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.

Volume Limitations

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 TSX.

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 that

  • 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 security.

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 requirements.

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.