Canada: CSA Moves Forward On Proposed Tailored Regime For Venture Issuers

The Canadian Securities Administrators (CSA) have published for comment a revised proposal for a new regulatory regime for venture issuers under Proposed National Instrument 51-103 Ongoing Governance and Disclosure Requirements for Venture Issuers (NI 51-103). Under NI 51-103, originally proposed in July of 2011, the CSA hope to usher in a tailored regime for venture issuers. As discussed in a post earlier this month, the highlights of the proposal include a new "annual report" to replace in large part the continuous disclosure that is currently required, as well as the elimination of business acquisition reports (or BARs).

Objectives of NI 51-103

In proposing this regime for venture issuers the CSA has four objectives: (i) to improve access to key information and facilitate informed decision-making by venture issuer investors; (ii) to allow venture issuer management more time to focus on the growth of their company's business by reducing the time venture issuer management have to spend reading and trying to understand disclosure requirements; (iii) to enhance investor confidence in the venture market by introducing substantive governance standards relating to conflicts of interest, related party transactions and insider trading; and (iv) to enhance the ability of securities regulators to focus on the unique challenges associated with the venture market when considering rule-making.

The CSA received 69 comment letters in response to the original proposal. The most significant revisions in the new proposal relate to continuous disclosure and governance.

Continuous Disclosure

The CSA's revised proposal does include significant changes regarding continuous disclosure requirements, particularly with respect to interim reporting. The new proposal no longer contemplates the requirement for venture issuers to file only a mid-year report; instead interim reports would continue to be required for the three, six, and nine month interim periods, to be filed within 60 days after the end of such interim period. These interim reports would contain interim financial reports and quarterly highlights with a short discussion of the venture issuer's operations and liquidity. Each interim report would be required to include a certificate from the CEO and CFO stating that there were no misrepresentations in the report or quarterly highlights. Providing management's discussion and analysis (MD&A) similar to that required under National Instrument 51-102 Continuous Disclosure Obligations (NI 51-102) would be optional for venture issuers in the interim reports. Although issuers would have the option of providing MD&A in addition to the required filings under NI 51-103 for the interim periods, those issuers who want to file NI 51-102 documents in lieu of the documents that would be required under NI 51-103 would have to apply for exemptive relief.

The revised proposal still consolidates most of a venture issuer's disclosure requirements into a single document called the "annual report." The annual report would contain disclosure about the venture issuer's business, management, governance practices, audited financial statements, the auditor's report, and MD&A. Similar to the proposed interim reports, the CEO and CFO of the issuer would also be required to certify and date the annual report. In keeping with the original proposal, this annual report would need to be filed within 120 days of the issuer's financial year-end.

In addition to making changes to the actual disclosure requirements for venture issuers, the revised proposal also contemplates a significant change in the delivery of those disclosure documents. Under NI 51-103, disclosure documents would only need to be delivered upon request, instead of the previous requirement of mandatory mailings. This proposed delivery option would require the venture issuer to issue a new release that discloses the filing of each annual and interim report within three business days of that filing. The news release would have to (i) provide the address of the SEDAR website and the address or a link to another webpage where the particular report could be viewed electronically; (ii) that a registered holder or beneficial owner of securities can receive a copy of the most recently filed report on request, free of charge; and (iii) disclose the contact information necessary for the registered holder or beneficial owner to make the request. If a request is made by a registered securityholder or beneficial owner, the venture issuer would have to send the most recently filed report to that person, without charge within three business days of the request. A paper copy of the report could be sent by pre-paid mail, courier, or the equivalent, or by any other method that the requestor consents to. This proposed "notice and access" method of delivery is meant to conform to the delivery requirements of NI 54-101 Communication with Beneficial Owners of Securities of a Reporting Issuer and to reduce additional costs to venture issuers.

Executive Compensation Disclosure

In the original proposal it was contemplated that executive compensation disclosure would be included in the annual report. Under the new proposal such compensation disclosure would be included in the information circular, which is intended to make executive compensation information more easily accessible to securityholders when they are voting. Also, this compensation disclosure would only be required for the top three named executive officers rather than the originally suggested top five named executives. 

Major Acquisition Disclosure

Under the original proposal, an optional significance test was to be introduced to allow significance to be calculated using market capitalization on the acquisition date rather than the announcement date for significant transactions. This optional significance test has been eliminated in the revised proposal and has been replaced with a "major acquisition test" that considers both the venture issuer's market capitalization and the estimated value of the business to be acquired prior to the announcement of the transaction. If the value of the consideration for the business is 100% or more of the market capitalization of the venture issuer then the transaction will be considered to be a major acquisition for the purposes of the proposed regime.

As was suggested in the original proposal, major acquisitions would not require business acquisition reports, but would instead require disclosure reporting that includes disclosure of material related entity transactions and the requirement of financial statements for such business acquisitions. The disclosure required for major acquisitions would include a statement of comprehensive income, a statement of changes in equity and a statement of cash flows for the two most recently completed financial years, if the venture issuer has completed two financial years. It is important to note that only the financial information for the year most recently completed before the acquisition would have to be audited. Additionally, unlike in the original proposals, pro forma financial statements would not be required for major acquisitions unless, in the context of a long form prospectus, the major acquisition is also a primary business.

Audit Committee Composition

In the original proposal, the board of directors of a venture issuer would have been required to appoint an audit committee composed of minimum of three directors, a majority of whom were not executive officers or employees of the issuer or its affiliates. Under the revised proposal, control persons have been added to this list of persons that are not considered independent for this purpose. This change is consistent with the requirements of the TSX Venture Exchange and was made based on the CSA's belief that control persons of venture issuers often have significant control over management.

Corporate Governance Guidelines

Under NI 51-103, venture issuers would be required to develop and implement of specific policies and procedures aimed at addressing substantive corporate governance issues. These include policies and procedures relating to conflicts of interest and related party transactions as well as insider trading.

Prospectus and Exempt Offerings

A new form of long form prospectus is proposed that would better conform to the disclosure in the proposed NI 51-103 venture issuer annual report. This new form of prospectus for venture issuers requires two years of audited financial statements instead of three years. For venture issuers wishing to use a short form prospectus, the revised proposal contemplates significantly enhanced disclosure requirements concerning the use of proceeds. This enhanced disclosure is not currently required with short form prospectuses, but the CSA believe that this is necessary for venture issuers. In general, the proposed disclosure rules would require venture issuers to state the estimated net proceeds or the minimum amount of net proceeds, depending on the circumstances of the issuance. It would also be necessary for the issuer to disclose the total funds available, accompanied by a breakdown of those funds in prescribed categories, and the principal purposes for which the issuer plans to use the available funds.

Under the proposed regime, all venture issuers would be required to file an annual report and would be eligible to file a short form prospectus (in contrast with non-venture issuers who are required to have a "current AIF" in order to be eligible).

Mining Issuers

In order to align the venture issuer trigger for filing a technical report with those of non-venture issuers, the requirement to file a technical report for a venture issuer would be triggered upon the filing of a short form prospectus or if the venture issuer's annual report contains disclosure relating to the first time disclosure of mineral resources, mineral reserves or a preliminary economic assessment or a change to that disclosure if such change constitutes a material change for the venture issuer.

The revised proposal is open for comment until December 12, 2012.

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.