On July 29, 2011, the Canadian Securities Administrators (CSA) published for comment Proposed National Instrument 51-103 Ongoing Governance and Disclosure Requirements for Venture Issuers and Related Amendments (NI 51-103) which introduces a new regulatory regime for venture issuers (Original Proposal). The Original Proposal was intended to streamline and tailor venture issuer disclosure requirements. The Original Proposal addressed continuous disclosure and governance obligations as well as prospectus offerings and certain exempt offerings that require prescribed disclosure.  After receiving comments on the questions posed by it in the Original Proposal, on September 13, 2012 the CSA republished for comment revisions to the Original Proposal (Revised Proposal). This bulletin provides a short summary of the differences between the Original Proposal and the Revised Proposal. Readers are also directed to our firm bulletin dated September 8, 2011 entitled Proposed National Instrument 51-103 – Ongoing Governance and Disclosure Requirements for Venture Issuers and Related Amendments, which provides a summary of the Original Proposal.

Summary of Changes to the Original Proposal

Below is a summary of the most significant differences between the Original Proposal and the Revised Proposal:

  1. Interim Financial Reports: The Original Proposal proposed that no interim financial reports or management’s discussion and analysis (MD&A) would be required for the 3 and 9 month interim periods, but instead mid-year financial statements and a mid-year report, including MD&A, would be required for the 6 month interim period.  The Revised Proposal now requires interim financial reports for venture issuers for each of the 3, 6 and 9 month interim periods.  The Revised Proposal provides that MD&A similar to that required under National Instrument 51-102 Continuous Disclosure Obligations (NI 51-102) will not be required; however, an interim report that includes quarterly highlights will be required.  In addition, a certificate from each of the chief executive officer and the chief financial officer of the venture issuer certifying that there are no misrepresentations in the interim financial report or quarterly highlights document, will be required. The Revised Proposal does indicate that venture issuers can still choose to provide MD&A similar to that required under NI 51-102.
  2. Major Acquisitions: The test included in the Original Proposal for determining when an acquisition is a major acquisition has been modified under the Revised Proposal. The Revised Proposal provides that both the venture issuer’s market capitalization and the estimated value of the business to be acquired are to be determined prior to the announcement of the transaction, which eliminates the need to provide for an optional significance test calculated using the market capitalization at the time of the closing of the transaction.
  3. Pro-forma Financial Statements: Pro-forma financial statements will not be required for major acquisitions, except if the major acquisition is also a primary business of the venture issuer in the context of a long form prospectus.
  4. Use of Proceeds Disclosure: The CSA has included enhanced requirements for disclosure in the short form prospectus regarding use of proceeds.
  5. Application: The Revised Proposal no longer includes a section designating a market as a “designated venture market”, as it may not be workable in all jurisdictions.
  6. Governance Responsibilities: The Revised Proposal has enhanced the guidance regarding the types of policies and procedures a venture issuer might implement to comply with its governance responsibilities.
  7. Audit Committees: Audit Committee impartiality has been enhanced in the Revised Proposal. The Original Proposal proposed that a majority of the members of the audit committee must not be executive officers or employees of a venture issuer. The Revised Proposal now adds control persons to this list, which is consistent with the requirements of the TSX Venture Exchange.
  8. Change of Auditor: The Revised Proposal provides clarification with respect to the disclosure regarding a venture issuer’s change of auditor.
  9. Executive Compensation Disclosure. The Revised Proposal now proposes to require executive compensation disclosure only in the venture issuer’s information circular, and not also in the annual report.  In addition, compensation disclosure will be required for only the top three, rather than top five, named executive officers of a venture issuer.
  10. Forward-looking Information. The Revised Proposal provides enhanced guidance regarding financial outlooks and future oriented financial information.


The Revised Proposal is a product of the CSA’s consultation with various stakeholders, including venture issuers, venture issuer investors and their respective advisors. The Revised Proposal also addresses the pointed questions addressed to market participants in the Original Proposal, which related to, among other things, (i) the replacement of the quarterly financial reporting requirement, (ii) the replacement of the requirement to file business acquisition reports for significant acquisitions with a requirement to file financial statements of the acquired business and only for acquisitions that are 100% significant, and (iii) relocating director and executive compensation and governance disclosure from the venture issuer’s information circular to the annual report proposed in the Original Proposal.

The comment period for the Revised Proposal ends on December 12, 2012.