Toronto, ON – The Canadian Securities Administrators (CSA) recently announced a number of amendments, which adjust disclosure obligations (National Instrument 51-102), audit committee requirements (National Instrument 52-110) and general prospectus requirements (National Instrument 41-101) for venture issuers. Collins Barrow Toronto experts have reviewed the amendments and highlighted the changes that may impact clients and corporate partners: 

NI 51-102, Continuous Disclosure Obligations

Quarterly highlights

In effect for fiscal years starting on or after July 1, 2015

All venture issuers now have the option to replace their Interim MD&A with “Interim MD&A - Quarterly Highlights” consisting of a short discussion of all material information about the venture issuer’s operations, liquidity, and capital resources. The quarterly highlights should also include an analysis of the company’s financial condition and performance, cash flows, known trends, operating milestones, commitments, expected or unexpected events, significant changes from disclosure previously made regarding the use of proceeds from any financing, as well as a discussion of significant related party transactions.

Executive compensation disclosure

In effect for fiscal years starting on or after July 1, 2015

The CSA has implemented Form 51-102F6V Statement of Executive Compensation – Venture Issuers which reduces existing executive compensation disclosure requirements and has set its filing deadline to 180 days after the fiscal year-end. While venture issuers may continue to use the existing Form 51-102F6, the revised Form (i) reduces the number of individuals for whom disclosure is required from five to three (ii) reduces the number of years of disclosure from three to two, (iii) eliminates the requirement to calculate and disclose some stock-based compensation in the summary table, and (iv) introduces disclosure of the value of perquisites depending on the named executive officer’s or director’s salary.

Significance level for BAR disclosure in prospectus or information circular

In effect as of June 30, 2015

The threshold set out in Part 8 of NI 51-102 for which a business acquisition report (“BAR”) is required has increased from 40% to 100% for venture issuers. A BAR contains certain disclosure requirements and must be filed within 75 days of a significant acquisition. Under the new threshold, a BAR would need to be prepared if a venture issuer’s investment in and advances to the acquiree exceeded 100% of the consolidated assets of the venture issuer, or if the book value of assets acquired exceed 100% of the venture issuer’s assets. The amendments harmonize the significance thresholds at 100% for both BARs and information circulars and reduce the instances when they are required for venture issuers. Furthermore, the CSA removed the requirement for BARs filed by venture issuers to contain pro forma financial statements.

NI 52-110, Audit Committees 

In effect for fiscal years beginning on or after July 1, 2016

Venture issuers are now required to have an audit committee consisting of at least three members, the majority of which cannot be executive officers, employees, or control persons of the venture issuer. The CSA has included exceptions in the case of events outside of the issuer’s control including death, disability, resignation, or an audit committee member becoming a control person. In those circumstances, an exemption is granted until the later of six months after the event and the next annual meeting of the venture issuer. Our clients should note that the TSX Venture already had an equivalent requirement and the CSA changes are convergent with existing regulations for that exchange.

NI 41-101, General Prospectus Requirements

In effect as of June 30, 2015

The completion of an initial public offering (“IPO”) for an issuer that will become a venture issuer will only need to include the audited financial statements for the last two (instead of three) fiscal years. Correspondingly, the requirement to disclose the venture issuer’s business and operating history is reduced to the last two years instead of three.

For more information:

Igor Kostioutchenko
Manager, Audit and Assurance
Collins Barrow Toronto LLP
iokostioutchenko@collinsbarrow.com
647.727.3677
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Octavio Cabral
Public Markets Lead
Collins Barrow Toronto LLP
ocabral@collinsbarrow.com
416.322.1657
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Stephen McCourt
Partner, Audit and Assurance
Collins Barrow Toronto LLP
smccourt@collinsbarrow.com
647.727.3722
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Abigail Gamble
Media Relations
Akcessia | Mayk Ideas
abigailg@akcessia.com
647.727.3584
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