Click here to see updated post on this topic dated October 23, 2017.
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
divided by
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of securities outstanding is to be calculated in accordance with the CPA Canada Handbook, as such may be amended or superseded from time to time.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 Linmac 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.
Suppliers who incorporate interest provisions into their invoices should take heed of the Alberta Court of Appeal’s decision in H2S Solutions Ltd. v Tourmaline Oil Corp., 2019 ABCA 373.
In H2S, the appellants had provided certain services to the respondents, and occasionally issued invoices. On the bottom of each invoice, the appellants included the following language:
TERMS: 2% PER MONTH (24% PER ANNUM) CHARGED ON ALL OVERDUE ACCOUNTS
The respondent argued that despite the wording on the invoices, there was no express or implied agreement between the parties to pay the invoice interest.
The Court agreed with the respondent, noting that a party cannot “unilaterally foist” the obligation to pay interest on another simply by adding such wording to its invoice, and sending it the other party (para 11).
The appellant relied heavily on the case Commercial Truck Equipment Corp. v Prairie Hydraulic Equipment, 2018 ABQB 218 to support its argument. In that case, the plaintiff charged interest to the defendant on its purchase orders. However, the Court distinguished Commercial Truck because the defendant had previously acknowledged the plaintiff’s invoice interest charges, and the plaintiff was also aware that it was an industry practice to include interest on invoices (para 12).
In contrast to Commercial Truck, the affidavit evidence provided by the respondent in H2S suggested that it had never expressly or impliedly agreed to pay invoice interest (para 17). As a result, the Court denied the appellant’s unilateral attempt to imposed invoice interest on the respondent.
The Court noted that in order to enforce interest charges, “…there must be some agreement to pay interest, whether oral, in writing, or implied by conduct or the natures of the parties’ business relationship or dealing concerning outstanding debt.” (para 11)
Given the H2S ruling, it may be prudent for suppliers to obtain a separate acknowledgement from their customers to pay interest. In principle, this could be achieved by attaching a separate sheet to the invoice which asks the customer to acknowledge that by accepting delivery, they are expressly agreeing to pay interest on any overdue invoice amounts.
I would like to thank Anuj Baxi for his assistance in writing this article.
Invitation for Discussion:
If you would like to discuss this blog in greater detail, or any other business litigation matter, please do not hesitate to contact Mohamed Amery.
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 adv