On July 29, 2011, the Canadian Securities Administrators (the
"CSA") published for comment proposed
National Instrument 51-103 Ongoing Governance and Disclosure
Requirements for Venture Issuers (the "Draft
Rule"). The Draft Rule proposes a new regulatory
regime for issuers other than those with securities listed on the
Toronto Stock Exchange, an exchange registered as a "national
securities exchange" under section 6 of the U.S.
Securities Exchange Act of 1934 or a marketplace outside
of Canada or the United States that is not a designated venture
market ("Venture Issuers"). The Draft
Rule would apply to issuers listed on the TSX Venture Exchange and
the Canadian National Stock Exchange. It also modifies the
long-form prospectus rules and other instruments to harmonize the
regime for Venture Issuers. The Draft Rule seeks to simplify the
regulatory regime for Venture Issuers, as well as to provide
investors with both targeted and enhanced information designed to
facilitate their investment decisions in this segment of the
The Draft Rule also proposes, among other things, to streamline
the rules governing prospectus offerings as well as certain exempt
offerings that require prescribed disclosure. Small and
medium-sized businesses (which would also qualify as Venture
Issuers) that want to make an initial public offering would still
be subject to the long-form prospectus rules, but the Draft Rule
would be adopted along with a new prospectus form for Venture
Issuers that is aligned with the new ongoing disclosure and
In addition, Venture Issuers filing a prospectus would only be
required to include two years of audited annual financial
statements, and would continue to benefit from the junior issuer
financial statement exemption in the current long-form prospectus
regime. Business acquisition reports for Venture Issuers would also
be replaced by revised and enhanced material change reporting. In
addition, no three and nine-months interim financial reporting and
associated MD&A would be required.
The Draft Rule introduces a new form of annual report that
combines in one document information relating to the business,
governance, executive compensation, the audited annual financial
statements and associated MD&A and CEO/CFO certifications. A
similarly streamlined document would be required for mid-year
reporting. The CSA's goal is to reduce duplication in
disclosure documents to provide investors with a much shorter
disclosure record to review. In addition, the Draft Rule provides
that these streamlined documents would only be submitted on
request, rather than through mandatory mailing to investors.
These new measures reflect a willingness of the CSA to recognize
the specific concerns facing Venture Issuers and the important
economic role played by small and medium-sized businesses in
Canada. This new streamlined regime would allow Venture Issuers to
further devote more resources to their growth and reduce their
costs of compliance.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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