Canada: Proposed National Instrument 51-103: CSA Proposes To Simplify Venture Issuer Regulation

Last Updated: September 15 2011
Article by Bill G. Gilliland

On May 31, 2010, the Canadian Securities Administrators (the "CSA") released a consultation paper detailing a proposal to overhaul the securities regulatory regime applicable to venture issuers (other than issuers that fall within the definition of "venture issuer" under securities legislation by virtue of issuing only debt or preferred shares). The proposal was intended to initiate a consultation with market participants with the goal of developing an approach to venture issuer regulation that better reflects the needs and expectations of venture issuer investors and makes regulatory compliance more manageable.

This initial proposal included some significant departures from the current governance and disclosure regime including: the consolidation of venture issuer governance and disclosure requirements into one national instrument; replacing interim MD&A and financial reports with a semi-annual report; streamlining annual disclosure into one core disclosure document; and modifying disclosure obligations for prospectuses and other offering documents. The proposal also intended to focus disclosure on information believed to be more relevant to venture issuers, such as annual biographical information about executive officers, comparative information regarding executive compensation and business development expenditures, and enhanced periodic reporting.

After a 14 month consultation process, the CSA has now published for comment rules and amendments that would introduce a new regulatory regime applicable to venture issuers.

Although there were different levels of support for each of the CSA's proposals, the consultations indicated strong overall support for pursuing a more tailored approach and for the development of a separate national instrument containing the main governance and disclosure obligations applicable to venture issuers.

The Proposed Rules

The CSA's proposed rules contain most of the significant aspects of the original proposal, while abandoning some of the more contentious ideas such as the introduction of a securities law standard of care and fiduciary duty applicable to directors and officers of venture issuers. The proposed rules are designed to eliminate certain disclosure obligations that may be of less value to venture issuer investors, provide supplemental disclosure thought to be more relevant, and make regulatory compliance more manageable.

Applicable securities laws define a "venture issuer" as a reporting issuer that does not have any of its securities listed or quoted on the Toronto Stock Exchange, an exchange registered as a "national securities exchange" under the U.S. Securities and Exchange Act of 1934, or a marketplace outside of Canada or the U.S. other than the AIM of the London Stock Exchange and the PLUS markets operated by PLUS Markets Group. The proposal would apply to all venture issuers other than debt-only issuers, preferred share-only issuers and issuers of securitized products – in other words the proposal is focused on public companies listed on a junior exchange. Debt-only, preferred share-only and issuers of securitized products would continue to be subject to the current venture issuer requirements if they meet the venture issuer definition in NI 51-102 Continuous Disclosure Obligations.

The principal features of the proposed rules are:

  • Consolidation of Venture Issuer Regulation: Canada's current governance and disclosure regime already recognizes many important variations to accommodate the differences between venture and senior issuers; however, these variations are scattered throughout the broader securities regulatory regime. The CSA's proposed rules would streamline and consolidate the main governance and disclosure requirements applicable to venture issuers into one new national instrument (NI 51-103 Ongoing Governance and Disclosure Requirements for Venture Issuers), providing venture issuers with one main reference point for securities compliance.
  • Annual Report: The proposal introduces an annual report requirement that combines business, corporate governance and executive compensation disclosure, along with MD&A, annual financials and CEO/CFO certifications. The annual report would be the core disclosure document for venture issuers. It would also have the effect of broadening the concept of the CEO/CFO certifications, as the certifications would apply to all of the material in the annual report.
  • Mid-year Report: In place of interim MD&A and financial reports, venture issuers would file a mid-year report that would include an interim financial report, the associated MD&A and CEO/CFO certifications.
  • Interim Filings: The new rules would make interim MD&A and financial reports voluntary; however, if a venture issuer decided to file voluntary interim reports, it would be required to do so for a minimum of two years. This modification, and in particular the move away from the U.S. approach to quarterly filings, has been the most contentious aspect of the proposal. Although other respected jurisdictions (including the U.K. and Australia) have adopted semi-annual filings, there are concerns about diverging from the U.S. practice; and those jurisdictions that have semi-annual filings do not differentiate between the senior and junior segments of the market.
  • Information Circular: The proposed rules would streamline information circular disclosure to information directly pertaining to the matters to be acted upon at the meeting. This would include enhanced biographical information about directors and the relocation of corporate governance and executive compensation disclosure to the new annual report.
  • Business Acquisition Report ("BAR"): BARs would be replaced with enhanced material change reporting, and the significance tests triggering financial statement disclosure would be increased from acquisitions that are 40% significant to acquisitions that are 100% significant.
  • Enhanced Material Change Reporting: The proposal would broaden the scope of events caught by periodic reporting, including enhanced reporting of material related entity transactions and major acquisitions. Venture issuers will continue to have access to the confidential filing procedures for material change reports, except in respect of material related entity transactions.
  • Initial Public Offerings: The disclosure required in a long-form prospectus would be conformed to the annual report disclosure. This would remove the requirement for business acquisition reports in connection with an offering (although financial statements would be required for reverse take-overs and acquisitions that are 100% significant), would eliminate three and nine month interim financial reports and associated MD&A, and would require only two years of audited annual financial statements.
  • Short-form Offerings: Venture issuers would also be permitted to use their annual reports in place of an annual information form in order to qualify as short-form eligible under NI 44-101 Short Form Prospectus Distributions. As a result, venture issuers would essentially have the same access to the short form regime as senior issuers. This is an important feature of the proposed rules given the constraints venture issuers face in timing the market, the costs and time associated with preparing a long-form prospectus, and venture issuer reliance on capital market financing.

Venture issuers would also be subject to new substantive corporate governance requirements relating to conflicts of interest, related entity transactions and insider trading; with the proposed rules requiring that venture issuers will develop policies relating to these issues. Director and executive compensation disclosure would be more tailored and streamlined, including the introduction of a simplified compensation table. New audit committee composition requirements would be introduced that largely codify the current corporate law requirements. The proposed rules would not impact other core disclosure instruments including: NI 51-101 - Standards of Disclosure for Oil and Gas Activities; NI 43-101 Standards of Disclosure for Mineral Projects; NI 52- 107 Acceptable Accounting Principles and Auditing Standards; NI 52-108 Auditor Oversight; and NI 54-101 Communication with Beneficial Owners of Securities of a Reporting Issuer.

About Fraser Milner Casgrain LLP (FMC)

FMC is one of Canada's leading business and litigation law firms with more than 500 lawyers in six full-service offices located in the country's key business centres. We focus on providing outstanding service and value to our clients, and we strive to excel as a workplace of choice for our people. Regardless of where you choose to do business in Canada, our strong team of professionals possess knowledge and expertise on regional, national and cross-border matters. FMC's well-earned reputation for consistently delivering the highest quality legal services and counsel to our clients is complemented by an ongoing commitment to diversity and inclusion to broaden our insight and perspective on our clients' needs. Visit:

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.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

In association with
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.