Amendments to Toronto Stock Exchange Rules on Normal Course Issuer Bids 

publication 

May 11, 2007 - (Corporate Finance & Securities Alert May 11, 2007)

Corporate Finance & Securities Alert May 11, 2007

On April 28, 2007, the Toronto Stock Exchange ("TSX") announced amendments (the "Amendments") to its policies on normal course issuer bids ("NCIBs").  The Amendments come into effect on June 1, 2007 and apply to NCIBs filed with the TSX on or after June 1, 2007.  NCIBs commenced or accepted by the TSX prior to June 1, 2007 may comply with the existing rules until the expiry of that bid.  An issuer whose NCIB is eligible to comply with the existing rules may elect to comply with the Amendments by filing with the TSX a revised Notice of Intention to make a NCIB and by issuing a news release announcing the revisions to its NCIB. 

The principal changes arising from the Amendments are as follows:

  • Purchases under the NCIB in any 12-month period will continue to be limited to the greater of 5% of the number of securities outstanding on the date of acceptance of the NCIB by the TSX (but excluding any securities held by or on behalf of the issuer) and 10% of the "public float" on the date of acceptance of the NCIB.  "Public float" is defined as the number of securities of the class that are issued and outstanding less the number of securities beneficially owned, controlled or directed by the issuer, its senior officers and directors and those shareholders who own, control or direct 10% or more of any voting or equity securities. Pooled, escrowed or otherwise non‑transferable securities are also excluded in determining the public float. For purposes of determining the 5% or 10% annual thresholds, all securities purchased, whether through the facilities of the TSX or otherwise, must be included.
  • Where the number of outstanding securities of the issuer has increased by at least 25% from the time that the notice of the NCIB was accepted by the TSX, an issuer will be able to amend the terms of the NCIB to increase the maximum number of shares purchasable thereunder.
  • The existing requirement that purchases under the NCIB in any 30-day period be limited to a maximum of 2% of the outstanding securities of the class, has been removed for all issuers other than investment funds.
  • A daily limitation on purchases under the NCIB has been introduced for issuers other than investment funds. Daily purchases will be limited to the greater of 1,000 securities and 25% of the "average daily trading volume" of the securities of the class.  Average daily trading volume (or "ADTV") is defined as the average trading volume of the securities on the TSX for the most recently completed six calendar months preceding the date of acceptance of the notice of the NCIB, excluding any purchases made through the TSX under a NCIB during the six-month period.  For securities listed less than six months, the calculation will be based on the period commencing from the date of listing, which must be a minimum of four weeks.
  • One block purchase per week under the NCIB will be permitted and block purchases will not be subject to the daily limits.  Block purchases will, however, be subject to the annual purchase limits.  A "block" refers to a quantity of securities that:
    • has a purchase price of $200,000 or more;
    • is at least 5,000 securities with a purchase price of at least $50,000; or
    • is at least 20 board lots of the security and totals 150% or more of the ADTV for that security.

Block purchases may not be made from insiders of the issuer. Once a block purchase has been made, no further purchases under the NCIB may be made on that trading day.

  • Purchases under the NCIB will be prohibited at the opening of trading and within 30 minutes of the close of trading.
  • Purchases under the NCIB must be by way of open market purchases and must not be at a price higher than the last independent board lot trade.  Pre-arranged trades and intentional crosses, other than in connection with a block purchase, will be prohibited.
  • As under the existing rules, issuers must submit a draft Notice of Intention to Make a NCIB to the TSX which, once approved by the TSX, must be finalized, signed and submitted at least two clear trading days prior to the commencement of the NCIB.  A summary of the material information contained in the Notice of Intention will need to be disclosed in the next annual report, proxy circular, quarterly report or other document mailed to securityholders. 

The TSX believes that the amended rules will better allow issuers to repurchase their securities in a cost effective manner while treating security holders fairly and not adversely impacting the market.

This article was issued as a Lang Michener Corporate Finance & Securities Alert May 11, 2007.