Companion Policy 51-102CP Continuous Disclosure Obligations
Part 1 Introduction and Definitions
Section 1.1

Introduction and Purpose

(1) National Instrument 51-102 Continuous Disclosure Obligations (the “Instrument”) sets out disclosure requirements for all issuers, other than investment funds, that are reporting issuers in one or more jurisdictions in Canada.

(2) The purpose of this Companion Policy (the “Policy”) is to help you understand how the provincial and territorial regulatory authorities interpret or apply certain provisions of the Instrument. This Policy includes explanations, discussion and examples of various parts of the Instrument.


Companion Policy 51-102CP Continuous Disclosure Obligations
Part 1 Introduction and Definitions
Section 1.2

Filing Obligations

(1) Reporting issuers must file continuous disclosure documents under the Instrument only in the local jurisdictions in which they are a reporting issuer.

(2) In some circumstances, the Instrument permits an issuer to satisfy a filing requirement by filing a different document instead. If an issuer is relying on one of these sections, the issuer must file the substitute document in the appropriate filing category and type on SEDAR. For example, an exchangeable share issuer relying on section 13.3(2) that must file a copy of its parent issuer’s annual financial statements must file those financial statements under the exchangeable share issuer’s SEDAR profile in the “Annual Financial Statement” filing type.


Companion Policy 51-102CP Continuous Disclosure Obligations
Part 1 Introduction and Definitions
Section 1.3

Corporate Law Requirements

Reporting issuers are reminded that they may be subject to requirements of corporate law that address matters similar to those addressed by the Instrument, and which may impose additional or more onerous requirements. For example, applicable corporate law may require the delivery of annual financial statements to shareholders or may require the board of directors to approve interim financial reports.


Companion Policy 51-102CP Continuous Disclosure Obligations
Part 1 Introduction and Definitions
Section 1.4

Definitions

(1) General – Many of the terms for which the Instrument or Forms prescribed by the Instrument provide definitions are defined somewhat differently in the applicable securities legislation of several local jurisdictions. A term used in the Instrument and defined in the securities statute of a local jurisdiction has the meaning given to it in the statute unless: (a) the definition in that statute is restricted to a specific portion of the statute that does not govern continuous disclosure; or (b) the context otherwise requires.

For instance, the terms “form of proxy”, “material change”, “proxy”, and “recognized quotation and trade reporting system” are defined in local securities legislation of most jurisdictions. The provincial and territorial regulatory authorities consider the meanings given to these terms in securities legislation to be substantially similar to the definitions set out in the Instrument.

(2) Asset-backed security – Section 1.8 of Companion Policy 44-101CP provides guidance for the definition of “asset-backed security”.

(3) Directors and Executive Officers – Where the Instrument or any of the Forms use the term “directors” or “executive officers”, a reporting issuer that is not a corporation must refer to the definitions in securities legislation of “director”. The definition of “director” typically includes a person acting in a capacity similar to that of a director of a company. Therefore, non-corporate issuers must determine in light of the particular circumstances which individuals or persons are acting in such capacities for the purposes of complying with the Instrument and the Forms. Further, in considering paragraph (c) of the definition of “executive officer”, we would consider an individual that is employed by an entity separate from the reporting issuer, but that performs a policy-making function in respect of the reporting issuer through that separate entity or otherwise, to fit within this definition.

Similarly, the terms chief executive officer and chief financial officer should be read to include the individuals who have the responsibilities normally associated with these positions or act in a similar capacity. This determination should be made irrespective of an individual’s corporate title or whether that individual is employed directly or acts pursuant to an agreement or understanding.

(4) Investment Fund – Generally, the definition of “investment fund” would not include a trust or other entity that issues securities which entitle the holder to substantially all of the net cash flows generated by: (i) an underlying business owned by the trust or other entity, or (ii) the income-producing properties owned by the trust or other entity. Examples of trusts or other entities that are not included in the definition are business income trusts, real estate investment trusts and royalty trusts.

(5) Reverse Takeover – The definition of reverse takeover includes reverse acquisitions as defined or interpreted in Canadian GAAP applicable to publicly accountable enterprises and any other transaction in which an issuer issues enough voting securities as consideration for the acquisition of an entity such that control of the issuer passes to the securityholders of the acquired entity (such as a Qualifying Transaction, as that term is defined in the TSX Venture Exchange policies). In a reverse acquisition, although legally the entity (the legal parent) that issued the securities is regarded as the parent, the entity (the legal subsidiary) whose former securityholders now control the combined entity is treated as the acquirer for accounting purposes. As a result, for accounting purposes, the issuing entity (the legal parent) is deemed to be a continuation of the acquirer and the acquirer is deemed to have acquired control of the assets and business of the issuing entity in consideration for the issue of capital.

(6) Restructuring transaction – A “restructuring transaction” includes a transaction in which a reporting issuer acquires assets, which may include assets that constitute a business, and issues securities resulting in

The acquisition and issuance may be in a single transaction, or a series of transactions. To be a “series of transactions”, the transactions must be related to each other.

The phrase “new securityholders” includes both beneficial owners who did not hold any of the reporting issuer’s securities before the restructuring transaction, and beneficial owners that held some securities in the reporting issuer before the transaction, but who now, as a result of the transaction, own more than 50% of the outstanding voting securities.

(7) Accounting terms – The Instrument uses accounting terms that are defined or used in Canadian GAAP applicable to publicly accountable enterprises. In certain cases, some of those terms are defined differently in securities legislation. In deciding which meaning applies, you should consider that National Instrument 14-101 Definitions provides that a term used in the Instrument and defined in the securities statute of a local jurisdiction has the meaning given to it in the statute unless: (a) the definition in that statute is restricted to a specific portion of the statute that does not govern continuous disclosure; or (b) the context otherwise requires.

For example, the term “associate” is defined in local securities statutes and Canadian GAAP applicable to publicly accountable enterprises. Securities regulatory authorities are of the view that the references to the term “associate” in the Instrument and its forms (e.g., item 7.1(g) of Form 51-102F5 Information Circular) should be given the meaning of the term under local securities statutes since the context does not indicate that the accounting meaning of the term should be used.

(8) Acceptable accounting principles other than Canadian GAAP applicable to publicly accountable enterprises – If an issuer is permitted under National Instrument 52-107 Acceptable Accounting Principles and Auditing Standards to file financial statements in accordance with acceptable accounting principles other than Canadian GAAP applicable to publicly accountable enterprises, then the issuer may interpret any reference in the Instrument to a term or provision defined or used in Canadian GAAP applicable to publicly accountable enterprises as a reference to the corresponding term or provision in the other acceptable accounting principles.

(9) Rate-regulated activities – If a qualifying entity is relying on the exemption in paragraph 5.4(1)(a) of National Instrument 52-107 Acceptable Accounting Principles and Auditing Standards, then the qualifying entity may interpret any reference in the Instrument to a term or provision defined or used in Canadian GAAP applicable to publicly accountable enterprises as a reference to the corresponding term or provision in Part V of the Handbook.


Companion Policy 51-102CP Continuous Disclosure Obligations
Part 1 Introduction and Definitions
Section 1.5

Plain Language Principles

You should apply plain language principles when you prepare your disclosure including:

  • using short sentences
  • using definite everyday language
  • using the active voice
  • avoiding superfluous words
  • organizing the document in clear, concise sections, paragraphs and sentences
  • avoiding jargon
  • using personal pronouns to speak directly to the reader
  • avoiding reliance on glossaries and defined terms unless it facilitates understanding of the disclosure
  • not relying on boilerplate wording
  • avoiding abstract terms by using more concrete terms or examples
  • avoiding multiple negatives
  • using technical terms only when necessary and explaining those terms
  • using charts, tables and examples where it makes disclosure easier to understand.

Question and answer bullet point formats are consistent with the disclosure requirements of the Instrument.


Companion Policy 51-102CP Continuous Disclosure Obligations
Part 1 Introduction and Definitions
Section 1.6

Signature and Certificates

Reporting issuers are not required by the Instrument to sign or certify documents filed under the Instrument. Certification requirements apply to some documents under National Instrument 52-109 Certification of Disclosure in Companies’ Annual and Interim Filings. Whether or not a document is signed or certified, it is an offence under securities legislation to make a false or misleading statement in any required document.


Companion Policy 51-102CP Continuous Disclosure Obligations
Part 1 Introduction and Definitions
Section 1.8

Acceptable Accounting Principles and Auditing Standards

An issuer filing any of the following items under the Instrument must comply with National Instrument 52-107 Acceptable Accounting Principles and Auditing Standards:

(a) financial statements;

(b) an operating statement for an oil and gas property as referred to in section 8.10 of the Instrument;

(c) summarized financial information, including the aggregated amounts of assets, liabilities, revenue and profit or loss of a business as referred to in section 8.6 of the Instrument; or

(d) financial information derived from a credit support issuer’s financial statements as referred to in section 13.4 of the Instrument.

National Instrument 52-107 Acceptable Accounting Principles and Auditing Standards sets out, among other things, the use of accounting principles other than Canadian GAAP applicable to publicly accountable enterprises or auditing standards other than Canadian GAAS in preparing or auditing financial statements.


Companion Policy 51-102CP Continuous Disclosure Obligations
Part 1 Introduction and Definitions
Section 1.10

Material Deficiencies

After filing a document under the Instrument, a reporting issuer may determine that the document was materially deficient in some respect and, as a result, the filing does not comply with the requirements of the Instrument. In this situation, the reporting issuer is expected to comply with the Instrument by filing an amended version of the materially deficient document.