During the current turbulent financial markets in which publicly-traded securities may not reflect their underlying value, companies may want to consider whether they should initiate a share buy-back program. Issuers listed on the Toronto Stock Exchange or the TSX Venture Exchange are generally permitted, on an exempt basis and in any 12-month period, to purchase up to the greater of:
- 5% of outstanding securities, or
- 10% of public float (excludes escrowed or otherwise non-transferable securities and securities held by senior officers, directors and 10% security holders).
Normal course issuer bids are commenced by filing a notice of intention with the applicable exchange and issuing a press release. Issuers must appoint only one broker to make purchases under the bid.
Daily purchases by TSX issuers (other than investment funds) are limited to the greater of (i) 25% of the average daily trading volume of the securities for the six months before the commencement of the bid, and (ii) 1,000 securities. Venture issuers do not have daily limits but are restricted to 2% of the outstanding securities of the class being purchased in a 30-day period.
TSX issuers are permitted to make one block purchase per week in excess of the daily limit. A block means (i) securities having a purchase price of at least C$200,000, (ii) at least 5,000 securities with a purchase price of at least C$50,000, or (iii) at least 20 board lots of the security totalling at least 150% of the average daily trading volume, and are not owned by an insider.
Issuers and their brokers should also be aware that there are other rules on the conduct of normal course issuer bids, including price limitations, prohibitions on prearranged trades, private agreements, sales from control persons and purchases during a take-over bid, and restrictions from purchasing at the opening of trading or during the 30 minutes before the close of trading.