Changes to TSX Exemptions for Inter-listed Issuers

A significant number of TSX issuers are inter-listed on stock exchanges outside Canada, such as the NYSE, the NASDAQ, London's AIM, the Australian Stock Exchange and others. TSX has historically exercised a degree of regulatory deference by exempting inter-listed issuers from certain TSX rules if the other exchange is the issuer’s primary trading market. Effective September 10, TSX has amended its exemption regime for inter-listed issuers. Some of the changes are beneficial for inter-listed issuers while others impose new requirements.

What You Need To Know

  • TSX has specified the foreign stock exchanges to which it will defer: the NYSE, the NASDAQ, the London Stock Exchange, AIM, the Australian Securities Exchange and the Hong Kong Stock Exchange’s main board.
  • Exemptions will now be available from TSX's rules on prospectus offerings, convertible securities and rights offerings, in addition to the transaction-based exemptions that were already available.
  • To be eligible for the exemptions, the issuer's trading volume on the TSX must be less than 25% of its overall trading volume. This is similar to the old rule, but is now measured over the past 12 months rather than 6 months. The issuer’s trading value no longer needs to be measured.
  • Exemptions from corporate governance rules, including majority voting for directors, will be available for issuers incorporated in Delaware, England, Australia, Hong Kong or another jurisdiction with a corporate governing statute substantially similar to the Canada Business Corporations Act (CBCA).

Transaction-Based Exemptions

TSX will now defer to the above six exchanges on the regulation of prospectus offerings, convertible securities and rights offerings (already exempt were security holder approval requirements, private placements, certain acquisitions and security-based compensation arrangements). To qualify, the issuer must provide evidence that the foreign exchange or securities regulator has accepted the transaction or confirmation from local counsel that the transaction complies with foreign requirements. The issuer must publicly announce its reliance on a TSX exemption by press release.

Corporate Governance Exemptions

Eligible issuers may apply for exemptions from the TSX’s director election and annual meeting requirements, including the rule on majority voting for directors. After being approved, an issuer need only provide a notice to TSX annually. Eligibility depends on the issuer being incorporated in Delaware, England, Australia, Hong Kong or another jurisdiction whose corporate statute is substantially similar to the CBCA. Issuers incorporated elsewhere may still apply for discretionary relief.

Exemptions Granted by the Foreign Exchange

The rules remain ambiguous about whether TSX will defer to a recognized exchange when that exchange grants an inter-listed issuer an overlapping exemption. For example, the NYSE provides various exemptions from its rules for the benefit of non-U.S. companies, limited partnerships and other issuers. Inter-listed issuers will likely need to address this through discussions with TSX on a case-by-case basis in light of the facts of a particular transaction.

To discuss these issues, please contact the author(s).

This publication is a general discussion of certain legal and related developments and should not be relied upon as legal advice. If you require legal advice, we would be pleased to discuss the issues in this publication with you, in the context of your particular circumstances.

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