New Toronto Stock Exchange (TSX) rules governing normal
course issuer bids came into effect on June 1, 2007. The new
TSX rules apply only to a normal course issuer bid that
commenced after June 1, 2007. Normal course issuer bids that
commenced before June 1, 2007 continue to be subject to the old
TSX rules unless the issuer files a new Notice of Intention and
issues a press release amending its bid so that it can be
governed by the new rules.
For issuers other than investment funds, the new TSX rules
replace the previous monthly limit for purchases of 2% of the
issued and outstanding securities of the class with a new daily
limit equal to the greater of (i) 25% of the average daily
trading volume of the listed securities of the class subject to
the bid and (ii) 1,000 securities. Cross-listed issuers will
find that the new daily limit is similar to the U.S. safe
harbour rules for share buybacks. Cross-listed issuers who also
make purchases over a U.S. exchange, however, do not need to
count those purchases toward the daily limit applicable on the
The "average daily trading volume" means the
average daily trading volume on the TSX for the most recently
completed six calendar months preceding the acceptance date of
the notice of normal course issuer bid by the TSX, excluding
any purchases made by the listed issuer under its normal course
issuer bid. The average daily trading volume for purposes of
the daily purchase limit remains constant throughout the term
of the bid.
A listed issuer may also make one block purchase per
calendar week that exceeds the daily repurchase restrictions
(but is still subject to the annual volume limit). Once the
block purchase exception has been relied on, the issuer cannot
make further purchases under the bid for the remainder of the
calendar day. A block is defined as a quantity of securities
has a purchase price of C$200,000 or more;
comprises at least 5,000 securities and has a purchase
price of at least C$50,000; or
comprises at least 20 board lots of the security and
totals 150% or more of the average daily trading volume for
The limit on purchases under a normal course issuer bid over
a 12-month period remains unchanged at the greater of 10% of
the public float and 5% of the issued and outstanding
securities, each calculated as of the TSX's acceptance date
of the notice of normal course issuer bid. Purchases made by a
cross-listed issuer over a U.S. exchange will count toward the
TSX's annual limit.
The TSX annual limit may be increased if the listed issuer
has increased the number of issued securities that are the
subject of the bid by at least 25% over the number of issued
securities at the start of the bid. In that circumstance, the
listed issuer would amend its notice with the TSX and publicly
announce the increased annual limit.
Restrictions On Purchases
Restrictions on purchases under the new TSX rules are
substantially the same under as the old rules, such as
requirements that purchases be made at a price no higher than
the last independent trade, that trades not be prearranged or
pursuant to private agreements, and that purchases not be made
from a control-block holder. A new requirement has been
introduced, however, that purchases not be made at the opening
of a trading session or during the 30 minutes before the
scheduled close of a trading session.
Notice Of Intention
The TSX has introduced a new Form 12, Notice of Intention to
Make a Normal Course Issuer Bid, to replace the previous notice
Accelerated Share Buybacks And Derivatives
The TSX had previously published proposals to amend its
rules to specifically deal with more complex strategies for
share buybacks, including what are referred to as
"accelerated buybacks" and the use of derivative
instruments such as forward purchase contracts and put options.
These proposals were not implemented with the other changes to
the normal course issuer bid rules and we expect that they will
be republished by the TSX at a later date.
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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