On January 7, 2011, the TSX Venture Exchange ("TSXV") published a Notice to Issuers ("Notice") to clarify certain requirements and procedures related to Expedited Private Placements (Part 5 of Policy 4.1 of the TSXV Company Manual and the related Form 4B). The Notice was issued because some issuers and advisors had been incorrectly interpreting the Expedited Private Placement procedures as permitting a private placement to close prior to completion of the prescribed filing requirements.
Procedures related to private placements of an issuer's securities are set forth in general in Policy 4.1. With the exception of Expedited Private Placements, approval of a private placement by the TSXV, whether brokered or non-brokered, involves a number of steps undertaken within prescribed timelines. Initially, the issuer issues a press release detailing the private placement including the price per security or files a Price Reservation Form (Form 4A). Then within 30 days, the issuer files a Private Placement Notice Form (Form 4B) which further sets out the details of the private placement, including any convertible securities, maximum number of securities to be issued, a list of subscribers, if available, and any commissions or finders' fees to be paid. The Form 4B is reviewed by the TSXV and if all the information has been completed, then a final acceptance will be issued. If the information is not complete, which is not unusual for more complex transactions, the TSXV will issue a conditional acceptance. Depending on the complexity of the transaction and the TSXV conditions, the issuer will either seek final acceptance and then close the private placement or close the private placement and file the final documentation to receive final acceptance.
The Expedited Private Placement Filing System is usually used by issuers for smaller, less complicated, private placement transactions that meet the eligibility criteria set out in Section 5.1 of Policy 4.1. These criteria include no convertible securities, except warrants, and participation by arm's length parties for at least 50% of the securities offered in the private placement. An Expedited Private Placement does not require TSXV review at any time during the process. However, the TSXV in this Notice has clarified that an issuer cannot close an Expedited Private Placement prior to having completed the filing requirements prescribed by Section 5.4 of Policy 4.1, including the filing of a completed Form 4B and the payment of applicable filing fees within certain prescribed deadlines.
TSXV Company Manual and the Notice both provide that an Expedited Private Placement can be closed once the filing requirements are completed. The TSXV recommends, but does not require, that issuers receive TSXV final acceptance prior to closing. In the event that the TSXV reviews an Expedited Private Placement during a routine audit process, and determines the private placement does not comply with Part 5 of Policy 4.1, the TSXV can require that the private placement, if closed, be unwound or take other actions against the issuer.
It is also important to note that during any six month period, an issuer may only avail itself of the Expedited Private Placement Filing System if the aggregate number of securities issued by the issuer pursuant to the Expedited Filing System, including any current transaction, has not exceeded 25% of the issued and outstanding securities at the date of the news release for the current transaction for a Tier 2 Issuer, or 50% for a Tier 1 Issuer.