TSX Proposes Amendments to Exemptions Available to Interlisted Issuers

On January 22, 2015, the Toronto Stock Exchange (the TSX) published proposed amendments to modify, expand and formalize certain exemptions available to interlisted issuers (the Amendments) in the TSX Company Manual (the Manual). The Amendments provide for public interest changes in Parts IV (Maintaining a Listing – General Requirements) and VI (Changes in Capital Structure of Listed Issuers) of the Manual, as well as certain ancillary changes that would allow the TSX to defer to other exchanges or jurisdictions for an expanded number of transactions as well as for certain corporate governance matters for interlisted issuers.

Interlisted Issuers on the TSX

According to the TSX, there were 332 interlisted issuers on the TSX as at November 30, 2014. The vast majority of these issuers (273 or 82%) are incorporated in Canada, while the remaining 59 (or 18%) are foreign incorporated. Also according to the TSX, 22% of the Canadian-based interlisted issuers and 46% of the international interlisted issuers had less than 25% of their trading volume on the TSX in 2013.

Exemptions Currently Available to TSX Interlisted Issuers

The TSX currently grants exemptions from its rules for a limited number of transactions, such as private placements and acquisitions, to certain interlisted issuers in an effort to reduce the regulatory burden on interlisted issuers. The TSX currently limits the availability of the exemptions to interlisted issuers where: (i) at least 75% of the issuer’s trading volume and value over the six months preceding notification of the transaction occurs on another exchange (the Trading Threshold); and (ii) the other exchange is reviewing the transaction. Certain interlisted issuers can also apply to the TSX for relief on a discretionary basis from elements of the TSX’s corporate governance requirements.

Proposed Amendments to the Company Manual

Under the proposed Amendments, an Eligible Interlisted Issuer, defined to mean a listed issuer that is also listed on a Recognized Exchange (the New York Stock Exchange, NYSE MKT, NASDAQ, London Stock Exchange Main Board, AIM, Australian Securities Exchange, Hong Kong Stock Exchange Main Board and others, as may be determined by the TSX from time to time, that had less than 25% of the overall trading volume of its listed securities occurring on all Canadian marketplaces in the 12 months immediately preceding the date of an application pursuant to Section 401.1 or 602.1 of the Manual, will be able to apply to be exempted from the following requirements relating to transactions:

• The current exemptions available pursuant to subsection 602(g) of the Manual:
  • Security holder approval
  • Private placements
  • Unlisted warrants
  • Acquisitions
  • Security based compensation arrangements

and the following new exemptions:

• Special requirements for non-exempt issuers
• Prospectus offerings
• Convertible securities
• Securities issued to registered charities
• Rights offerings

Eligible Interlisted Issuers incorporated in a Recognized Jurisdiction (including Australia, England and the State of Delaware and other jurisdictions with corporate statutes substantially modelled after these jurisdictions, together with such other jurisdictions as may be determined by the TSX from time to time), defined as Eligible International Interlisted Issuers, would also be able to apply for an exemption from the following corporate governance requirements:

• Director Election Requirements
• Annual Meeting

In order to apply for an exemption in respect of transactions, Eligible Interlisted Issuers and Eligibile International Interlisted Issuers will be required to: (i) notify the TSX; (ii) provide evidence that the Recognized Exchange has accepted the transaction, or confirmation from qualified legal counsel in the local jurisdiction that the proposed transaction is in compliance with applicable rules of the other exchange or marketplace, as well as applicable laws; and (iii) disclose in a press release issued in connection with the transaction that the issuer intends to or has relied on the exemption from TSX rules.

The TSX is proposing to continue with the current practice of making an exemption available for transactions based on the Trading Threshold, but is proposing to recast the test based on: (i) less than 25% of trading occurring in Canada, rather than more than 75% of trading occurring outside Canada; (ii) the trading over a period of 12 months preceding the application, rather than six months; and (iii) trading volume only, rather than value and volume.

For corporate governance matters, exemptions from the TSX requirements will not be available to Canadian-based interlisted issuers unless the TSX grants a discretionary waiver from its requirements. A new section of the Company Manual will be introduced to set out the requirements from which Eligible International Interlisted Issuers may apply for an annual exemption, together with the application process for such exemptions.

The Amendments will be effective upon approval by the Ontario Securities Commission following public notice and comment. Comments are to be delivered by March 9, 2015. 

This update is intended as a summary only and should not be regarded or relied upon as advice to any specific client or regarding any specific situation.

If you would like further information regarding the issues discussed in this update or if you wish to discuss any aspect of this commentary, please feel free to contact us.