Canada: TSX Proposes New Security Holder Approval Requirements For Acquisitions Of Listed Investment Funds

Last Updated: November 27 2009
Article by Carol E. Derk

Most Read Contributor in Canada, September 2016

Proposed amendments to the TSX rules will require an investment fund listed on that exchange to seek security holder approval if it is being "acquired" or if it proposes to acquire another investment fund by issuing securities in payment of the purchase price for that fund in excess of a specified threshold. Exemptions from these requirements will be available assuming that specified conditions are met. These proposed amendments can be viewed as a direct result of regulatory concerns raised about recent transactions involving listed investment funds and, at least in part, as an attempt by the TSX to fill a perceived regulatory gap, in that no other rules directly address mergers or other acquisitions of investment funds that are not mutual funds.

The proposed amendments to Part VI of the TSX Company Manual are available [here] and the TSX asks for comments to be delivered by December 14, 2009. We intend to provide comments on the proposed amendments and would be pleased to assist you in providing comments.

Security holder Approval for Listed Investment Funds Being "Acquired": Under the proposed amendments, investors of an investment fund that is the subject of an acquisition would be required to approve the proposed transaction unless the following conditions are met:

  1. The investment fund has a "permitted merger clause" in its constating documents that permits it to merge with another entity without security holder approval.
  2. The aggregate consideration offered to security holders of the fund in connection with the acquisition has a value that is not less than the net asset value of the fund.
  3. The independent review committee of the investment fund has determined that the investment objectives, valuation procedures and fee structure of the investment fund and the purchasing entity are substantially the same and has approved the acquisition.
  4. The investment fund has provided its security holders with a redemption right for cash proceeds that are not less than its net asset value, together with adequate notice and description of such redemption right and the acquisition.

Security holder Approval for Listed Investment Funds that are "Acquiring" Another Investment Fund: TSX rule amendments that will be effective on November 24, 2009 will require all listed issuers, including listed investment funds, to obtain security holder approval if they propose to acquire another entity and issue securities as payment for the purchase price where such share issuance results in excess of 25 percent dilution.1 The TSX now proposes to exempt an investment fund from these requirements if the following conditions are met.

  1. The target is an investment fund that calculates and publishes its net asset value at least once a month.
  2. The consideration being offered for the purchase does not exceed the net asset value of the target investment fund.
  3. The independent review committee of the acquiring investment fund has determined that the investment objectives of the applicable investment funds are substantially the same and has approved the acquisition.
  4. The number of securities issued or issuable in payment of the purchase price must not exceed 100 percent of the number of outstanding securities of the acquiring investment fund calculated on a nondiluted basis.

Rationale for Proposed Amendments: The TSX is concerned about the appropriate protection of investors in funds where the constating documents of such funds permit mergers to be carried out without security holder approval (generally only if certain conditions are met) because, in its view, these provisions can permit fundamental alterations in an investment to occur without investor approval. Historically, the TSX required investment funds that relied on so-called "permitted merger clauses" to provide a redemption right to investors for cash proceeds based on net asset value. The proposed amendments codify this existing practice.

As noted above, an investment fund that is issuing securities to acquire another investment fund is proposed to be exempt from the requirement to obtain investor approval, but only if the dilution does not exceed 100 percent. In providing this proposed exemption, the TSX acknowledges that investors in an investment fund do not suffer the same economic dilution as investors in operating companies and that the cost of holding a meeting of investors is an important consideration.

While we believe that the proposed exemptions are generally appropriate, in our view, further thought should be given as to the prescriptiveness of the proposed conditions, including the right of redemption that must be provided, the necessity for IRC "approvals" and the matters that the IRC must "determine", as well as the technically imprecise language used in the proposed rule changes. On a more fundamental level, we also query whether such requirements should be imposed by the TSX on investment funds, rather than by the securities regulatory authorities (the CSA), who have primary jurisdiction over the regulation of investment funds and have prescribed rules governing similar matters for publicly offered mutual funds.

Our Structured Products practice group has been involved in many leading edge transactions in the structured products and closed-end fund markets in Canada. By being creative, persuasive and flexible, we provide innovative solutions and help our clients achieve their business objectives. We monitor regulatory developments and make information available on a regular basis.


1 See TSX Introduces New Securityholder Approval Requirements for Takeover Bids and Mergers Involving Share Exchanges Securities & Capital Markets Alert October 2009 Borden Ladner Gervais LLP [available here]

About BLG

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.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

In association with
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.