Canada: TSX Venture Exchange - Policy Amendments And Reminder Of Ongoing Corporate Governance Requirements

Last Updated: March 23 2012
Article by Francesco Tallarico

On February 24, 2012 and February 29, 2012 the TSX Venture Exchange (TSXV) published the following two bulletins: (a) Reminder of Ongoing Corporate Governance Requirements of Boards of Directors and Audit Committees (Corporate Governance Bulletin); and (b) Policy Amendments: (i) Policy 3.2 – Filing Requirements and Continuous Disclosure; (ii) Policy 1.1 – Interpretation – Reminder of Certain Ongoing Requirements under Policy 3.2 (Policy Amendments Bulletin).

Corporate Governance Bulletin

The Corporate Governance Bulletin indicates that the TSXV has identified a degree of non-compliance by listed issuers with respect to the corporate governance requirements mandated by the TSXV. In particular, the Corporate Governance Bulletin notes the following:

Board and Management Composition and Qualifications

The TSXV reminds issuers that they must, at all times, comply with the composition and qualification requirements pertaining to their boards and management teams. The requirements are principally set forth in section 5.6 to 5.10 of TSXV Policy 3.1, and include (among other things), the requirement to have at least two "independent" directors. "Independent" under TSXV Policy 3.1, has the same meaning used in National Instrument 52-110 Audit Committees (NI 52-110).

Entrenchment of Management

The TSXV reminds issuers that they must not, at any time, construct mechanisms that entrench existing management. Section 19.6 of TSXV Policy 3.1 prohibits, without limitation: (a) staggered elections of the board; and (b) the election of the board as a slate (i.e., as a group in its entirety) without also providing the shareholders of the issuer with the ability to elect the directors individually.

Audit Committee Composition

The TSXV reminds issuers that they must comply with the composition requirements for audit committees as set forth in section 21(b) of TSXV Policy 3.1. Section 21(b) of TSXV Policy 3.1 mandates that: (a) the audit committee be comprised of at least three directors; and (b) the majority of the members of the audit committee must not be officers, employees (which includes consultants) or control persons of the issuer or its associates or affiliates. Issuers are also reminded of the application of NI 52-110 as it relates to their audit committees.

Policy Amendments Bulletin

The Policy Amendments Bulletin outlines certain amendments to TSXV Policy 3.2.

Addressing Redundancies and Inconsistencies with Securities Laws

To avoid potential inconsistencies between TSXV Policy 3.2 and corresponding securities law requirements, the TSXV has deleted, or where appropriate, amended certain sections of TSXV Policy 3.2. For example, provisions regarding the filing and delivery of financial statements and management discussion and analysis, business acquisition reports, filings in respect of shareholder meetings (i.e., notices, form of proxy, circular, etc.), filing of documents through SEDAR and compliance with National Instrument 51-102 Continuous Disclosure Obligations as it relates to a change of auditor or fiscal year end, have been deleted.

In addition, the amendments to TSXV Policy 3.2 provide that:

  • where a document or agreement is made publicly available by an issuer on SEDAR in conjunction with its filing with any securities commission or similar regulatory body, the issuer will not be required to separately file that document or agreement with the TSXV except where required pursuant to another TSXV policy; and
  • for any transaction requiring shareholder approval, whether pursuant to a TSXV requirement or otherwise, the meeting materials must describe the substance of the transaction and all related matters in sufficient detail to enable a shareholder to form a reasoned judgment concerning the transaction and related matters.

In addition, the definition of "dividends" for the purposes of section 10 of the TSXV Policy 3.2 has been amended to include any dividend or similar distribution by an issuer to its shareholders whether in the form of cash, securities or other property. Further, the amendments provide that the timing for the ex-dividend date is based on the premise that the shareholders of record as of close of business on the record date (and not some earlier point in time) will be entitled to receive the dividend.

These amendments can be found in the blackline version of TSXV Policy 3.2 posted on the TSXV's website at

Clarification of Exchange Hold Period Requirements

Section 5.3(a) of TSXV Policy 3.2 and the definition of "Exchange Hold Period" in TSXV Policy 1.1 have been amended to reflect the circumstances in which the Exchange Hold Period is applicable. Section 5.3(a) of TSXV Policy 3.2 now specifies the application of the Exchange Hold Period legend in circumstances where the securities are not evidenced by a certificate (i.e., a direct registration or electronic book-entry system). In addition, section 5.3(b) of TSXV Policy 3.2 has been amended to provide clear guidance as to the time period that the Exchange Hold Period is applicable. The amendments specifically indicate that for securities convertible into listed shares (i.e., options), the legend must be modified to indicate that the remaining portion of the Exchange Hold Period will continue to apply to the underlying listed shares if the original security is converted, exercised or exchanged within four months of the distribution date of the original security. Thus, if the Exchange Hold Period on the original security has not expired at the time the original security is converted, exercised or exchanged, the certificate representing the underlying listed shares must bear the legend prescribed by section 5.3(a) with the applicable date to be inserted in the legend (i.e., a date that is four months and a day after the distribution date of the original security).

Clarification of Material Agreement Notice Requirements

Sections 8.1 and 8.2 of TSXV Policy 3.2 have been amended to more accurately set forth the circumstances under which an issuer is required to provide the TSXV with prior written notice of any material agreement. Section 8.1(a) now states that to the extent practicable, the issuer should provide written notice of any material agreement to the TSXV prior to the agreement being entered into and that the agreement is to provide that it is subject to TSXV acceptance. Where a transaction that is the subject of a material agreement requires TSXV acceptance pursuant to another policy of the TSXV and the material agreement (or particulars thereof) is provided to the TSXV in connection with the issuer's application for acceptance of the transaction, the issuer is deemed to have complied with the foregoing notice requirement.

In addition, the amendments to section 8.2 have expanded the definition of "material agreement", which now means any agreement, commitment, contract or understanding, written or otherwise, that an issuer or any of its subsidiaries is a party to that is material to the issuer. The definition of "material agreement" has also been amended to include the following matters deemed to be "material agreements":

  • any issuance of shares or other securities of the issuer or any of its subsidiaries;
  • management services, investor relations services, fiscal agency or financial advisory services, other services outside the normal or ordinary course of the issuer's business, and any transactions with a Non-Arm's Length Party (as defined in the TSXV policies) to the issuer; and
  • any amendment, termination or extension of a material agreement.


The Corporate Governance Bulletin and Policy Amendments Bulletin reflect the TSXV's monitoring of corporate governance practices and its goal of clarifying the continuous disclosure provisions of TSXV Policy 3.2. The Policy Amendments Bulletin also reminds issuers of their ongoing requirements with respect to the holding of annual shareholder meetings and notice of material agreements. The foregoing reflects the TSXV's objective of maintaining its oversight of TSXV issuers' corporate governance and continuous disclosure practices.

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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