Toronto Stock Exchange ("TSX") has proposed amendments
to Part VI - Changes in Capital Structure of Listed
Issuers of the TSX Company Manual (the "Manual").
The proposed amendments relate to:
the adoption of security based compensation arrangements in the
context of acquisitions under Section 611 of the Manual; and
when TSX will consider a transaction to be a backdoor listing
under Section 626 of the Manual.
TSX has provided a 45 day comment period. All comments should be
submitted in writing by Monday, January 13, 2014.
Amendments to Section 611 – New Security-Based
Compensation Plans in Acquisitions
The amendments to Section 611 of the Manual (the "611
Amendments") are designed to formalize an exemption that the
TSX currently provides on a discretionary basis to allow listed
issuers, in the context of an acquisition, the flexibility to adopt
new incentive security based compensation arrangements
("Arrangements") for employees of a target issuer.
Under the current regime, the Arrangements of a target issuer
existing at the time of the acquisition may generally continue
following completion of an acquisition without security holder
approval. The 611 Amendments would permit TSX listed acquirers to
implement Arrangements for employees of a target issuer without
security holder approval, provided that:
the number of securities issuable under such Arrangements do
not exceed 2% of the issued and outstanding securities of the
listed issuer and such employees are not insiders or employees of
the listed issuer prior to the acquisition; and
the number of securities issuable pursuant to the acquisition,
including any related Arrangement, does not exceed 25% of the
issued and outstanding securities of the listed issuer.
Further, securities made issuable to insiders under such
Arrangements would be included in determining whether security
holder approval, on a disinterested basis, is required for the
acquisition if the number of securities issued or issuable to
insiders as a group, together with any securities issued or made
issuable to insiders as a group for acquisitions during the
preceding six months, in payment of the purchase price for an
acquisition exceeds 10% of the number of securities of the listed
The exemption provided by the 611 Amendments would only be
available for Arrangements adopted for persons who are employees or
insiders of a company being acquired by a listed issuer.
Amendments to Section 626 – Clarifying Backdoor
The amendments to Section 626 of the Manual (the "626
Amendments") are designed to better define backdoor listings
(also referred to as reverse takeovers). The intent is to close a
perceived gap that may allow unlisted entities to use TSX-listed
issuers to "go public" without having to meet original
listing requirements, thereby facilitating investor protection by
preserving the integrity of the stock list and the stock
market. In particular, the 626 Amendments:
clarify the definition of "backdoor listing" as
occurring when a transaction, or series of transactions, results in
the acquisition of a listed issuer by an entity not currently
listed on TSX, including a merger, an amalgamation or an issuance
of securities for assets. It will still be the case that a
transaction resulting, or that could result, in the security
holders of the listed issuer owning less than 50% of the securities
or voting power of the entity resulting from the transaction, will
generally be considered a backdoor listing;
introduce the consideration of several factors to be used to
assess whether a transaction results in an unlisted entity becoming
listed by acquiring a listed issuer, including the business of the
listed issuer and the unlisted entity, changes in management
(including the board of directors), voting power, ownership, name
changes and the financial structure of the listed issuer; and
clarify the discretion of TSX to either: (i) exempt a
transaction from the requirement to meet original listing
requirements that may otherwise constitute a backdoor listing; or
(ii) consider a transaction as a backdoor listing even if it may
not otherwise constitute a backdoor listing.
Concurrent financings, whether by way of private placement or
public offering, that are contingent on or otherwise linked to the
transaction will also be considered by TSX in the calculation of
whether security holders of the listed issuer will or could own
less than 50% of the securities or voting power of the entity
resulting from the transaction.
A copy of the proposed amendments is available here. The TSX is seeking written responses to
specific questions, all of which are set out in the notice of the
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.
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Under the Income Tax Act, the Employment Insurance Act, and the Excise Tax Act, a director of a corporation is jointly and severally liable for a corporation's failure to deduct and remit source deductions or GST.
Under the Income Tax Act, the Employment Insurance Act, the Canada Pension Plan Act and the Excise Tax Act, a director of a corporation is jointly and severally liable for a corporation's failure to deduct and remit source deductions.
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