Securities Law Update Bulletin
May 2007
Fasken Martineau DuMoulin LLP
AMENDMENTS TO TORONTO STOCK EXCHANGE’S RULES ON NORMAL
COURSE ISSUER BIDS AND DEBT SUBSTANTIAL ISSUER BIDS COMING
INTO FORCE ON JUNE 1, 2007 – A REMINDER
Peter Villani, Nicolas Morin, Montréal
On April 27, 2007, the Toronto Stock
Exchange (the “TSX”) issued a Notice of
Approval for Amendments to Toronto
Stock Exchange’s Policy on Normal
Course Issuer Bids and Debt Substantial
Issuer Bids (the “Amendments”). The
Amendments will be effective on June 1,
2007.
The Amendments will effect a change on
how normal course issuer bids (“NCIB”)
are conducted. While this newsletter does
not purport to be an exhaustive review of
the Amendments, we would like to offer
highlights in order to reflect the major
changes that are implemented by the
Amendments.
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Normal Course Issuer Bids –
Sections 628 and 629.1
The most critical aspect of the
Amendments is the replacement of the
definition of NCIB for listed issuers who
are not an investment fund to permit those
listed issuers to buy-back during the same
trading day the greater of (a) 25% of the
average daily trading volume (“ADTV”)
of the listed securities of that class, and (b)
a total of 1,000 securities. The ADTV is
calculated on the basis of a six month
period of trading of the listed securities
immediately preceding the date of
acceptance of the NCIB by the TSX.
Issuers (including investment funds) are
still entitled to purchase, on a 12-month
period, up to 10% of the public float
(including the issued and outstanding
securities but excluding the securities that
are pooled, escrowed or non-transferable
and the securities that are held by the
issuer itself, senior officers or directors
and principal securityholders) calculated
on the date of acceptance of the notice of
NCIB by the TSX, or 5% of their issued
and outstanding securities calculated on
the date of acceptance of the notice of
NCIB by the TSX.
There is however an exception to the
above purchase rules. The issuer is entitled
to make one block purchase per calendar
week which exceeds the above daily
restrictions. A “block” is defined in the
Amendments as a quantity of securities
that are not owned by an insider and that
either (a) has a purchase price of $200,000
or more, or (b) constitutes at least 5,000
securities having a purchase price of
$50,000, or (c) constitutes at least 20 board
lots of the security and total 150% or more
of the ADTV for that security. An other
interesting change is that any NCIB
purchases may be made on the same
trading day of the block purchase.
However, once the block purchase
exception has been relied on, the issuer
may not make any other NCIB purchases
for the remainder of that trading day.
Fasken Martineau DuMoulin LLP
SECURITIES LAW BULLETIN (cont’d)
In order for the issuer to not be able to abnormally
influence the market price of its securities, NCIB
purchases have to be made at a price which is not
higher than the last independent trade of a board lot
of the class of securities which is the subject of the
NCIB. The Amendments enumerate the following
trades as non-independent : (a) trades directly or
indirectly for the account of an insider, (b) trades for
the account of a broker making purchases for the
bid, (c) trades solicited by the broker making the
purchases for the bid, and (d) trades by the broker
making in order to facilitate a subsequent block
purchase by the issue rat a certain price.
Use of Derivatives and Accelerated Buy
Backs in Conjunction with Normal
Course Issuer Bids – Section 629.1
Undisclosed Material Information
The Manual prohibits an issuer from making any
purchases of securities pursuant to a NCIB while it
possesses any material undisclosed information.
However, the Amendments state that this restriction
does not apply to an NCIB carried out through
automatic securities purchase plans established by
the issuer pursuant to applicable securities laws.
Under Ontario securities laws, purchases and sales
of securities are exempted from the general
prohibition from trading with knowledge of an
undisclosed material fact or material change and any
liabilities related to such trade where the purchases
or sales were made through an automatic securities
purchase plan that was entered into by the person
making the trade prior to the acquisition of
knowledge of such material fact or material change.
We may then conclude that an issuer will be allowed
to purchase its own securities under an automatic
securities purchase plan conducted under its NCIB
even if it possesses undisclosed material fact or
material change at the time of the actual purchase.
The important thing to remember is that at the time
the decision to purchase was made (reflected by the
instructions to the broker to proceed with the
purchase), the issuer is not to have been in
possession of undisclosed material fact or material
change.
2
The TSX has decided not to integrate the proposed
amendments as set forth in the October 2005 draft
version to the Amendments. Therefore, Section
629.1 will not be in effect and will be published at
an undisclosed later date.
Debt Substantial Issuer Bids – Section
629.2
A debt substantial issuer bid (“DSIB”) is an issuer
bid, other than a NCIB, for debt securities that are
not convertible into securities other than debt
securities. An issuer making a DSIB must file with
the TSX a notice in the form of new Form 13 of
Appendix H of the Manual which must be accepted
by the TSX. After such notice has been accepted by
the TSX, a book for receipt of tenders to the DSIB
must be opened on the TSX not sooner than the
thirty-fifth calendar day after the date of such
acceptance and for such length of time, as may be
determined by the TSX.
A DSIB must be made to all the debt securityholders
for identical consideration. If more debt securities
are tendered than the issuer originally sought, the
issuer must take up the debt securities on a pro rata
basis.
Effective Date and Transition
As stated in the beginning of this newsletter, the
Amendments will take effect on June 1, 2007.
Notwithstanding the effective date, a bid whose
commencement date was prior to June 1, 2007 or
whose notice have been accepted by the TSX, but
have not yet commenced, may comply with the
former rules. The issuers who are eligible to be
grandfathered under the former rules may still elect
to comply with the Amendments, provided that, a
notice of intention is filed in compliance with new
Form 12 of the Manual, and upon acceptance by the
TSX, a press release reflecting the revisions to the
bid is filed.
Fasken Martineau DuMoulin LLP
SECURITIES LAW BULLETIN (cont’d)
For more information, please contact Peter Villani or
your Fasken Martineau professional.
3
Peter Villani
514 397 4316
pvillani@mtl.fasken.com
Nicolas Morin
514 397 7471
nmorin@mtl.fasken.com
The texts included in this collection are intended to provide general comments on Securities Law. They reflect the point of view of their respective author
and are not opinions expressed on behalf of Fasken Martineau DuMoulin LLP or other member corporations. These texts are not intended to provide legal
advice. Therefore, readers should seek out advice on issues specific to them before acting on any information set out in these texts. We would be pleased to
provide additional information on request.
© 2007 Fasken Martineau DuMoulin LLP
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