Normal-Course Issuer Bid (NCIB)

A stock repurchase program based in

What is the Normal-Course Issuer Bid (NCIB)?

In accordance with Policy 5.6, the publicly-traded corporation has limitations on purchasing its own shares over a period of 12 months, ranging from 5% to 10%. The repurchase of shares by the listed public company is done within the Canadian-based stock buyback program known as Normal-Course Issuer Bid (NCIB), with the intention of canceling them.

Normal-Course Issuer Bid (NCIB)

Summary

  • Them.The Canadian-based stock buyback initiative, referred to as the Normal-Course Issuer Bid (NCIB), entails a publicly-traded corporation repurchasing its stocks with the aim of nullifying them.
  • To initiate a regular-course issuer bid, a company must initially submit a Notice of Intention.
  • A corporation has the ability to repurchase its shares to regain authority over its ownership of stocks and thwart any potential takeover of the company.
  • How an NCIB Works

    Participating in the buyback, prior to obtaining approval and being listed on the stock exchanges where they are registered, the action seeks to decrease the quantity of shares in order to initiate a typical issuer bid. The statutory requirement restricts the company’s ability to purchase shares within a single day.

    “The process of “going private” is known as the transaction in which the company acquires all of its outstanding stocks. If a company purchases multiple shares from its shareholders at a predetermined price and date, it entails an alternative approach to the NCIB.”

    In section 8 of the notice outlining the reasons for imposing restrictions on the NCIB, it is necessary to specify whether a company neglects to provide the necessary description of voting rights. The submitted Notice of Intention to carry out a regular issuer bid should explicitly detail the voting rights of all the stocks owned by the issuer, as stated in Policy 3.5, in the event that the purchasing company possesses a category of shares that are subject to limitations.

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    The issuer has the authority to purchase its stock securities as it sees fit after approval during the suggested timeframe. Moreover, the company is not obligated to acquire all of the shares.

    When stock prices rise, supply decreases and demand increases, which prompts investors to buy shares in the market. In such cases, a company initiates a normal course issuer bid to repurchase shares, as the company’s publicly traded shares are undervalued.

    By utilizing an NCIB, a company can take advantage of the present markdown on the prevailing share prices. This enables the expansion of its investor base, facilitates the generation of funds, and promotes enhanced liquidity once the value of its stock reaches the projected levels. Consequently, the company has the option to dispose of a portion of its stock.

    How to Make a Normal-Course Issuer Bid

    Notice of Intention

    The company presently does not intend to purchase securities, so the Intention of Notice does not need to be filed. The board of directors must specify the number of shares for the acquisition. Conducting a normal bid for any publicly-traded company is a requirement in line with Section 6 of the policy, thus an Intention of Notice is necessary.

    After the start date of the acquisitions, a NCIB should not surpass one year. The notification is applicable even after the issuer has finished all the intended purchases in the notification. The exchange will not approve the Notice of Intention if the company fails to meet the ongoing listing criteria.

    News Release

    The next step when making a bid to communicate the company’s normal-course intentions involves releasing a news summary that should embody a summary of the material aspects of the bid issuer’s release contents.

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    Some key elements of the release include the name of the member carrying out the bid on behalf of, the reason for the bid, and the percentage of the outstanding number of stocks sought.

    Once the exchange grants approval to the notice, the issuer must proceed to issue a preliminary announcement to the exchange, and subsequently issue a press release if there is a delay in the press release.

    Disclosure

    The disclosure notice needs to indicate how its copy can be obtained and must be mailed to the shareholders. The subsequent report of the company must capture a summary of the material information outlined in the notice.

    The purchase process starts three days after receiving all the necessary documents. Once the Notice of Intention is accepted, the exchange must publish a circular reporting the bid. The exchange is obligated to publish this bid report circular upon accepting the Notice of Intention, commencing the purchase three days after receiving all the required documentation.

    Amendment

    The company can adjust its notice to increase the number of shares to be purchased within the prescribed number of shares, as provided. This is followed by the publication of the exchange’s amendment.

    If the issuer’s bid is large enough, it can change the concept of stock ownership and regain control of its controlling interest in the company, thus preventing third parties from challenging the company’s ownership.

    More Resources.

    The additional resources below will be beneficial in furthering your career. CBCA is an internationally recognized certification program for Commercial Banking & Credit Analysts (CBCA)™, aimed at assisting individuals in becoming exceptional financial analysts. CFI is the authorized provider of this program.

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