TSXV Takes with One Hand but Gives with the Other 


August 2013

Securities Bulletin

Companies listed on the TSX Venture Exchange (the "Exchange") intending to complete share/unit private placement financings below $0.05, are now ‘on the clock' to complete those financings by August 31, 2013. This was one of several announcements made by the Exchange in its August 7th bulletin, which included the announcement of certain amendments to Exchange policies, including reducing the allowable minimum exercise price of warrants and incentive stock options from $0.10 to $0.05.

expiry of temporary pricing relief measures

In August 2012, in response to market conditions faced by many of its listed companies and the effect such conditions were having on the ability of companies to complete financings, the Exchange introduced temporary pricing relief measures allowing companies to complete share/unit offerings below the Exchange mandated minimum of $0.05 per share/unit. These temporary relief measures also allowed companies to issue convertible debentures and warrants at a conversion price/exercise price below the Exchange mandated minimum of $0.10 for these securities. The relief measures were originally set to expire on December 31, 2012, but were extended to April 30, 2013 and further extended to August 31, 2013. The Exchange has provided notice that these relief measures will not be further extended and will lapse on August 31, 2013.

policy amendments

Perhaps in an effort to do ‘something' for companies continuing to struggle during these difficult market conditions, the Exchange will be amending its policies to lower the minimum pricing thresholds of securities in the following circumstances:

  • Warrants and Options: the minimum allowable exercise price for share purchase warrants and incentive stock options will be reduced from $0.10 to $0.05 per share, such price applying to the full term of the warrant or option.

  • Convertible Debentures: the minimum allowable conversion price for debentures will be reduced from $0.10 to $0.05 per share for the first year of the term of the debenture, but will remain at $0.10 per share for the balance of the term of the debenture. 

  • IPOs: the minimum allowable offering price for initial public offerings (excluding Capital Pool Companies) will be reduced from $0.15 to $0.10 per security.

Additionally, the Exchange has removed the requirement that a company must obtain shareholder approval for share consolidations, subject to certain limitations. However, this change will have no impact on those companies whose corporate law governing statute mandates that shareholder approval be obtained for share consolidations, as is the case under the Ontario, Alberta and Canada Business Corporations Acts.

The implementation of these policy amendments is targeted for mid-August, and the Exchange has advised it will publish a separate bulletin confirming the implementation of the amendments and setting out applicable transitional provisions, if any.

rescission of founder share guidelines

In 2008 and 2009, the Exchange instituted guidelines with respect to the number of existing ‘founder shares' it would permit a company, seeking to list on the Exchange, to have outstanding at the time of listing. Founder shares are shares issued to principals and third parties of the company for nominal consideration. Generally, the Exchange objected to the capital structure of a company if founder shares represented more than 15% of the company's outstanding shares at the time of listing.

Effective immediately, the Exchange has rescinded these guidelines and removed the 15% limit on founder shares. However, the Exchange retains general discretion to refuse a listing on the basis that a company's capital structure is excessively dilutive or otherwise imbalanced. It remains to be seen whether the removal of this ‘bright line test' in favour of greater Exchange discretion results in a loosening of the thresholds regarding founder shares. 

by John Conway

a cautionary note

The foregoing provides only an overview and does not constitute legal advice. Readers are cautioned against making any decisions based on this material alone. Rather, specific legal advice should be obtained.

© McMillan LLP 2013