FAIR Canada wrote to the TSX in January urging the TSX to act promptly to amend its  rules to give shareholders the right to approve acquisitions that would result in the significant dilution of their shares, whether or not a private or public company is being acquired.   

Ermanno Pascutto, Executive Director said “FAIR Canada is encouraged that the TSX has realized that an amendment is necessary to protect the integrity of shareholders’ investments and to foster investor confidence in TSX listed issuers.  We do not agree, however, with the TSX’s proposal to set the dilution limit at 50% prior to requiring shareholder approval”.  

Virtually all major international markets require shareholder approval at a lower level of dilution.  The NYSE, Amex, NASDAQ, London Stock Exchange (LSE), Hong Kong, Singapore and Johannesburg exchanges all require shareholder approval for transactions that result in dilution ranging from 20% to 30%, with the most prevalent (and the U.S. standard) being 20%.
 
Contrary to the information in TSX Request for Comments, the Hong Kong Stock Exchange (“HKEx”) does not allow dilution up to 50% without shareholder approval.  It requires all share issuances to be approved by shareholders.  
 
FAIR CANADA is of the view that the listing rules of the TSX should be brought in line with those of other major international exchanges, particularly those of the U.S. given the number of issuers that are cross-listed in the U.S. and Canada.  Accordingly, the maximum dilution allowed prior to requiring shareholder approval should be 20%.

We note that most markets consider themselves to be unique in some way, and assertions regarding the unique features of a marketplace are often used to bolster arguments against compliance with international best practices.

Click here to read the full submission to TSX.