Nouveau manuel de politique de la Bourse des valeurs canadiennes :
ce que les entreprises doivent savoir (en anglais)

15 minutes de lecture
15 mai 2023

The Canadian Securities Exchange (CSE or the Exchange) has introduced a number of updates to its listing policies that bring extensive changes to its listing criteria and continued listing requirements. The amendments also introduce a new senior tier for companies classified by CSE as "non-venture issuers" (NV Issuers).

The following are notable policy changes that are relevant to current and prospective CSE-listed companies.

Qualification for listing

Eligibility review

As part of the initial listing process, applicants will now submit a disclosure document or draft preliminary prospectus to the CSE to complete an "eligibility review" and confirm in writing that all requirements are met or will be met prior to final listing approval. For natural resource companies, a technical report is required as part of this process. A non-refundable fee will be payable and will be applied toward the initial listing fee. 

New NV Isuer category

The most substantial addition to the policy manual is the introduction of a new senior "NV Issuer" tier for companies that meet additional qualifications.

The Exchange will categorize a listing applicant as an NV Issuer at the time of listing and will conduct reviews on an annual basis to determine whether the designation should continue to apply. Companies currently listed on the CSE will be subject to a review process and the designation, if applicable, will take effect in conjunction with the filing of second quarter financial results.

As the Exchange begins identifying NV Issuers, it is expected that NV Issuers will be required to comply with the enhanced requirements and shorter timelines imposed on "non-venture issuers" under securities laws. For example, an NV Issuer will be obligated to file an annual information form within 90 days of the NV Issuer's financial year end and to meet shorter deadlines for the filing of annual and interim financial statements.

To qualify as an NV Issuer, a listing applicant must satisfy one of the following four standards, in addition to meeting the basic listing requirements:

  1. Equity standard: (i) shareholders' equity of at least $5 million; and (ii) expected market value of the public float of at least $10 million; or
  2. Net income standard: (i) net income of at least $400,000 from continuing operations in the last fiscal year or in two of the last three fiscal years; (ii) shareholders' equity of at least $2.5 million; and (iii) expected market value of the public float of at least $5 million; or
  3. Market value standard: (i) market value of all securities of at least $50 million based on the initial public offering or concurrent financing price; (ii) shareholders' equity of at least $2.5 million; and (iii) expected market value of the public float of at least $10 million; or
  4. Assets and revenue standard: (i) total assets and total revenues of at least $50 million each in the last fiscal year or in two of the last three fiscal years; and (ii) expected market value of the public float of at least $5 million.

The Exchange has discretion to designate a company as an NV Issuer if, in its view, it is close to satisfying two of the above standards or it is in the public interest to categorize the company in the senior tier.

To continue as an NV Issuer with equity securities listed on the CSE, a company must, on an annual basis, (i) maintain a public float of 500,000 common shares with a value of at least $2,000,000; and (ii) report net income from continuing operations of $100,000 or a market value of listed securities of at least $3,000,000.

Enhanced requirements for natural resources companies

The expenditure requirements for an exploration company's property increased from $75,000 to $150,000 within the most recent three-year period. Further, the minimum budget for the first phase of exploration increased from $100,000 to $250,000.  A company meeting the minimum listing requirements with a single exploration project must disclose its objectives to pursue additional exploration projects or opportunities or to otherwise remain in the mineral exploration business. Notwithstanding the new exploration requirements, the Exchange has discretion to approve mineral exploration companies with qualifying exploration expenditures and a first phase budget in line with previous policy standards with additional escrow requirements.

Public float

The amendments adjust the public float requirements from 500,000 freely tradable common shares representing 10% of the issued and outstanding shares to 1,000,000 freely tradable common shares representing 20% of the issued and outstanding common shares. The minimum of 150 board lot holders remains unchanged.

For NV Issuers, the public float requirement is 1,000,000 freely tradable common shares and at least 300 board lot holders.

Continued qualification

The Exchange has clarified the potential ramifications for failing to meet continued listing requirements, including the possibility of suspension or delisting.

Where a company no longer meets a listing requirement, the CSE issues a notice and provides a nine-month cure period to regain compliance. The amended policies add the context that this is intended to allow the company time to demonstrate that it continues to pursue the business objectives outlined in its disclosure and is working towards compliance with continued listing requirements. The Exchange now has the ability to suspend, delist or designate a company as inactive if it acknowledges at any time during the cure period that it is not actively operating.

Corporate governance, shareholder meetings and shareholder approvals

Position descriptions and committee charters

The CSE now recommends that its companies develop written position descriptions for the chair of the board of directors, chairs of board committees and each member of senior management. In addition to companies having board-approved corporate objectives, the Exchange now recommends written charters for the board and board committees that are approved by the board.

Annual meetings and majority voting policy

The amendments set out the items of business that must be addressed at each annual meeting of shareholders: (i) the presentation of audited annual financial statements, (ii) the appointment of auditors and (iii) the election of directors. Companies are also now required to renew their rolling incentive plans once every three years.

For NV Issuers, the amendments require that each director be elected by a majority of the votes cast (at least 50% + 1 vote), except in the case of a contested meeting. An NV Issuer must adopt a majority voting policy unless it otherwise satisfies the majority voting requirement in a manner acceptable to the Exchange. The majority voting policy must require a director to immediately resign if not elected by a majority of the votes cast with respect to their election. The board of directors can determine whether and when to accept such resignation, however that decision must be announced by press release with an explanation if a director's resignation is not accepted.

New shareholder approval requirements

The CSE has expanded the list of transactions requiring shareholder approval. There are now circumstances where both offerings of securities and acquisitions must receive shareholder approval to proceed. The broadened policy intends to better capture transactions that materially affect the control of the company, and the Exchange has discretion to require shareholder approval for transactions that do not explicitly fall under the below categories but nonetheless have a material impact.

While companies will typically call a meeting of shareholders to obtain approval, the Exchange permits a written resolution representing at least 50% of a company's outstanding shares. If a company wishes to rely on a written resolution instead of a meeting, it must issue a press release seven trading days prior to closing to announce the material terms of the transaction and the intention to rely on a written resolution.

a. Sale of securities 

Shareholder approval by ordinary resolution is now required if the number of securities issuable in the offering is, on a fully diluted basis, (i) more than 50% of the outstanding securities when the issuance creates a new control person, or more than 100% of the outstanding securities; and (ii) for NV Issuers, more than 25% of outstanding securities.

Additionally, approval is now required if the issuance price is lower than the current market price minus the Exchange's maximum permitted discount or the transaction materially affects control of the company (as determined by the company or the Exchange).

In the NV Issuer policies, shareholder approval is required for an issuance of securities to a related person if the total amount of securities issued to that related person in private placements or acquisitions within the last 12 months combined with the new issuance exceeds 10% of the company's outstanding securities.

The amendments provide an exemption from shareholder approval requirements where a company is in severe financial distress and has an agreement in place to complete an offering without the participation of any related parties. To qualify for this exemption, the company's independent audit committee or a majority of its independent directors must confirm that the offering is in the best interests of the company and is reasonable, and obtaining shareholder approval or completing a rights offering on the same terms is not feasible. The company must issue a press release at least five days before closing the offering explaining the exemption, why it qualifies, and that it will not hold a shareholder vote.

b. Acquisitions and dispositions

The amended policies now require shareholder approval for an acquisition or disposition if a related person or group of related persons of an NV Issuer holds a 10% or greater interest in the assets involved and the total number of securities to be issued exceeds 5% of the total number of outstanding securities on a fully diluted basis.

Shareholder approval is also required for a transaction if the number of securities issuable in connection with the transaction is, on a fully diluted basis, (i) more than 50% of the outstanding securities when the issuance creates a new control person, or more than 100% of the outstanding securities; and (ii) for NV Issuers, more than 25% of outstanding securities. If the issuance of securities is expected to materially affect control of the company, then shareholder approval will be required.

Shareholder approval is also required for the disposition of all or substantially all of the assets, business or undertaking of the company.

c. Consolidations

Consolidations with a ratio greater than 10:1 now require shareholder approval. Where a company proposes a consolidation that, when combined with any other consolidation in the preceding 24-month period that was not approved by shareholders, results in a cumulative consolidation ratio greater than 10:1, then shareholder approval is required for any further alteration.

Distributions and corporate finance

Private placements

The amendments now permit a company to complete a private placement at a price below the previous $0.05 minimum as long as the proposed offering price is not lower than the 20-day volume-weighted average price minus the maximum permitted discount. Additionally, the funds raised must be used for either working capital or a legitimate debt settlement. Warrants may also be issued with a purchase price less than $0.05 if they are paid in cash and the price is not lower than the volume-weighted average price for the previous 20 trading days. Warrants can be given as a bonus or extra incentive when issued with other securities, but they cannot be given for no consideration.

The amendments include a notice period for private placements and acquisitions, requiring that these transactions be announced at least five business days prior to closing. This is a change from the current practice of filing an initial form upon announcement and a final form, if applicable, concurrently with closing. The CSE now reserves an approval right on transactions and can object or impose additional requirements within the five business day notice period.

Security based compensation arrangements

The amendments to the Exchange's policy on security based compensation arrangements align the requirements with those of the other major Canadian stock exchanges. Namely, the amendments require a company to specify the maximum number of securities that can be issued as a fixed number or percentage under a plan and to obtain shareholder approval every three years for "rolling" or "evergreen" plans to continue granting awards. The ordinary resolution to approve a plan should include the date by which the plan must be re-approved. If that re-approval is not obtained within three years, all unallocated entitlements must be cancelled, and the company cannot grant further entitlements until approval is received.

Investor relations and promotional activity

Restrictions for providers of investor relations and promotional activities

The amendments contain a new provision requiring that compensation to any person providing investor relations or promotional activities must be paid in cash, rather than listed securities. Incentive stock options may still be granted to such service providers, and the amendments increase the allowable percentage of incentive stock options that they may be granted from 1% to 2% of the outstanding number of listed shares, which is now similar to the limits of other Canadian stock exchanges.

Additional amendments

Treasury orders

The amendments prescribe information that must now be included in all treasury orders and introduce a requirement that the transfer agent provide the Exchange with a copy of all treasury orders within five business days of their submission. The latter now aligns the CSE with the requirements of other Canadian stock exchanges.

CSE posting

Companies listed on the CSE will now be required to have two authorized posting officers instead of one, each of whom must be registered with the CSE. The amendments also clarify the requirement of companies to post material contracts to their CSE profile in addition to filing on SEDAR.

We encourage companies listed on the CSE to review the amended policies in full to determine whether any action is required and how the changes affect your business.

Our Capital Markets Group would be pleased to discuss any questions and provide assistance to ensure companies are in compliance with the new CSE listing policies.

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