Employment

U.S. National Labor Relations Board Restricts Confidentiality and Non-Disparagement Terms for Separation and Release Agreements

Employers have frequently included confidentiality and non-disparagement terms in their separation and release agreements. Confidentiality terms help ensure that employees won’t brag to coworkers about large payouts and encourage them to seek similar payouts. Such payouts can also give the impression that a company is looking to avoid exposure for wrongdoing, and confidentiality terms can help maintain the privacy of such payouts. Non-disparagement terms can help companies deter departing employee from publically trashing their former employers on their way out the door. Employees don’t always leave on good terms and non-disparagement terms can help incent employees to keep their negative opinions to themselves. U.S. employers, however, must re-evaluate their use of confidentiality and...

Tax

Initial Guidance for New U.S. Excise Tax on Stock Repurchase Transactions: IRS Substantially Expands Scope of Applicable Canadian Companies

In our blog post dated August 22, 2022, we discussed the one percent (1%) excise tax on certain stock repurchase transactions by certain publicly traded corporations enacted as part of the Inflation Reduction Act of 2022 (the “Excise Tax”). The Excise Tax became effective on January 1, 2023. The Internal Revenue Services (the “IRS”) issued initial guidance describing future Treasury Regulations expected to be promulgated regarding the Excise Tax that, when finalized, are expected to be effective retroactive to the beginning of 2023. That initial guidance is contained in Notice 2023-2. (the “Notice”). Among other changes and clarifications, the Notice substantially expands the scope of Canadian corporations that may be subject to the...

SEC Rulemaking

Implications of SEC Amendment to Insider Trading Safe Harbor for Canadian Issuers

On December 14, 2022, the SEC adopted final rules amending Rule 10b5-1, a safe harbor from liability under the U.S. insider trading rules.  The safe harbor permits directors, executive officers and others, including issuers, to engage in securities transactions while in possession of material non-public information, by entering into a binding contract, instruction or plan adopted prior to effecting the transaction and at a time when the seller or buyer was not in possession of material non-public information about the issuer. The new rules include a number of measures intended to limit certain potentially abusive strategies permitted under the old rules and certain new disclosure requirements intended to enhance investors’ understanding of the...

Employment / Litigation

U.S. Equal Pay and Pay Transparency Laws Are Getting More Complex

Several U.S. states have been adopting more complex pay transparency laws and stricter equal pay statutes that prohibit employers from paying two employees differently to perform the same role based on factors such as race or gender. While these two types of laws are different, they go hand in hand since pay transparency laws require employers to disclose the very information that tips off employees (and plaintiffs’ attorneys) to the facts necessary to bring equal pay claims. Companies looking to hire in the U.S. must become familiar with these laws or face substantial statutory penalties and civil liability. Equal Pay Laws Most U.S. states have some form of equal pay law. Many U.S....

Capital Markets / Securities

The SEC’s Form F-7 Can Be Used to Conduct a U.S. Public Offering of Securities, with No Review, No Ongoing SEC Reporting, and No Market Capitalization Requirement

Did you know that the Canada-U.S. multijurisdictional disclosure system (MJDS) includes an SEC form that does not include any minimum market capitalization requirement, and can be used to complete a public offering of securities in the United States without triggering any ongoing SEC reporting requirements?  It’s true. Form F-7 allows certain TSX and TSXV-listed Canadian companies to extend a rights offering to its United States shareholders on a public offering basis, provided they satisfy certain form eligibility requirements.  U.S. information legends are included in the Canadian offering documents, which are filed with the SEC under cover of Form F-7, together with certain consents.  A Form F-7 is not normally reviewed by the SEC. ...

Benefits / Tax

DSU Plans May Run Afoul of U.S. Deferral Election Timing Rules Resulting in Adverse U.S. Tax Treatment

A Canadian company adopting a deferred share unit plan (DSU plan) for its directors must consider U.S. tax implications for U.S. taxpayers.  It is important to remember that U.S. citizens and U.S. residents for tax purposes (including green card holders) are taxed on worldwide income, regardless of where they reside.  As such, participation by a U.S. director, including an expat or holder of dual citizenship, could result in significant adverse tax consequences under Section 409A of the Internal Revenue Code, as a typical Canadian DSU plan often runs afoul of Section 409A.  In a prior article, DSU Plans Require Careful Review to Avoid Adverse U.S. Tax Treatment, common payment timing violations of U.S....

Capital Markets / Securities

Raising U.S. Funds Under Canada’s New “Listed Issuer Financing Exemption”

As many of our readers will have heard, the Canadian Securities Administrators (“CSA”) has announced the adoption of a new prospectus exemption for certain reporting issuers listed on a Canadian stock exchange (the “Listed Issuer Financing Exemption”), effective November 21, 2022.  To date, little attention has been given to the potential effect of the Listed Issuer Financing Exemption on the practices of Canadian listed companies raising funds from U.S. investors.  In this post, we discuss those implications and suggest methods for relying on the Listed Issuer Financing Exemption while still preserving the ability to raise funds from U.S. investors. Overview of the Listed Issuer Financing Exemption The Listed Issuer Financing Exemption will allow...

Natural Resources / Securities

Mining Companies Subject To The SEC’S Subpart 1300 Of Regulation S-K Should Prepare Now For Next Year’s Annual Report

In 2022, many SEC reporting companies with mineral resource assets completed their inaugural SEC annual report on Form 10-K or 20-F subject to the SEC’s mining disclosure rules in subpart 1300 of Regulation S-K (“subpart 1300”), and filed their inaugural subpart 1300 technical report summaries, if applicable. As 2023’s annual reporting season approaches, we outline for our readers some important factors to consider in preparing for Year 2 of subpart 1300 compliance.  Depending on the situation, an issuer may need to begin its preparations well in advance of its fiscal year end (“FYE”), or risk being in default of its reporting requirements. Overview Subpart 1300 requires an issuer with material mining assets that...

Tax

Inflation Reduction Act: New U.S. Excise Tax on Stock Repurchase Transactions Applicable to Certain Canadian Companies

On August 16, 2022, President Biden signed the Inflation Reduction Act of 2022, HR 5376 (the “Act”), into law. Among other significant changes, the Act includes a new 1% excise tax on stock repurchase transactions by certain publicly traded corporations (the “Excise Tax”). As described below, publicly traded Canadian companies that: are treated as U.S. corporations for U.S. federal income tax purposes under the anti-inversion rules in Code Section 7874(b); became treated as “surrogate foreign corporations” for U.S. federal income tax purposes on or after September 20, 2021 under the anti-inversion rules in Code Section 7874(a)(2)(B); or are not subject to the anti-inversion rules but that effect a stock repurchase through one or...

M&A / Securities

Continuing a Company from One Country to Another Country Without U.S. Registration or Exemption Triggers Shareholder Rescission Rights

In Canada it’s considered no big deal to ask shareholders to approve a continuance or redomicile of a company from one province to another, or between Canadian provincial and federal jurisdictions. That’s also largely true from a U.S. securities perspective, but only because the continuance is being made within the same country. If a continuance or redomicile is made from one country to a different country, it’s a completely different story. Canadian counsel and their clients are sometimes surprised to hear that if a company continues from Canada to another country, or if a company continues into Canada, the failure to comply with U.S. securities laws may subject the company to rescission rights...