5 Key Changes Streamline Venture Issuer Obligations

Things have gotten a bit easier for venture issuers, such as those listed on the TSX Venture Exchange, with recent changes to their obligations. Venture issuers with a December 31^st year-end can take advantage of the most significant change – a new way to meet the interim Management’s Discussion and Analysis (MD&A) requirement – for the first quarter of 2016. Here are the five key changes that streamline venture issuer obligations for 2015 and beyond.

1. Simplified Interim MD&A With Quarterly Highlights. Venture issuers have the option to meet the requirement to provide interim MD&A with quarterly highlights disclosure. These quarterly highlights must give a short discussion of all material information about the issuer’s operations, liquidity and capital resources including:
   • An analysis of the issuer’s financial condition, financial performance and cash flows and any significant factors that have caused period to period variations in those measures.
   • Known trends, risks or demands.
   • Major operating milestones.
   • Commitments, expected or unexpected events, or uncertainties that have materially affected the issuer’s operations, liquidity and capital resources in the interim period or are reasonably likely to have a material effect going forward.
   • Any significant changes from disclosure previously made about how the issuer was going to use proceeds from any financing and an explanation of variances.
   • Any significant transactions between related parties that occurred in the interim period.
2. Executive Compensation Disclosure. Venture issuers will also have the option to simplify their annual executive compensation disclosure.  The Canadian Securities Administrators (CSA) adopted a new form (Form 51-102F6V) implementing changes for venture issuers, including:
   • Reducing the number of executive officers for whom disclosure is required to the one, rather than three, highest-paid executive officer in addition to the CEO and CFO.
   • Reducing the number of years of disclosure from three to two.
   • Eliminating the requirement for venture issuers to calculate and disclose the grant date fair value of stock options and other equity-based awards in the summary compensation table. Venture issuers that choose to use the new form will instead disclose detailed information about stock options and other equity-based awards issued, held and exercised.
3. Business Acquisition Reporting. The changes also simplify the business acquisition reporting requirements in National Instrument 51-102 Continuous Disclosure Obligations (NI 51-102) for venture issuers. The significance tests are narrowed for venture issuers so an acquisition for a venture issuer is only “significant” if the issuer’s proportionate share of the consolidated assets of the acquired business, or its consolidated investments in that business and advances to it as at the acquisition date, exceeds 100%, rather than the 40% before the change, of the issuer’s consolidated assets when calculated in the manner NI 51-102 requires. Venture issuers also no longer need to include pro forma financial statements in their business acquisition reports.
4. Audit Committee Requirements. Venture issuers are also subject to new requirements for the composition of their audit committees starting in their first financial years beginning on or after January 1, 2016. However, for many venture issuers subject to stock exchange rules or corporate laws addressing audit committee composition similar to these changes, they will likely not have a material impact. Historically, venture issuers were exempt from the composition requirements in National Instrument 52-110 Audit Committees. With the changes, venture issuers are required to have an audit committee with at least three members, a majority of whom must not be executive officers, employees or control persons of the issuer or of an affiliate of it (except for limited periods of time in certain circumstances).
5. Mineral Project Disclosure For Annual Information Form. Changes to the mineral project disclosure requirements in the annual information form (Form 51-102F2) conform mineral project disclosure to the requirements of National Instrument 43-101 Standards of Disclosure for Mineral Projects. Venture issuers that voluntarily file an annual information form as well as non-venture issuers will benefit from the consistency this change implements.

Read the CSA’s Notice of Amendments to National Instrument 51-102 Continuous Disclosure Obligations, National Instrument 41-101 General Prospectus Requirements and National Instrument 52-110 Audit Committees here.

Please contact your McInnes Cooper lawyer or any member of our McInnes Cooper Corporate Finance and Securities Team to discuss this topic or any other legal issue.

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