On April 12, 2010, the TSX Venture Exchange (Exchange) announced changes to certain policies set-out in its corporate finance manual. The changes, which will become effective June 14, 2010, include amendments to the Exchange’s capital pool company program, initial and continued listing requirements, and minor amendments to various other policies. What follows is a brief summary of some of the changes.
Capital Pool Companies (CPC)
The Exchange’s CPC program allows seasoned directors and officers to form a CPC with no assets, other than cash, and no commercial operations, to list on the Exchange and raise a pool of capital. The upcoming changes to the CPC policy include:
- increasing the minimum amount of seed capital required to be raised by the CPC through the issuance of ‘seed shares’ (shares issued prior the CPCs initial public offering (IPO)) to the greater of (i) $100,000, and (ii) 5% of the aggregate of all proceeds received by the CPC at the time of its IPO from the issuance of treasury securities (including proceeds from all seed shares, private placement securities and IPO shares that have been issued);
- increasing the maximum proceeds that can be raised by a CPC from $2 million to $5 million; and
- stipulating that the minimum seed capital requirement is to be contributed by the directors and officers of the CPC.
The policies with respect to the second stage of the CPC process (being the 24 month period following its IPO during which a CPC is required to identify and complete an investment in an appropriate business – known as a ‘qualifying transaction’), were not significantly changed.
Initial Listing Requirements (ILR) and Continued Listing Requirements (CLR)
The Exchange has introduced various changes to ILR and CLR which it believes will simplify the requirements for both issuers seeking to list on the Exchange and issuers wishing to maintain their Exchange listing. For issuers listed on either Tier 1 or Tier 2 of the Exchange, the new ‘simplified’ requirements include:
- making the respective working capital component of ILR for Tier 1 and Tier 2 issuers consistent across all industry segments (Tier 1 issuers will be required to have adequate working capital or financial resources to carry out a work program or execute its business plan, as applicable, for the 18 month period following listing (12 months for Tier 2 issuers), plus $200,000 in unallocated funds ($100,000 for Tier 2 issuers));
- providing that a Tier 1 issuer from any industry segment will be meet CLR if it continues to meet the Tier 1 ILR applicable to its industry segment; and
- making Tier 2 CLR consistent across all industry segments (except for activity tests – i.e. cash flow, operating revenue and expenditures).
Other Policy Changes
Along with the changes noted above, the Exchange has also made various minor changes to its policies to address changes to securities laws and with the goal of reducing ambiguity and ensuring consistency across all its policies. With respect to private placements, one such change will require all non-individual placees (corporate placees) in a private placement to complete a corporate placee form (Form 4C). Currently, corporate places that will hold less than 5% of the issuer’s shares upon completion of the private placement and who are subscribing for less than 25% of the private placement are exempt from this filing requirement.