the main continuous disclosure requirements under securities legislation in Ontario.

Financial Statements

Reporting issuers are required to file annual and interim financial statements with the OSC. Part 4 of National Instrument 51-102 Continuous Disclosure Obligations (NI 51-102) discusses annual and interim financial statements required to be filed, comparative financial statement requirements and the deadlines for filing.

A reporting issuer that is not a venture issuer must file annual financial statements 90 days after the end of its most recently completed financial year and interim financial statements 45 days after the end of the interim period. A venture issuer must file annual financial statements 120 days after the end of its most recently completed financial year and interim financial statements 60 days after the end of the interim period.

Part 4 of NI 51-102 also outlines requirements relating to auditor involvement; approval and delivery of financial statements; and what to do in the case of a change in year-end, corporate structure or auditor.

Management's Discussion and Analysis (MD&A)

Financial statements must be accompanied by the MD&A. The MD&A is a narrative explanation, through the eyes of management, of how a company performed during the period covered by the financial statements, and of the company's financial condition and future prospects. The MD&A supplements, but does not form part of, financial statements and is required to be filed at the same time as the financial statements.

For further information, see Part 5 of National Instrument 51-102 Continuous Disclosure Obligations and Form 51-102F1.

Forward-Looking Information

Companies are encouraged to provide forward-looking information in the disclosure they provide to the public if they have a reasonable basis for doing so. For example, the preparation of MD&A necessarily involves some degree of prediction or projection. The MD&A requires a discussion of known trends or uncertainties that are reasonably likely to affect your company's business.

All forward-looking information must contain a statement that the information is forward-looking; a description of the factors that may cause actual results to differ materially from the forward-looking information; material assumptions; and appropriate risk disclosure and cautionary language. Detailed guidance can be found in Parts 4A and 4B of National Instrument 51-102 Continuous Disclosure Obligations.

Certification of Disclosure

National Instrument 52-109 Certification of Disclosure in Issuers' Annual and Interim Filings sets out certification requirements for all reporting issuers, other than investment funds.

The objective of these requirements is to improve the quality, reliability and transparency of annual filings, interim filings and other materials that companies file or submit under securities legislation. Each certifying officer (usually the CEO and CFO) must certify the annual and interim filings of the company they work for. The content of the certification and the related disclosure is different for venture issuers and non-venture issuers.

Annual Information Form (AIF)

A company that is not a venture issuer must file an AIF every year, usually 90 days after the end of the company's most recent financial year. An AIF provides material information about a company and its business in the context of its historical and possible future development. It describes the company and its operations, prospects, risks and other factors that impact its business.

For further information, see Part 6 of National Instrument 51-102 Continuous Disclosure Obligations and Form 51-102F2.

Disclosure of Material Changes

Reporting issuers are required under securities legislation to publicly disclose any material changes to the issuer's affairs.

A material change is (for a reporting issuer other than an investment fund):
  • a change in the business, operations or capital of a company that would reasonably be expected to have a significant effect on the market price or value of any of its securities; or
  • a decision to implement such a change made by the board of directors or other persons acting in a similar capacity or by senior management of the issuer who believe that confirmation of the decision by the board of directors or any other persons acting in a similar capacity is probable.
Upon the occurrence of a material change, a reporting issuer must immediately issue and file a news release disclosing the substance of the change. The reporting issuer must also file a material change report on Form 51-102F3 as soon as practicable and in any event within 10 days of the date of which the change occurs.

For further information on disclosure of material changes, see Part 7 of National Instrument 51-102 Continuous Disclosure Obligations and Form 51-102F3.

Business Acquisition Reports (BAR)

A company must file a BAR after completing a significant acquisition. The BAR describes the significant business(es) acquired and the effect of the acquisition on the company. The BAR must be filed within 75 days after the date of acquisition.

For further information see Part 8 of National Instrument 51-102 Continuous Disclosure Obligations and Form 51-102F4.

Proxies and Information Circulars

A proxy is a form by which a shareholder appoints a person or company to act on the shareholders' behalf at a shareholder meeting. Subject to certain exemptions, when a company solicits proxies, it must also prepare an information circular.

An information circular includes information on how to exercise a proxy and provides details of the matters to be voted on at the shareholder meeting. The specific information required to be included in an information circular is set out in Form 51-102F5.

An information circular must also include prospectus-level disclosure about certain entities if shareholder approval is required in respect of a significant acquisition under which securities of the acquired business are being exchanged for the issuer's securities or in respect of a restructuring transaction under which securities are to be changed, exchanged, issued or distributed.

For further information, see Part 9 of National Instrument 51-102 Continuous Disclosure Obligations and Form 51-102F5.

Executive Compensation

Information circulars prepared for an annual meeting of shareholders must also include detailed disclosure about the compensation paid to certain executive officers and directors in connection with their office or employment by a reporting issuer or a subsidiary of a reporting issuer. The disclosure requirements for executive compensation are contained in Form 51-102F6.

Restricted Security Disclosures

If a reporting issuer has outstanding restricted securities, or securities convertible into or exchangeable for restricted securities, it must provide certain specified disclosure about those securities.

A restricted security is an equity security of a reporting issuer if any of the following apply:
  • there is another class of securities of the reporting issuer that carry a greater number of votes per security relative to the equity security;
  • the conditions attached to the equity security or contained in the reporting issuer's constating documents have provisions that appear to significantly restrict the voting rights of the equity securities; or
  • the reporting issuer has issued another class of equity securities that appears to enable the owners of the other class to participate in the earnings or assets of the reporting issuer to a greater extent, on a per security basis, than the owners of the first class of equity securities.
For further information on disclosure requirements related to restricted securities, see Part 10 of National Instrument 51-102 Continuous Disclosure Obligations.

Material Contracts and Other Documents

A reporting issuer is required to file with the OSC copies of all material contracts entered into within the last financial year. A material contract entered into in the ordinary course of business may not have to be filed, unless it falls into a category of contract specified in Part 12 of National Instrument 51-102 Continuous Disclosure Obligations (NI 51-102).

A material contract is any contract that a company or any of its subsidiaries is a party to, that is material to the issuer. For a discussion on making materiality determinations, see Part IV of National Policy 51-201 Disclosure Standards.

For further information on the filing requirement for material contracts and other documents affecting the rights of securityholders, see Part 12 of NI 51-102.

Mineral Projects and Oil & Gas Activities

Companies that are engaged in mineral projects or oil and gas activities are subject to additional continuous disclosure requirements.

For example, a company must ensure that all disclosure of scientific or technical information concerning a mineral project on a property material to the company is based on information prepared by or under the supervision of a qualified person. Detailed disclosure requirements for mineral projects are set out in National Instrument 43-101 Standards of Disclosure for Mineral Projects (NI 43-101).

In addition, upon becoming a reporting issuer in a jurisdiction in Canada an issuer must file a technical report for a mineral project on each property that is material to the issuer. The disclosure requirements for technical reports are contained in NI 43-101 and Form 43-101F1 Technical Report.

Disclosure requirements relating to oil and gas activities are set out in National Instrument 51-101 Standards of Disclosure for Oil and Gas Activities (NI 51-101).

For more information on the disclosure requirements that apply to companies with an interest in mineral projects, see NI 43-101.

For companies engaged in oil and gas activities, see NI 51-101.

Continuous Disclosure Exemptions for Foreign Issuers

Foreign companies that are reporting issuers in Canada may be eligible for relief from certain of the continuous disclosure requirements in securities legislation. National Instrument 71-102 Continuous Disclosure and Other Exemptions Relating to Foreign Issuers (NI 71-102) provides relief from many of the continuous disclosure requirements in securities legislation for two types of foreign issuer: SEC Foreign Issuers and Designated Foreign Issuers.

SEC Foreign Issuers are reporting issuers incorporated outside of Canada that are also registered with the SEC and meet certain additional criteria. Designated Foreign Issuers are reporting issuers that are incorporated outside of Canada and are regulated by one of 15 specified jurisdictions. In addition, to be eligible for relief under NI 71-102, a Designated Foreign Issuer cannot have more than 10% of its outstanding equity securities held by Canadian residents. U.S. incorporated companies may also be eligible for relief from certain continuous disclosure requirements under National Instrument 71-101 The Multi Jurisdictional Disclosure System.  

For more information about the categories of foreign issuer and the exemptions that apply, see NI 71-102.

Continuous Disclosure Reviews

Staff of the Commission conduct ongoing reviews of the disclosure documents filed by reporting issuers. A reporting issuer may be selected for a full, issue-oriented or targeted review. The responsibility to ensure compliance with applicable securities legislation, policies and practices rests with a company and its advisors. The fact that a company has not been selected for review in a given year in no way detracts from its duty to remain compliant.

OSC Staff Notice 51-703 Implementation of Reporting Issuer Continuous Review Program, Corporate Finance Branch provides information on the types of reviews that a company can expect the OSC to undertake.

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