Copyright 2011, Blake, Cassels & Graydon LLP

Originally published in Blakes Bulletin on Securities Regulation, August 2011

Highlights

The TSX has amended certain provisions of the TSX Company Manual to:

  • introduce a new subcategory of minimum listing requirements for oil and gas development stage companies
  • provide for aggregation of transactions involving insiders or related parties over a six- or 12-month period, as applicable
  • permit conditional rights offerings

Further to a public request for comments issued on February 4, 2011, the Toronto Stock Exchange (TSX) has published amendments to the TSX Company Manual (Manual) relating to original listing requirements, aggregation of insider and related party transactions, and rights offerings. The following is a summary of the changes represented by the amendments.

Original Listing Requirements

Section 319 of the Manual has been amended to introduce a new subcategory of minimum listing requirements for oil and gas development stage companies. Pursuant to the amendments, companies with contingent resources of at least C$500-million, a minimum market value of securities to be listed of C$200-million and which otherwise satisfy the requirements of section 319 – being, generally, a clearly defined development plan, adequate funds to carry out the plan and an adequate capital structure – may satisfy the listing requirements of the TSX, subject to the exercise of the discretionary authority of the TSX.

Applicants applying under this new listing category are strongly encouraged to consult with the TSX prior to making an application as the subcategory is generally intended to apply only to unconventional oil and gas assets, such as oil sands.

The amendments to section 319 came into effect on July 29, 2011.

Aggregation of Transactions

Subsections 501(c), 604(a)(ii) and 611(b) of the Manual, which deal with transactions involving insiders and related parties, have been amended to aggregate transactions during any six-month period. The amendments have the potential to increase the number of transactions for which the board must establish a valuation through a third-party report or obtain security holder approval, depending upon the circumstances.

The amendments generally affect the following types of transactions:

  • transactions involving insiders or other related parties of a non-exempt issuer and which:
  • do not involve an issuance or potential issuance of listed securities; or
  • that are initiated or undertaken by the non-exempt issuer and materially affect control;
  • transactions involving insiders and other related parties of non-exempt issuers where the value of the consideration to be received by the insider or other related party exceeds 10% of the market capitalization of the issuer;
  • transactions providing consideration to insiders in aggregate of 10% or greater of the market capitalization of the listed issuer and that has not been negotiated at arm's length; and
  • transactions where securities issued or issuable to insiders as a group in payment of the purchase price for an acquisition exceeds 10% of the number of securities of the listed issuer which are outstanding on a non-diluted basis, prior to the date of closing of the transaction.

Exemption for Employment Inducements

Security holder approval is not required for security‑based compensation arrangements used as an inducement to persons or companies not previously employed by and not previously an insider of the listed issuer, provided that:

  • such persons or companies enter into a contract of full-time employment as an officer of the listed issuer; and
  • the number of securities made issuable pursuant to section 613(c) during any 12-month period do not exceed in aggregate 2% of the number of securities of the listed issuer which are outstanding, on a non-diluted basis, prior to the date this exemption is first used during such 12-month period.

As previously drafted, section 613(c) considered issuances of securities to a particular person or company to induce them to accept employment as an officer. As amended, section 613(c) has the effect of aggregating all such issuances to all such persons or companies within any 12-month period.

The amendments to sections 501(c), 604(a)(ii) and 611(b) come into effect on August 29, 2011 and will have no retroactive effect.

Rights Offerings

The TSX has removed section 614(n)(v) from the Manual such that rights offerings relating to TSX‑listed securities may be made on a conditional basis. Previously, a rights offering was required to be made on an unconditional basis.

This amendment to section 614(n)(v) comes into effect on August 29, 2011 and will have no retroactive effect.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.