The TSX Venture Exchange (the “Exchange”) on April 12, 2010 announced changes to its minimum listing and continued listing requirements, the CPC policy and various other minor policy amendments. The changes and amendments will become effective June 14, 2010. Issuers who have filed applications prior to June 14, 2010 will be subject to the policy requirements of the Exchange currently in effect. Issuers who submit an application on or after June 14, 2010 will be subject to the new requirements.
1. New Minimum (Initial) and Maintenance (Continued) Listing Requirements
The following is a brief summary of initial listing requirements (“ILR”) and continued listing requirements (“CLR”) which will apply to Tier 1 and Tier 2 issuers.
(a) Initial Listing Requirements – Tier 2
The working capital metrics for Tier 2 issuers have been made consistent for all Tier 2 industry segments. For working capital, a Tier 2 issuer will need to have adequate working capital or financial resources (i) to carry out a work program or execute its business plan, as applicable, for the 12 month period following listing as well as (ii) $100,000 in unallocated funds.
Public distribution requirements will be as follows: (i) public float of 500,000 shares, (ii) 200 public shareholders each holding a board lot and having no resale restrictions on their shares and (iii) 20% of all issued and outstanding shares in the hands of public shareholders.
For non-resource issuers, there will be five industry segments: industrial, technology, life sciences, real estate and investment. In addition, non-resource issuers in the industrial, technology or life sciences industry segments will have the ability to select from one of (i) a net tangible asset test ($750,000), (ii) a revenue test ($500,000) or (iii) an arm’s length financing test ($2 million) in order to meet what were formerly net tangible asset tests and revenue tests. The real estate and investment industry issuers will be able to choose from a $2,000,000 net tangible asset or $3,000,000 arm’s length financing test in order to meet ILR.
For the industrial/technology/life science industry segments, an issuer will need to have a significant interest in the business, property or asset. Real estate issuers will need to have a significant interest in real property.
With respect to business history, an industrial/technology/life sciences issuer will need either to demonstrate a history of operations or provide evidence of business validity. Investment issuers will need to have an investment policy disclosed to their investors and at least 50% of their available funds allocated to no less than two specific investments.
Initial listing requirements for Tier 2 resource issuers will remain largely unchanged though certain changes have been made. The oil & gas industry segments will have two sub segments under which an issuer can be categorized: exploration or reserves.
An oil & gas issuer’s ability to meet property metrics will depend upon whether it falls within the exploration or reserves sub segment. The latter requiring either $500,000 in proved developed producing reserves or $750,000 in proved plus probable reserves.
In order to meet prior expenditures and work program requirements, mining issuers will need (i) to demonstrate expenditures of no less than $100,000 on a qualifying property within the 36 month period preceding listing and (ii) an initial phase work program, recommended in a geological report, of no less than $200,000. Oil & gas issuers will need to have a $1.5 million work program recommended in a geological report if they fall within the exploration sub segment or, for the reserves sub segment, where proved developed reserves have a value of less than $500,000, a work program of no less than $300,000 recommended in a geological report. Oil & gas issuers in the exploration sub segment will also have the ability to meet property and prior expenditures and work program metrics through a joint venture interest provided an amount of $5 million is being raised through a prospectus offering.
(b) Initial Listing Requirements – Tier 1
New listing requirements for Tier 1 issuers have been generally structured to provide a bridge between the Tier 2 issuer listing requirements of the Exchange and those of the TSX. All Tier 2 industry segments have been carried over to Tier 1 with the exception of the oil & gas sub segments. Tier 1 oil & gas issuers will either fall into the exploration sub segment or the producing sub segment (as opposed to the exploration or reserves sub segment).
For the working capital metric, a Tier 1 issuer will be required to have (i) adequate working capital or financial resources to carry out a work program or execute its business plan, as applicable, for the 18 month period (versus the 12 month period for Tier 2 issuers) following listing as well as (ii) $200,000 in unallocated funds.
Public distribution requirements will be as follows: (i) public float of 1 million shares, (ii) 250 public shareholders (versus 200 for Tier 2 issuers) each holding a board lot and having no resale restrictions on their shares and (iii) 20% of all issued and outstanding shares in the hands of public shareholders.
Non-resource issuers in the industrial, technology or life sciences industry segments will have the ability to select from one of (i) a net tangible asset test ($5 million) or (ii) a revenue test ($5 million) to meet what were formerly net tangible asset tests and earnings tests. Tier 1 real estate and investment industry issuers will need to meet net tangible asset metrics of $5 million and $10 million, respectively.
As with Tier 2, a Tier 1 industrial/technology/life science industry issuer will need to have a significant interest in the business property or asset. A Tier 1 real estate issuer will need to have a significant interest in real property. With respect to business history, Tier 1 industrial/technology/life sciences issuers must either demonstrate a history of operations or provide evidence of business validity. A Tier 1 investment issuer will need only to have an investment policy disclosed to its investors.
For the property and reserves metric, an oil & gas issuer’s ability to satisfy Tier 1 requirements will depend on whether it falls within the exploration or producing sub segment. If the former, $3 million in reserves (of which $1 million must consist of proved developed reserves) will need to be demonstrated. If the latter, $2 million in proved developed reserves must be demonstrated. Mining issuer property requirements remain substantively unchanged.
The prior expenditures and work program requirements for Tier 1 mining issuers remain substantially unchanged. Oil & gas issuers in the exploration sub segment will need to have a $500,000 work program which work program, based on a geological report, must be expected to increase reserves. Tier 1 Oil & gas issuers in the producing category will not need to meet any prior expenditure or work program requirements.
(c) Continued Listing Requirements – Tier 2
Generally, Tier 2 CLR have been simplified and except for activity tests, are consistent for all industry segments.
A Tier 2 issuer, regardless of industry segment, will be able to satisfy the public distribution and market capitalization tests (which have been rolled into one category) if i) no less than 500,000 listed shares are in the public float, ii) 10% of listed shares are in the public float, iii) the listed shares within the public float have a minimum market capitalization of $100,000 and iv) at least 150 public shareholders hold at least one board lot each, free of any resale restrictions.
With respect to working capital, a Tier 2 issuer will be able to satisfy the metric with the greater of (i) $50,000 and (ii) the amount required to maintain operations and cover general and administrative expenses for a period of six months.
The assets and operations metric for Tier 2 issuers will be generally more flexible. However, the Exchange will ultimately retain discretion to determine eligibility in situations where the Tier 2 issuer or its principal operating subsidiary reduces or impairs its principal operating asset, ceases or discontinues a substantial portion of its operations or business for any reason, or seeks protection from or is placed under the protection of any bankruptcy or insolvency law or is placed into receivership.
With respect to activity tests, a Tier 2 issuer’s ability to satisfy these tests will depend on whether it is a resource or non-resource issuer. Tier 2 resource issuers (mining or oil & gas issuers) will be able to satisfy their activity tests based on either (i) their most recently completed financial year (positive cash flow, significant operating revenue or $50,000 of exploration or development expenditures) or (ii) the two most recently completed financial years ($100,000 of exploration or development expenditures). Tier 2 non-resource issuers (industrial, technology, life sciences, real estate or investment industry segments) will be able to satisfy their activity tests based on either (i) their most recently completed financial year (positive cash flow, $150,000 of operating revenues or $150,000 of expenditures relating to the development of its assets or business) or (ii) their two most recently completed financial years ($300,000 of operating revenues or $300,000 of expenditures relating to the development of its assets or business).
(d) Continued Listing Requirements – Tier 1
Tier 1 issuer CLR has been dramatically simplified. A Tier 1 issuer from any industry segment will be able to meet CLR if it will continue to meet the Tier 1 ILR applicable to its industry segment.
2. Policy 2.4 – Capital Pool Companies
(a) Maximum Aggregate Gross Proceeds to the Treasury of a CPC
The maximum aggregate gross proceeds to the treasury of a CPC from the issuance of IPO shares and all seed shares and shares issued pursuant to a private placement is increased from $2 million to $5 million.
(b) Minimum Total Amount of Seed Capital Raised by the CPC
The minimum total amount of seed capital raised by the CPC through the issuance of seed shares must be equal to or greater than the greater of (i) $100,000 and (ii) 5% of the aggregate of all proceeds received by the CPC on the date of its final prospectus resulting from the issuance of treasury securities, including proceeds from the issuance of seed shares, from any private placement securities and from IPO shares.
The minimum seed capital contribution must be contributed by directors and officers of the CPC.
The additional seed shares investment requirement will only impact CPCs that are raising more than $2 million.
(c) Validity Period of Form 2A Personal Information Form (“PIF”)
Until now, a director or officer of a CPC had the possibility to file a duly completed Form 2C1 Declaration, in substitution for a Personal Information Form, as long as the director or officer had previously submitted a PIF within the last 18 months. The period is now being extended from 18 to 36 months.
3. Other Policy Changes
The Exchange has made several minor changes to its policies to clarify and reduce ambiguities, address various changes to securities laws which have impacted its policies, conform to Exchange practice and to achieve greater consistency across all policies. These changes will be set out in the Exchange Manual.