Amendments to Continuous Disclosure Requirements and Corporate Governance Obligations for Venture Issuers

April 27, 2015 | Nikita Ponomarev

On April 9, 2015, the Canadian Securities Administrators (the “CSA“) announced that it is implementing amendments (the “Amendments“) to National Instrument 51-102 Continuous Disclosure Obligations (“NI 51-102“), National Instrument 41-101 General Prospectus Requirements (“NI 41-101“) and National Instrument 52-110 Audit Committees (“NI 52-110“) with respect to disclosure obligations for venture issuers.  The CSA also announced that it is implementing changes to Companion Policy 51-102CP to NI 51-102 and Companion Policy 41-101CP to NI 41-101. The Amendments will streamline and tailor disclosure by venture issuers by addressing continuous disclosure and governance obligations, as well as disclosure for prospectus offerings. The Amendments are intended to allow management of venture issuers to focus on the growth of its business.

Option to Use Quarterly Highlights

As discussed in our Spring 2014 Securities Practice Notes, the CSA originally proposed to permit venture issuers without significant revenue in the most recently completed financial year to provide the more tailored and focused “quarterly highlights” form of management’s discussion and analysis (“MD&A“) in interim periods. The quarterly highlights report would primarily consist of a short discussion about the venture issuer’s operations and liquidity.

The CSA has decided that all venture issuers, regardless of their revenue in the most recently completed financial year, should have the option of providing quarterly highlights disclosure. The CSA believes that a simpler regime in which venture issuers are not sub-divided is preferable and that issuers will likely take the needs of their investors into consideration when determining whether to provide quarterly highlights or full interim MD&A.

Deadline for Filing Executive Compensation Disclosure

As also discussed in our Spring 2014 Securities Practice Notes, the CSA proposed to clarify the filing deadlines for executive compensation disclosure by both venture and non-venture issuers. Executive compensation disclosure is usually contained in an issuer’s information circular for an issuer’s annual general meeting (“AGM“). The filing deadline for such information circulars is driven by applicable corporate law or the issuer’s organizing documents.

The CSA set the deadline for filing executive compensation disclosure at 140 days after the issuer’s financial year-end for non-venture issuers and a filing deadline of 180 days after the financial year-end for venture issuers. The CSA thinks that this is a reasonable deadline considering the information needed to put together the executive compensation disclosure will be available to venture issuers at the time of filing their annual financial statements.

New Executive Compensation Disclosure Form for Venture Issuers

The CSA also implemented Form 51-102F6V Statement of Executive Compensation – Venture Issuers (“Form 51-102F6V“), a new form of executive compensation disclosure for venture issuers. This form, among other things:

  • reduces the number of individuals from whom disclosure is required from a maximum of five to three (the chief executive officer, the chief financial officer and the highest paid individual who is not the chief executive officer or the chief financial officer);
  • reduces the number of years of disclosure from three to two; and
  • eliminates the requirement to calculate and disclose the grant date fair value of stock options and other share-based awards in the summary compensation table.

Alternatively, venture issuers can still choose to comply with the existing Form 51-102F6. 

Form 51-102F6V also requires disclosure of the value of perquisites provided to a named executive officer (“NEO“) or director. The CSA originally proposed that an issuer would have to disclose the total value of perquisites even if that was only a small amount. Upon consideration of comments received, the CSA has now included a staggered threshold for perquisite disclosure, so that if the NEO’s or director’s salary is $150,000 or less, perquisites greater than $15,000 must be disclosed; if the salary is greater than $150,000 but less than $500,000, perquisites greater than 10% of the salary must be disclosed; and if the salary is $500,000 or greater, perquisites greater than $50,000 must be disclosed.

Significance Level for BAR Disclosure

The CSA has also increased the threshold at which a business acquisition report (“BAR“) is required for venture issuers. A BAR contains certain disclosure requirements and must be filed within 75 days of a significant acquisition. Prior to the Amendments, an acquisition was considered significant for a venture issuer if a 40% threshold was met under certain tests set out in Part 8 of NI 51-102. For example, a BAR would need to be prepared and filed if a venture’s issuer investments and advances to the business it is acquiring exceed 40% of the consolidated assets of the venture issuer. Following the Amendments, the threshold has been increased to 100%. The CSA also removed the requirement for BARs filed by venture issuers to contain pro forma financial statements.

The Amendments also harmonize significance level thresholds for situations where BAR-level disclosure in a prospectus or information circular is required for a venture issuer making an acquisition. In the Amendments, the significance threshold is 100% for both prospectuses used to finance proposed acquisitions and information circulars related to proposed acquisitions.

Amendments to Prospectus Requirements 

The Amendments also reduce prospectus disclosure requirements for venture issuers. Under the revised NI 41-101, an initial public offering (“IPO“) prospectus for an issuer that will become a venture issuer upon completion of its IPO would only need to include audited financial statements for the last two, instead of three, financial years. Similarly, the Amendments reduce the requirement to disclose the venture issuer’s business history from three to two years.

The Amendments to the prospectus disclosure requirements are harmonized with the changes to the other disclosure requirements described above by allowing venture issuers to use quarterly highlights instead of existing interim MD&A in their prospectus, to comply with executive compensation disclosure pursuant to Form 51-102F6V and to only require the inclusion of BAR level disclosure in a venture issuer prospectus when the acquisition is significant at the 100% level. Alternatively, venture issuers can still choose to provide prospectus disclosure by complying with the existing interim MD&A and Form 51-102F6. 

Exceptions from Audit Committee Composition Requirements

Pursuant to the Amendments, venture issuers are now also required to have an audit committee consisting of at least three members, the majority of whom cannot be executive officers, employees or control persons of the issuer. The CSA originally proposed not to provide for exceptions from these requirements. After considering comments received, the CSA decided to include exceptions for events outside the control of the member (subsection 6.1.1(4) of NI 52-110) and for death, disability or resignation of a member (subsection 6.1.1(5) of NI 52-110).

Changes to Annual Information Form for Mining Issuers

The Amendments also revise the annual information form (“AIF“) disclosure requirements for mining issuers by harmonizing the AIF disclosure with the amendments made in 2011 to National Instrument 43-101 Standards of Disclosure for Mineral Projects.

Transition Dates

Other than those Amendments set out below, the Amendments are in effect as of June 30, 2015. The option to provide quarterly highlights disclosure will apply in respect of financial years beginning on or after July 1, 2015. The executive compensation filing deadlines for venture and non-venture issuers will apply in respect of financial years beginning on or after July 1, 2015. The audit composition requirements will apply in respect of financial years beginning on or after January 1, 2016.

For more information, please refer to the CSA 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 at


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