TSX Mandates Burn Rate Disclosure for Equity Compensation Plans
*This article updates an earlier one dated April 13, 2017 when the new rule was in the proposal stage.
Compensation committees and executive officers of TSX-listed companies should note that the Toronto Stock Exchange has recently amended its rules, effective October 31, 2017, to require TSX listed issuers to annually disclose, in their management information circulars sent to their shareholders, the company’s burn rate under each of its equity compensation plans for each of the listed issuer’s three most recently completed fiscal years.
Under the new rule, the annual burn rate of each 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of securities outstanding is to be calculated in accordance with the CPA Canada Handbook, as such may be amended or superseded from time to time.
If the securities awarded include a multiplier, listed issuers are required to provide details in respect to such multiplier.
Invitation for Discussion:
If you would like to discuss this new 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 Shea Nerland LLP.
Disclaimer: 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.