TSX has adopted new rules for dividend and distribution
reinvestment plans, effective immediately, to provide a complete
set of standards and practices. Existing DRIPs, and the listing of
additional securities under them, are grandfathered, so issuers
with DRIPs already in place will not have to comply with the new
rules until the DRIP is amended and requires TSX approval.
Summary of the New DRIP Rules
The rules apply to plans under which securityholders may
reinvest their cash dividends or distributions in additional listed
securities or elect to receive additional listed securities in lieu
of cash dividends or distributions. Excluded from the rules are
DRIPs not involving issuances from treasury, i.e., where the issuer
purchases securities for the DRIP solely on the secondary
DRIPs and amendments must be submitted to TSX for pre-clearance
at least 5 business days in advance. Following pre-clearance and
approval by the issuer's board of directors, supporting
documentation for the listing must be filed with TSX.
The number of securities listed to cover DRIP issuances must be
either (i) 5% of the issuer's outstanding securities or (ii) an
amount to cover issuances for two years, up to a maximum of 10% of
the outstanding securities. (TSX permits re-applications, and this
rule is not meant to restrict the overall number of securities
issuable under DRIPs.)
The floor price for DRIP issuances is a 5% discount to market.
Market prices must be calculated using volume-weighted average
trading prices for an immediately preceding period of between 5 and
20 trading days.
Securities issued under a DRIP may be of a different class than
the dividend- or distribution-paying securities. But if the latter
are not listed, and the DRIP involves issuing listed securities,
the TSX's private placement rules will apply. TSX will,
however, typically permit unlisted securities to participate in
DRIPs on an equivalent basis with listed securities if the two
classes are economically equivalent; for example, the unlisted
securities are exchangeable for the listed securities.
All securityholders must be eligible to participate in a DRIP,
except that issuers may limit the participation of securityholders
residing outside of Canada.
Suspensions or terminations of DRIPs must be announced by news
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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