In December 2012, the Toronto Stock Exchange (TSX) and TSX
Venture Exchange (TSXV) (collectively, the Exchanges) jointly
released the Consultation Paper on Emerging Market Issuers
(Consultation Paper), as part of their ongoing review of emerging
market issuers (EM Issuers). The Consultation Paper follows the
release of the Ontario Securities Commission Staff Notice 51-720
Issuer Guide for Companies Operating in Emerging Markets,
published in November 2012, which offers assistance and
clarification to EM Issuers and their directors and management, on
governance and disclosure practices by highlighting eight areas for
consideration, together with disclosure tips to assist companies
and their boards in assessing risks and complying with applicable
Canadian securities law. The purposes of the Consultation Paper are
to (i) identify the potential risks associated with listing EM
Issuers that have been identified by the Exchanges, (ii) provide
preliminary guidance with respect to listing considerations
applicable to EM Issuers, and (iii) solicit feedback from market
participants on matters related to listing EM Issuers and possible
new guidance or requirements that the Exchanges may implement.
Key Risks Identified by the Exchanges
The Consultation Paper identifies four risk categories
associated with EM Issuers:
Management and Corporate Governance Issues
Management may lack a knowledge and understanding of Canadian
Communication issues may exist if the directors and officers
are not fluent in the language in which the EM Issuer conducts its
Management may lack experience and familiarity with local laws
and business practices of the jurisdiction in which the EM Issuer
conducts its business.
Financial Reporting Issues
Canadian auditors may lack sufficient expertise and experience
in the jurisdiction in which the EM Issuer conducts its
There may be inadequate internal controls over financial
The CFO or the audit committee may lack sufficient expertise
and experience related to applicable audit procedures, in
particular as they pertain to international audit engagements for
While the Exchanges acknowledge that tax or foreign ownership
restrictions encourage or necessitate more complex corporate or
capital structures, there may be potential risks associated with
such structures, including:
Where the structure requires that legal ownership of the EM
Issuer's operating assets be vested in non-affiliated entity,
the title to, and control over, such assets by the EM Issuer may be
The structures may limit, or otherwise inhibit, the ability of
shareholders to have recourse against the assets of the EM Issuer;
Inadequate public disclosure of the nature, material
characteristics and risks associated with such structures.
Legal Matters Relating to Title and Ability to Conduct
Legitimacy and certainty of title to the principal operating
assets of the EM Issuer are key and fundamental listing
requirements of an EM Issuer; and
An EM Issuer must have the specific permits and licenses to
carry out its business operations.
As a practical matter, the Exchanges strongly recommend that
issuers with "significant connections" to an emerging
market arrange a pre-filing meeting with Exchanges'
representatives, and inter alios, senior management, key
directors and the sponsor of the applicant, to facilitate the
identification and resolution of concerns with the proposed
listing. In particular, the pre-filing meeting will (i) introduce
the Exchange to the EM Issuer, its business and key individuals;
(ii) provide a forum for questions from issuers and their advisors
relating to the listing process; (iii) identify the requirements
and procedures that the Exchanges will apply to the EM Issuer's
application; and (iv) identify potential issues and areas of
concern that the Exchanges may have with the proposed listing.
The Consultation Paper also includes a proposed TSXV policy
document Appendix 2B - Listing of Emerging Market Issuers
which sets out specific guidance and requirements applicable to
listing Emerging Market Issuers on the TSXV.
The feedback period ended on February 28, 2013. The Exchanges
are in the process of reviewing comments from stakeholders and
assessing whether to implement new guidance or requirements for
listing EM Issuers. It is likely that the feedback will result in
new guidelines or requirements for listing EM Issuers.
Under the Income Tax Act, the Employment Insurance Act, and the Excise Tax Act, a director of a corporation is jointly and severally liable for a corporation's failure to deduct and remit source deductions or GST.
Under the Income Tax Act, the Employment Insurance Act, the Canada Pension Plan Act and the Excise Tax Act, a director of a corporation is jointly and severally liable for a corporation's failure to deduct and remit source deductions.
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