Amendments to Policy 5.1 – Loans, Bonuses, Finder's Fees and Commissions ("Policy 5.1") of the TSX Venture Exchange ("TSXV") came into force on January 26, 2015. Large portions of the amendments are housekeeping in nature. The substantive amendments involve formalizing into written policy new or existing working practices and the creation of new requirements and limitations to address certain circumstances involving loan bonuses, finder's fees and commissions that were not previously addressed in Policy 5.1. Notable substantive changes to Policy 5.1 include the following revisions:

1. Loan Bonus Requirements and Limitations:

  1. Loan bonuses may not be granted to a lender or guarantor in relation to a loan or debt instrument that is convertible into shares listed on the TSXV.
  2. The limits for both bonus shares and bonus warrants are now calculated using the applicable market price, not the discounted market price.
  3. The limit on bonus warrants increased from 40% to 100% of the value of the loan (i.e. 100% warrant coverage). This, combined with the change in (a) above, addressed a discrepancy between the TSXV's limit on detachable warrants issued in connection with a convertible debenture (as set forth in Policy 4.1 – Private Placements) and the current limit on bonus warrants issued in connection with a non-convertible loan.
  4. For loans with a term of less than one year, bonus warrants are permitted, but bonus shares are generally no longer permitted.
  5. Provisions related to the acceptability of a loan bonus for loan renewals or extensions are formalized.

2. Restrictions on "Finding Oneself":

The TSXV formalized restrictions on the ability of an issuer to pay either: (i) a commission to an investor in respect of such person's own investment in the issuer; or (ii) a finder's fee to a vendor or purchaser in respect of such person's sale or purchase of assets or services to or from the issuer. Certain limited exceptions to these general rules are laid out in the amendments.

3. Commission Limitations:

The amendments also clarify that if compensation payable by an issuer in respect of a financing transaction includes shares or warrants, the aggregate value of the shares and warrants cannot exceed 12.5% of the gross proceeds of the financing. For these purposes, one warrant will be valued as one-half of a share (i.e. the existing 25% limit on warrants under section 3.4 of Policy 5.1 was unchanged).

The amended version of Policy 5.1 can be found on the TSXV's website (here) along with a blackline to the previous version (here).

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