December 2009

TSX introduces amendments to shareholder approval requirements

The Toronto Stock Exchange (TSX) has announced changes to its rules governing takeover bids and mergers. 

TSX-listed companies are now required to obtain shareholder approval in cases where consideration for an acquisition results in an increase of the current issued and outstanding shares by 25 per cent or greater. 

Previously, the purchasing company was exempt from this requirement if it was acquiring a public company with 50 or more shareholders.  Effective November 24, 2009, this exemption was eliminated, and shareholder approval of TSX-listed companies is now required regardless of whether the target company is public or private and irrespective of size.  This means that any acquisition that results in an increase of issued and outstanding shares by 25 per cent or greater first requires shareholder approval.

Amendments to the shareholder approval requirements were initiated by separate requests for comments published by the TSX in 2007 and 2009.  While initially focused on the 25 per cent threshold, feedback for the request for comments shifted attention to the treatment of public versus private companies.  Based on the issuer comments, the TSX determined that the threshold should remain at 25 per cent and would now extend to the acquisition of private companies.   

By John Fish, communication specialist, business development communication

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