On July 29, 2011, the Canadian Securities Administrators (the “CSA”) published for comment National Instrument 51-103 Ongoing Governance and Disclosure Requirements for Venture Issuers (“NI 51-103”), and based on comments received, an amended version was released on September 13, 2012 for further comment. The proposed NI 51-103 provides substantial changes to the continuous disclosure and governance obligations of venture issuers. The goal of NI 51-103 is to adjust and streamline the continuous disclosure and governance regime for venture issuers so that it is more efficient for the issuers and is of greater relevance to investors. For the purpose of NI 51-103, “venture issuers” includes companies listed on junior markets, such as the TSX Venture Exchange and the Canadian National Stock Exchange.

NI 51-103 would serve to replace venture issuer’s current disclosure, governance and certification obligations, as set out under:

  • National Instrument 51-102 Continuous Disclosure Obligations (“NI 51-102”);
  • National Instrument 52-109 Certification of Disclosure in Issuers’ Annual and Interim Filings;
  • National Instrument 52-110 Audit Committees;
  • National Instrument 58-101 Disclosure of Corporate Governance Practices; and
  • National Policy 58-201 Corporate Governance Guidelines.

The CSA also proposes to make corresponding changes to the disclosure that a venture issuer must provide in a prospectus or in a required offering document under certain prospectus-exempt offerings.

The key proposals related to corporate governance and continuous disclosure requirements are as follows:

General Disclosure Requirements

NI 51-103 would introduce a mandatory annual report (“Annual Report”) which will consolidate into one document the disclosure of the venture issuer’s business, management, governance practices, audited annual financial statements, associated management’s discussion and analysis (“MD&A”), and CEO/CFO certifications.

With respect to interim financial reports, the current requirement for the filing of an associated MD&A would be replaced by the requirement for a short discussion of the venture issuer’s operations and liquidity to accompany the interim financial report (“quarterly highlights”). The quarterly highlights would require CEO/CFO certifications.

Under the proposed new regime, disclosure of executive compensation in a venture issuer’s information circular would be required only for the top three named executive officers, rather than the top five, along with a summary compensation table that covers the previous two fiscal years, rather than the previous three.

Prospectus Requirements

The proposed amendments to the rules relating to prospectus offerings would: (i) create a new long form prospectus form specific to venture issuers that conforms to the disclosure required in an Annual Report; and (ii) require only two instead of three years of audited financial statements to be included in a venture issuer’s long form prospectus. Under the proposed new regime, all venture issuers would be required to file an Annual Report and would be eligible to file a short form prospectus.

Mining Technical Report

Currently, in order to be eligible to file a short form prospectus, a venture issuer must file an annual information form (“AIF”). The filing of an AIF triggers the requirement to file a technical report under National Instrument 43-101 Standards of Disclosure for Mineral Projects (“NI 43-101”). Under NI 51-103, the filing of an Annual Report will not trigger the mandatory filing of a technical report. Instead, the filing of a technical report would only be required when a venture issuer files a short form prospectus or when its Annual Report contains disclosure of the type that would trigger a technical report under NI 43-101 (i.e. first time disclosure of mineral resources, mineral reserves or a preliminary economic assessment or a change to that disclosure, if that change constitutes a material change for the venture issuer). The short form prospectus trigger would only apply if the venture issuer has not, in the 12 months preceding the date of the preliminary short form prospectus, filed a technical report or qualified for and relied on an exemption from filing a technical report.

Major Acquisitions

Under NI 51-103, venture issuers making a major acquisition would be required to file a material change report with enhanced disclosure instead of a business acquisition report. The venture issuer’s market capitalization and the estimated value of the business would be used to determine whether the acquisition requires disclosure prior to the announcement of the transaction. When making the required disclosure, no pro forma financial statements would be required, except for business acquisitions that are 100% significant based on a market capitalization test.

Corporate Governance

NI 51-103 would also require enhanced corporate governance for venture issuers. Under the proposed rule, the audit committee of a venture issuer must be composed of at least three directors, the majority of whom are not executive officers, employees or control persons of the venture issuer or its affiliates. This change is consistent with the requirements of the TSX Venture Exchange. In addition, venture issuers would be required to develop policies and procedures that address conflicts of interest for directors, related party transactions and insider trading and disclosure policies. Venture issuers would have discretion in designing these policies and procedures to achieve the desired objective of enhanced transparency for investors.


The CSA has requested further comment on the revised NI 51- 103 by December 12, 2012.

Chris Berrigan