Information on legal and business topics from Canadian business lawyer Shane McLean

Archive for the ‘TSX’ Category

Review of TSX Venture Exchange New Listings Activity in 2012

Posted by Shane McLean on May 14, 2013

Each year the TSX Venture Exchange publishes a summary of its “new listings” activity.  New listings include IPOs, qualifying transactions through the Capital Pool Company program, companies completing a reverse takeover and companies moving up from the NEX exchange or down from the TSX.  Here are some random reflections after reviewing the data for 2012:

  • In 2012 there were a total of 236 “new listings” compared to 334 in 2011.  I would not think the reduction in new listings activity comes as a shock to anyone that works in or follows public markets in Canada.
  • Of the new listings in 2012 there were 121 IPOs.  44 of those were traditional IPOs of operating companies (vs 47 in 2011) and the other 77 were IPOs of Capital Pool Companies (vs 112 in 2011).  The rate of traditional IPOs is fairly steady year over year.  The year over year drop in CPC formation would seem to line up with market sentiment over a good portion of 2012.
  • In 2012 there were 61 CPC qualifying transactions completed on the TSXV compared to 87 during 2011.   It would be interesting to know whether there is a causal relationship between this statistic and the drop in CPC formation during 2012.  For example, did the drop in qualifying transactions in 2012 lead to a drop in interest in forming a CPC or was it the other way around?  It is not possible to say from reviewing the publicly available data but with CPC formation and qualifying transactions accounting for 60-65% of new listings activity on the TSXV over the last couple years, any drop in CPC activity hurts the Exchange.
  • In 2012 there were half as many Reverse Takeovers on the TSXV as in 20112 (18 in 2012 vs 36 in 2011).  I would hazard a guess that this is closely tied to the general drop in investment activity that was felt by market participants in 2012.  If doing an RTO will not open up new sources of funding for private enterprises it greatly reduces the incentive.

All in all, the 2012 TSX Venture Exchange new listing statistics do not reveal any surprises and seem to confirm what those of us who work with companies in the public markets felt in terms of market sentiment and availability of capital during much of 2012.  Here’s hoping for a pick-up in 2013!


Posted in Capital Pool Company Program, Financing, Mergers and Acquisitions, TSX, TSX Venture Exchange | Leave a Comment »

Common Mistakes for New Public Companies

Posted by Shane McLean on February 21, 2013

Here is a link to a recent article in the Financial Post ( which comes from the Ontario Securities Commission. It sets out some of the more common mistakes the Ontario Securities Commission has seen from newly listed public companies. The mistakes listed essentially boil down to: (i) not putting enough effort into compliance with rules and laws applicable to public companies; (ii) not understanding securities laws; and (iii) issues with disclosure, either by providing inappropriate disclosure or not providing disclosure on a timely basis.

I have seen a lot of issuers make a lot of mistakes and would put the disclosure issues at the top of the list in terms of importance. The other issues around the rules, securities laws etc. can often be dealt with by ensuring the company has good external advisors. In my  view the disclosure obligations are something that management must really internalize and understand because, at the very least, they need to have a good sense of when to call on their external advisors for advice on whether and when disclosure is required.

Posted in Capital Pool Company Program, Law, TSX, TSX Venture Exchange | Leave a Comment »

Notice and Access Comes to Canada

Posted by Shane McLean on January 23, 2013

Here is my latest post from the LW Connect Blog:

Amendments to Canada’s securities laws come into effect in February introducing a process referred to as “Notice and Access” for public company shareholder meetings taking place March 1, 2013 or later.  The “Notice and Access” process provides issuers (other than investment funds) with the ability to deliver a prescribed form of notice to shareholders directing them to a non-SEDAR web site where they may access the balance of the meeting materials.  This process should reduce both printing and mailing costs for issuers because they can avoid printing and mailing the meeting circular and financial statements to all shareholders.  The Notice and Access is available for all types of shareholder meetings. For each issuer, it will be important to review its governing corporate statute (e.g. Canada Business Corporations Act, Ontario Business Corporations Act, etc) to determine if the Notice and Access process will meet all shareholder meeting notice requirements under such statute.   For more information about Notice and Access please feel free to contact Shane McLean at or (613) 599 9600 ext. 262

Posted in Law, TSX, TSX Venture Exchange | Leave a Comment »

CSA Report on Review of Executive Compensation Disclosure

Posted by Shane McLean on November 30, 2009

On November 20, 2009 the Canadian Securities Administrators (the “CSA”) released their report on their recent review of executive compensation disclosure.  The review conducted by the CSA follows the adoption of a new form for executive compensation disclosure by Canadian public companies which came into effect on December 31, 2008.  The new form requirements added additional areas of disclosure and more detail in some of the areas previously covered.

The CSA began their review in spring of 2009 in order to assess the implementation of the new disclosure requirements.  70 public companies were reviewed and of that number, the CSA reports that 62 “generally met the [new] requirements”.  However, “most” of the issuers reviewed were asked to improve their disclosure in future filings and 8 of the companies reviewed were required to file supplemental materials because their disclosure did not meet minimum acceptable standards.

The two key areas where most issuers failed to meet the standards expected by the CSA were the discussion and analysis of (i) performance goals and (i) benchmarking.  The CSA believes that companies should be more specific and detailed with respect to the performance goals that are tied to executive compensation.  In addition, the CSA felt that companies that use benchmarking to assess executive compensation as against companies in their peer group did not, among other things, clearly explain the methodologies and many did not disclose the peer group against which executive compensation was benchmarked.

Issuers and their advisors should take note not just of the findings of the CSA review but also of the areas on which the review concentrated in an effort to ensure that future executive compensation disclosure is carefully crafted so as to  avoid the shortcomings described in the report.   In this era of closer scrutiny on executive compensation levels, transparency and attention to detail are crucial.

Posted in Law, Misc., TSX, TSX Venture Exchange | Leave a Comment »

Rights offerings — an old new way to raise money

Posted by Shane McLean on November 12, 2009

In the past 6 months or so I have had a number of clients ask about the possibility of raising funds by way of  a rights offering.  In late October we even filed a preliminary prospectus for one of our TSX Venture Exchange listed clients in connection with a proposed rights offering.  Public markets have seen a bit of a resurgence lately but we all know how abysmal things have been over the last while and so I think more companies are  looking at creative ways to raise funds and have been looking to the rights offering as one alternative.

In a “rights offering” a corporation issues “rights” to its existing shareholders. The rights entitle those existing shareholders to acquire additional shares (or some other form of security) from the corporation for a fixed exercise price over a fixed period of time (called the rights offering period).  When issued by a public company, the rights will typically trade  as separate securities on the same exchange as the company’s shares for the duration of the rights offering period.

Companies often look at rights offerings as a way to provide a presumably willing audience — i.e. those who have already bought the company’s shares — with an ability to buy additional shares directly from the company.  To sweeten the deal and encourage exercise of the rights, the rights are often issued with an exercise price at a discount to the market price of the common shares and may also entitle the exerciser to receive a warrant, preferred share or some other security in addition to the common share on exercise of the right. The “sweeter” the deal, the more likely  the rights will have some trading value, thereby enriching your shareholders just by issuing them, and the more likely they will ultimately be exercised prior to the end of the rights offering period.

Rights offerings of smaller sizes can often be done without prospectus under applicable Canadian securities laws but larger offerings will usually require a prospectus.

Rights offerings seem to have had a mixed reputation in the past with some viewing them as a fund raising method of last resort.  For example, I was told by someone at the TSX Venture Exchange that for many years they have only seen one or two a year on the exchange.  Recently, however, there seems to be a renewed interest in this fund raising vehicle and it’s worth a second look for any company looking to raise funds.

Posted in Financing, Law, Misc., TSX, TSX Venture Exchange | Leave a Comment »

TSX To Require Shareholder Approval of Public Company Acquisitions

Posted by Shane McLean on September 28, 2009

The TSX manual, applicable to companies listed on the Toronto Stock Exchange, currently requires that a listed company obtain approval from its shareholders if it intends to complete an acquisition of another company and, in the course of that acquisition, intends to issue shares representing more than 25% of its currently outstanding shares.  Since 2005 there has been an exemption to that shareholder approval requirement when a TSX listed company was acquiring another public company.   On September 25, 2009 the TSX announced that this exemption will be removed effective as of November 24, 2009.

After November 24, 2009 all acquisitions which involve the issuance of shares representing more than 25% of a TSX listed company’s currently outstanding shares will require shareholder approval.

The amendment follows a public consultation process initiated in October of 2007, which at one point saw the TSX propose a new 50% threshold for public company acquisitions.  According to the TSX, a majority of the submissions received were in favour of eliminating the exemption and in favour of applying the same 25% threshold to both private and public company acquisitions.

Posted in Law, Mergers and Acquisitions, Misc., TSX | Leave a Comment »

CSA Releases Report on Continuous Disclosure Review

Posted by Shane McLean on July 29, 2009

On July 24, 2009 the Canadian Securities Administrators (“CSA”) released a staff notice with the results of their continuous disclosure review program of public companies in Canada for the fiscal year ended March 31, 2009.   The CSA conducted a total of 1,094 continuous disclosure reviews out of approximately 4,300 issuers who are reporting issuers in Canada.  Of those, 465 were full reviews and 629 were issue oriented reviews.   These numbers are up from last year when the CSA reviewed only 854 issuers.

The results are a bit concerning in that a full 80% of issuers reviewed had some form of action required as a result of the review.  In other words, of the 1,094 companies reviewed only around 218 of them came out clean.  Here are some highlights:

  • 5% of reviewed companies  had critical disclosure deficiencies and were either referred to enforcement, cease traded or placed on a default list
  • 13% were required to amend or refile certain continuous disclosure documents
  • 14% were warned about certain disclosure enhancements that should be considered in their next filings
  • a full 48% were required to make changes or enhancements in their next filings as a result of  deficiencies identified

Even if we exclude the 14% who received  “warnings” to “consider” disclosure enhancements in their next filings, that leaves 66%, or about 722 issuers, who were actually not in compliance with the legal public disclosure requirements.   That’s over 16% of all reporting issuers in Canada!

This should be a wake up call to public  companies to ensure that adequate time and attention is given to public disclosure documents and requirements by both the company and its legal and accounting advisers.  Not only will this avoid future  heat from the CSA, but more importantly it will mean that the investing public will have access to the information they are supposed to receive by law.

Too often I hear from companies that we speak to that their existing lawyers and accountants do not dedicate enough time to prepare and review public disclosure documents and only turn their attention to the task when the filing deadline looms.  This kind of approach makes it more likely that there will be deficiencies in disclosure and should definitely be avoided.  As everyone knows, it’s far too easy to miss a detail when rushing through the materials at the last minute.

A final note to companies that don’t use their accountants and/or lawyers to review all continuous disclosure documents:  you should.   If the cost of review scares you, remember that an ounce of prevention is worth a pound of cure and if your advisers are too expensive relative to the service you are receiving, get new advisers that are more reasonably priced.

Posted in Law, Misc., TSX, TSX Venture Exchange | Leave a Comment »

What is a Special Purpose Acquisition Corporation?

Posted by Shane McLean on June 7, 2009

With many similarities to the TSX Venture Exchange’s Capital Pool Company Program (see my prior post on the CPC Program), the TSX has itself rolled out a program in which it will permit the listing of what are essentially shell companies with lots of cash in them for the sole purpose of finding an acquisition target.  Called a Special Purpose Acquisition Corporation or “SPAC” (note that unlike my post about the CPC program when I joked that nobody calls it a “C-Pick”, in this case people do call it a “Spack”), the TSX has adopted the concept from the United States where this type of program has existed on the more junior exchanges/bulletin boards for years.    

The similarities between the TSX SPAC Program and the TSX Venture Exchange CPC Program are many including (i) the small group of founders with certain minimum investment requirements; (ii) an IPO to raise funds in a shell company and (iii) a defined period of time in which to find a target acquisition.   The biggest difference in my mind is size.  Where a CPC shell can raise as little as $200,000 including both seed capital and IPO proceeds, a SPAC must raise a minimum of $30 Million on its IPO.  The cash commitment on the part of the founders of a SPAC is larger too given that they must hold an equity stake of between 10% and 20% of the SPAC after the IPO.

According to the website, from 2003 to 2008 there was nearly $22 Billion raised on SPAC IPOs in the United States.  However, as far as I am aware there have been no SPACs in Canada yet even though the TSX opened the program for business in December of 2008.  The TSX is out there at seminars and events talking up the program in the hopes that someone will take the plunge (don’t forget that more IPOs and more listings means more revenue in the form of listing fees for the TSX which is itself a for-profit company).  Unfortunately they rolled out the program in the middle of a recession and it may be a while before anyone is able to raise $30 Million for a shell company IPO in Canada.

For more detail on the program, check out the TSX’s product sheet on SPACs or give me a call.

Posted in Capital Pool Company Program, Financing, Special Purpose Acquisition Corporations, TSX, TSX Venture Exchange | 1 Comment »