An issuer seeking to voluntarily delist its securities from the Toronto Stock Exchange (TSX) is now faced with new rules aimed at providing protection to its security holders, which may require security holder approval to proceed with the delisting. On April 30, 2015, the Ontario Securities Commission announced that amendments by the TSX to section 720 of the TSX Company Manual had been approved and became effective that day. These amendments were originally published for comment in a request for comments on January 22, 2015.
Section 720 of the TSX Company Manual concerns the voluntary delisting of an issuer. The amendments to section 720 require an issuer applying for a voluntary delisting to submit with its application: (a) a resolution of the issuer's board of directors approving the delisting application; and (b) a draft copy of the press release announcing the voluntary delisting and the details relating thereto. The amendments also require issuers to obtain the approval of the holders of an affected class or series of securities for a voluntary delisting application for the principal equity class or classes of a listed issuer's securities. The TSX may waive the requirement for security holder approval if it is satisfied that:
- an acceptable alternative market exists or will exist for the listed securities on or about the proposed delisting date;
- security holders have a near term liquidity event, such as a going private transaction, for which all material conditions have been satisfied and the likelihood of non-completion is remote; or
- the listed issuer is under delisting review and it is unlikely that the TSX will be satisfied that the deficiencies will be cured within the prescribed period.
Any insider whose interest differs materially from other security holders will be ineligible to vote and any security holder that controls 50 percent or more of the affected class or series of securities will generally be ineligible to vote.
Where security holder approval is required, a draft copy of the information circular or form of written consent used to obtain security holder approval must be submitted to the TSX for pre-clearance at least five business days prior to finalization. The proposed delisting date cannot be earlier than the tenth business day following the later of (a) the dissemination of the press release announcing the voluntary delisting; and (b) the date the issuer obtains security holder approval.
The amendments to section 720 bring the TSX's voluntary delisting requirements in line with the requirements on other Canadian stock exchanges, and are a step forward in protecting the investing public. However, additional protection for security holders could result in increased costs to and additional regulatory burden on an issuer. Nevertheless, the TSX believes the amendments are beneficial to the market as a whole.