The Canadian Securities Administrators have launched new proposals to amend the disclosure and corporate governance requirements applicable to venture issuers, including the streamlining of the interim MD&A requirements.


The proposals are a second attempt by the CSA to change venture issuer disclosure requirements and improve corporate governance. The previous proposal involved a new disclosure regime which lost support from the venture issuer community which considered it too burdensome to transition to a new regime during a challenging time.

The new proposals purport to have the needs and expectations of venture investors in mind, by streamlining the disclosure requirements for venture issuers to allow their management to focus on the growth of their businesses.


One of the principal changes proposed is to modify the MD&A disclosure currently required for interim periods to allow venture issuers without significant revenue to prepare a summary document referred to as “quarterly highlights” in lieu of the current Form 51-102F1. The quarterly highlights is intended to be a short discussion of no longer than one to two pages about the venture issuer’s operations and liquidity. At this early stage, the CSA have not provided a definition or thresholds for what they consider to be “significant revenue”. The CSA may also want to consider measures other than revenue to determine whether a venture issuer is too large to be allowed to use the streamlined disclosure.

The quarterly highlights would be optional as venture issuers could decide to continue to prepare their interim MD&A under the current requirements.

Business Acquisition Reports

The proposals increase the threshold for disclosure of a business acquisition by venture issuers. Under the proposals, the significant asset test and investment test thresholds would be increased from 40% to 100% and therefore, venture issuers would be required to include financial statements of the businesses they are acquiring in their prospectuses or information circulars in fewer cases. Also, the CSA propose to eliminate the requirement for venture issuers to prepare pro forma financial statements.

Executive Compensation

The CSA also propose to reduce the executive compensation disclosure requirements for venture issuers. Disclosure would only be required for the CEO, the CFO and one additional highest paid executive officer. In addition, the number of years of disclosure would be reduced from three to two years and the requirement to calculate and disclose the grant date fair value of stock options and other share-based awards in the summary compensation table would be eliminated. Venture issuers would instead be required to disclose detailed information on options or awards issued, held and exercised.

Alternatively, venture issuers could choose to comply with the current executive compensation disclosure requirements.

New Audit Committee Requirements

The CSA propose to require that venture issuers have an audit committee consisting of at least three members, the majority of whom must not be executive officers, employees or control persons of the venture issuer. Venture issuers are currently exempt from the audit committee composition requirements under securities laws, but the policies of the TSX Venture Exchange impose audit committee requirements which are reflected in the CSA proposal.

Changes to Prospectus Requirements

The proposed changes to continuous disclosure would also be reflected in the disclosure required for prospectuses. For the purposes of an IPO by an issuer that will become a venture issuer, the issuer would only be required to provide audited financial statements and describe its business and history for the previous two years instead of the previous three years.

Deadline for Comments

Comments on the proposals are due to members of the CSA by August 20, 2014.