The Canadian Securities Administrators (CSA) are implementing amendments to the continuous disclosure and governance obligations of issuers listed on the TSX Venture Exchange (the venture issuers) in the following three national instruments:
- National Instrument 51-102 Continuous Disclosure Obligations (NI 51-102);
- National Instrument 52-110 Audit Committees (NI 52-110); and
- National Instrument 41-101 General Prospectus Requirements (NI 41-101) (together, the Amendments).
The Amendments are intended to streamline and tailor disclosure by venture issuers and further make disclosure requirements more suitable and manageable so that management of such venture issuers can focus on growing their businesses. The Amendments are scheduled to come into force on June 30, 2015.
Amendments to NI 51-102
Option to Provide Quarterly Highlights
The Amendments will give venture issuers the option of filing “quarterly highlights” instead of a full interim management discussion and analysis (MD&A) for financial years beginning on or after July 1, 2015. Providing this option of using quarterly highlights will most likely satisfy the needs of investors in smaller venture issuers, particularly those without significant revenue in the most recently completed financial year. Larger venture issuers with significant revenue, however, should continue providing investors with a full interim MD&A to assist them in making informed investment decisions.
Venture issuers opting to provide quarterly highlights will be required to include:
- an analysis of the financial condition, financial performance and cash flows as well as any significant factors that have caused variations in these figures;
- known trends, risks or demands;
- major operating milestones;
- commitments and events, whether expected or not, that have materially affected operations, liquidity, and capital resources or may do so going forward;
- any significant changes from previous disclosure about the intended use of proceeds from any financing and an explanation of the changes; and
- any significant related party transaction.
Executive Compensation Disclosure
The Amendments provide that venture issuers will be required to file executive compensation disclosure within 180 days after their financial year-end.
This will apply to financial years beginning on or after July 1, 2015.
Venture issuers will have the option of using a new Form 51-102F6V Statement of Executive Compensation – Venture Issuers (Form 51-102F6V), which is specifically tailored to venture issuers and requires less disclosure. Some of the changes in Form 510102F6V are:
- disclosure of director and named executive officer (NEO) compensation is only required for each of the two most recently completed financial years instead of three;
- disclosure of the value of perquisites provided to a director or NEO is staggered based on his/her total salary for the financial year;
- disclosure required of NEOs is reduced from five individuals to three; and
- disclosure is not required of the value of unexercised in-the-money options or the market/payout value of vested share-based awards that have not been paid out or distributed.
Increased Significance Threshold for Acquisitions
The Amendments increase the significance threshold at which a Business Acquisition Report (BAR) is required for venture issuers from 40% to 100%, thereby decreasing the instances in which a venture issuer will have to file a BAR.
Amendments to NI 52-110
The Amendments now require venture issuers to have an audit committee consisting of at least three members, the majority of whom cannot be executive officers, employees or control persons of the venture issuer or its affiliate. NI 52-110 currently exempts ventures issuers from this audit committee requirement. The Amendments, however, are consistent with the TSX Venture Exchange Corporate Finance Manual.
The Amendments provide limited exemptions from this requirement for events beyond the audit committee member’s reasonable control and for the death, disability or resignation of a member. The audit committee requirement will apply to venture issuers beginning on or after January 1, 2016.
National Instrument 41-101
The Amendments will reduce disclosure required of a venture issuer in its initial public offering prospectus by decreasing the number of years of describing its history and audited financial statements from three years to two.
- Non-venture issuers will be required to file executive compensation disclosure within 140 days after their financial year-end.
- The threshold is $15,000 if the director’s or NEO’s total salary is $150,000 or less; 10% of the director’s or NEO’s salary if the total salary is greater than $150,000 but less than $500,000; or $50,000 if the total salary is $500,000 or greater.