The Toronto Stock Exchange is proposing changes to its rules
listing standards for development-stage oil and gas
securityholder approval requirements for
transactions involving insiders, and
transactions involving employment inducements; and
Comments on the proposals are due by March 7, 2011. The TSX has
also made various non-material changes to the listed company
manual, primarily to codify existing practices or incorporate
existing positions from TSX staff notices.
Development-Stage Oil and Gas Issuers
The TSX is proposing to add a listing subcategory for
development-stage oil and gas issuers that have no proven developed
reserves. The proposed requirements are
contingent resources of $500 million;
a minimum C$200 million market value of the issued securities
to be listed;
a clearly defined development plan that will advance the
sufficient funds for an 18-month period or to bring the
property into commercial production; and
an appropriate capital structure.
Securityholder Approval Requirements
When a listed company engages in a transaction involving an
issuance of securities, the TSX may, depending on the
circumstances, require disinterested securityholders to approve the
transaction. The TSX is proposing several amendments to the
securityholder approval requirements.
Transactions involving insiders. The TSX seeks
to prevent issuers from avoiding securityholder approval by
separating insider transactions into smaller tranches over a period
of time. Accordingly, TSX proposes that for the purpose of the 10%
limit, insiders' participation in the following transactions be
aggregated with their participation in other transactions during
the preceding six months (similar to the way private placements are
security issuances in which the consideration paid to insiders
represents 10% or more of the issuer's market capitalization;
acquisitions in which the number of securities to be issued in
payment to insiders exceeds 10% of the number of outstanding
The same aggregation rule would apply to any transaction by a
non-exempt issuer (whether or not involving an issuance of
securities) in which consideration to insiders exceeds 10% of the
issuer's market capitalization.
Employment inducements. The TSX is proposing to
modify the exemption from its securityholder approval requirements
for securities issued to proposed new employees as employment
inducements. Instead of allowing each officer to receive up to 2%
of the issuer's outstanding securities, the TSX is proposing to
make the exemption available only if the number of securities
issued to all officers as employment inducements in the preceding
year does not exceed 2%.
TSX is proposing to eliminate its requirement that rights
offerings be unconditional. The TSX believes this requirement is no
longer necessary, in part because of the extensive disclosure
framework applicable to rights offerings under securities laws.
Other Changes to the TSX Company Manual
In addition to the substantive rule changes described above, the
TSX has made various non-material changes to the listed company
manual, including amendments to the rules governing security-based
compensation arrangements, normal course issuer bids, dividends and
distributions, anti-dilution provisions, stock option backdating,
rights offerings and securityholder rights plans. All of these
amendments represent updates to the manual and simply codify the
TSX's existing practices and/or incorporate existing positions
from its staff notices.
The content of this article does not constitute legal advice
and should not be relied on in that way. Specific advice should be
sought about your specific circumstances.
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