Amendments to the TSX Venture Exchange’s Policies on Private Placements and Loans, Loan Bonuses, Finders Fees and Commissions

January 2015

On January 26, 2015, the TSX Venture Exchange (the “Exchange”) implemented amendments to Policy 4.1 – Private Placements (“Policy 4.1”), the corresponding Form 4B – Notice of Private Placements (“Form 4B”) and other related forms and Policy 5.1 – Loans, Loan Bonuses, Finder’s Fees and Commission (“Policy 5.1”). A number of the changes are non-substantive in nature and involve, among other things, a redrafting of the policies to provide better clarity and guidance. A summary of the notable substantive changes are discussed below.

Policy 4.1 – Private Placements

  1. Expanded Guidance on Notice and Acceptance Procedures

    The summary of procedures section is revised to provide detailed guidance on the steps and procedures involved in the notice and acceptance process for a private placement offering by the Exchange.

  2. Part and Parcel Pricing Exception

    The part and parcel exception section has been revised to facilitate an understanding of the existing pricing rules and to clarify that the exercise price of warrants issued as part of a concurrent financing to a Qualifying Transaction, Reverse Takeover or Change of Business must not be less than the Market Price.

  3. News Releases

    Expanded guidance is provided with respect to the disclosure requirements for the initial, closing and other news releases that may be applicable to a private placement. An issuer is required to provide its initial disclosure of a private placement at the time the price is reserved by news release, or alternatively, if a Price Reservation Form is filed, upon the earlier of the private placement constituting a Material Change for the issuer and 30 days after the Price Reservation Date.

  4. Filing Requirements

    Expanded and detailed guidance is provided with respect to the filing requirements applicable to an application for conditional acceptance and an application for final acceptance for a private placement offering.

  5. Closing of the Private Placement

    The closing of a private placement section has been revised to provide expanded and detailed guidance with respect to the Exchange’s conditions for closing, timeframes for closing and final filing requirements. If a private placement results in the creation of a new Insider or Control Person, the issuer cannot close on subscriptions from those persons until the final Exchange acceptance has been received.

  6. Amending Convertible Securities

    The Convertible Securities sections of Policy 4.1 have been significantly redrafted. Of note, Policy 4.1 now includes the applicable requirements for obtaining Exchange acceptance for an amendment to the terms of previously issued Convertible Securities.

  7. Implementation of V-File and Discontinuation of Expedited Filing System

    The Exchange has recently introduced “V-File”, an electronic filing system, which allows for the filing of the information that is currently included in Form 4B. This system also automates certain components of the Exchange’s review and acceptance process for private placements. The intention is for V-File to create efficiencies in the review and acceptance process as certain aspects of the filing, review and acceptance process will be automated and the transfer of information is quicker. As a result of the implementation of V-File, the Expedited Private Placement system is discontinued.

The full text of the amendments to Policy 4.1 is available at: http://www.tsx.com/resource/en/1055.

Policy 5.1 – Loans, Loan Bonuses, Finder’s Fees and Commission

1. Revised Loan Bonus Requirements and Limitations

    1. The applicable Market Price will now be used when calculating the limits for both bonus shares and bonus warrants, instead of the Discounted Market Price.
    2. The limit on bonus warrants is increased from 40% to 100% of the value of the loan, thereby providing 100% warrant coverage. This revision, along with (a) above, brings in line the Exchange’s limit on detachable warrants issued in connection with a convertible debenture (as set out in Policy 4.1) and the current limit on bonus warrants issued in connection with a non-convertible loan.
    3. Generally, bonus shares will no longer be permitted on loans having a term of less than one year. Conversely, if the loan bonus is comprised of warrants only, bonus warrants are permitted on loans having a term of less than one year.
    4. Expanded and detailed guidance is provided with respect to the provisions related to the acceptability of a loan bonus for loan renewals or extensions.

2. Restrictions on Finding Oneself

The Exchange implemented restrictions on the ability of an issuer to pay either: (a) a commission to an investor in respect of such investor’s own investment in the issuer; or (b) a finder’s fee to a vendor or purchaser in respect of such investor’s sale or purchase of assets or services to or from the issuer. Policy 5.1 sets out the exceptions to these restrictions, which include: (a) commissions payable to a company that is a Registrant in consideration for any securities it acquires as a principal pursuant to a brokered financing for which it is acting as underwriter or agent; (b) commissions or finder’s fee payable to a person in respect of a transaction with such person, if such person was, prior to and independent of the consummation of that transaction, retained by written agreement with the issuer to source capital (for a financing transaction) or seek out a buyer/seller of assets or services or perform a similar function (for a non-financing transaction); or (c) in other circumstances as may be determined by the Exchange on a case by case basis.

3. Commission Limitations

In respect of a financing transaction, the Exchange does not prescribe restrictions on the cash component of any commission or the cash component of any other form of compensation payable by the issuer. However, in respect of a financing transaction, if a commission or other form of compensation payable by an issuer includes shares or warrants, the aggregate value of the shares and warrants cannot exceed 12.5% of the gross proceeds of the financing. The Exchange will, for these purposes, value one warrant as one-half of a share. Notably, the existing 25% limit on warrants under Section 3.4 of Policy 5.1 remains unchanged.

The full text of the amendments to Policy 5.1 is available at: http://www.tsx.com/resource/en/1061.

All capitalized terms that are not defined herein have the meaning ascribed to them in the policies of the Exchange.

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