TSX Proposes Burn Rate Disclosure for Equity Compensation Plans
Compensation committees and executive officers of TSX-listed companies should note that the Toronto Stock Exchange has recently published proposed amendments to its rules that will, if adopted, require a TSX listed issuer to annually disclose, in its management information circular sent to its shareholders, the company’s burn rate under its equity compensation plans.
Under the proposed rule, the annual burn rate of the arrangement must be calculated as follows and expressed as a percentage:
# of securities1 granted under the arrangement during the applicable fiscal year
weighted average # of securities outstanding2 for the applicable fiscal year
1 Securities awarded under an arrangement include, but are not limited to, options, performance stock units, deferred stock units, restricted stock units or other similar awards.
2 The weighted average number of securities outstanding during the period is the number of securities outstanding at the beginning of the period, adjusted by the number of securities bought back or issued during the period multiplied by a time-weighting factor. The time-weighting factor is the number of days that the securities are outstanding as a proportion of the total number of days in the period; a reasonable approximation of the weighted average is adequate in many circumstances. The weighted average number of securities outstanding is to be calculated in accordance with the CPA Canada Handbook, as such may be amended or superseded from time to time.
The proposed rule further provides that, if the securities awarded include a multiplier, provide details in respect to such multiplier.
The proposed new TSX rule is open for comment until May 8, 2017. Given that this latest proposal is actually only a refinement of an earlier proposal made by the TSX in May 2016, and given the relatively short comment period, I expect that the proposal will be likely be adopted shortly following the expiry of that comment period (i.e. sometime in the next few months).
Invitation for Discussion:
If you would like to discuss this proposed rule and its potential impact on your company, or if you would like to discuss any other Canadian securities law matter, please do not hesitate to contact one of the lawyers in the business law group at Nerland Lindsey LLP.
Note that the foregoing is for general discussion purposes only and should not be construed as legal advice to any one person or company. If the issues discussed herein affect you or your company, you are encouraged to seek proper legal advice.