On September 1, 2016, the Toronto Stock Exchange ("TSX") published "Notice of Approval - Amendments to Part VI of the Toronto Stock Exchange Company Manual (September 1, 2016)" (the "Amendments") setting out clear requirements for Dividend/Distribution Reinvestment Plans ("DRIPs") in the TSX Company Manual. The notice is available here.
Section 617.1, which has been added in Part VI, includes requirements for:
- Implementing a DRIP;
- Requirements applicable to DRIPs;
- Listing Additional Securities under an Existing DRIP;
- Amending a DRIP; and
- Suspending or Terminating/Resuming or Reinstating a DRIP.
Listed issuers who currently have a DRIP have been grandfathered and are not required to comply with the Amendments until their DRIP is being amended and requires TSX approval. An application to list additional securities under an existing DRIP without any amendment to the DRIP itself will not be considered an amendment that requires TSX approval.
Some other details of the final rule are:
- The new requirements apply to any DRIP where existing holders can either (a) reinvest their dividends or distributions by purchasing additional listed securities or (b) elect to receive additional listed securities in lieu of cash dividends.
- For a new DRIP, a draft copy of the plan text must be provided to the TSX for pre-clearance at least five business days prior to the effective date. There is no requirement for the TSX to pre-clear DRIPs where shares being issued to holders who have elected reinvestment are solely purchased on the secondary market.
- The Volume Weighted Average Price (VWAP) to be used for reinvestment can be calculated using a minimum of 5 and maximum of 20 trading days.
- If the DRIP offers a discount, the maximum available is 5%.
- Provision must be made for fractional security interests that may result from the reinvestment.
- All securityholders must be eligible to participate in a DRIP, although there can be limitations applied for securityholders that reside outside of Canada.
- There must be a sufficient number of additional securities listed to allow for issuances under a DRIP or optional cash purchase feature (if available), which is either (a) sufficient securities to cover issuances for two years, provided the amount does not exceed 10% of the issued and outstanding securities, or (b) 5% of the issued and outstanding securities.
- The DRIP must state that all amendments to it must be pre-cleared by the TSX.
- When an issuer proposes to amend an existing DRIP, a black-lined copy must be provided to the TSX for pre-clearance at least five business days prior to the effective date of any amendment.
- If an issuer is proposing to suspend or terminate an existing DRIP, or resume or re-instate a suspended DRIP, they must promptly notify securityholders and the TSX by issuing and filing a news release.
Please be sure to consult with your legal counsel regarding your specific situation. If you have any questions about amending an existing DRIP that Computershare already manages for you, or if you are considering implementing a new DRIP, please contact your Relationship Manager.