Important changes ahead for TSX Venture issuers under proposed changes
The Canadian Securities Administrators (CSA) have proposed a set of sweeping changes that could potentially have a significant impact across the financial reporting and governance landscapes for venture issuers.
After a year-long consultation process, the CSA has issued a proposed new standard, National Instrument 51-103, Ongoing Governance and Disclosure Requirements for Venture Issuers. It would replace a number of existing standards to make them more specific to the needs of venture issuers, including NI 51-102, Continuous Disclosure Obligations, and NI 52-109, Certification of Disclosure in Issuers' Annual and Interim Filings. NI 52-110, Audit Committees, and NI 58-101, Disclosure of Corporate Governance Practices, will also be replaced for venture issuers.
Venture issuers are defined as those listed on the venture exchange. However, debt-only and preferred-share-only issuers will not fall under the venture definition for the purposes of adopting the proposed national instrument. In addition, issuers of securitized products would also be ineligible. These issuers would continue to use the current rules.
Among the key proposals is to make quarterly reporting for interim financial statements and MD&A voluntary. Instead, a more robust semi-annual reporting package would come into play for mid-year reporting. As such, Q1 and Q3 reporting would be effectively eliminated.
However, an issuer could decide to continue the current quarterly reporting structure. In this case, continued compliance with quarterly reporting would be needed for a continued two years.The intention to file quarterly would also need to be press released upfront. The proposals also allow the MD&A to be filed semi-annually, even where the voluntary decision to file the financials quarterly has been made.
Another proposal put forth would be a new requirement for venture issuers to issue an annual report. The annual filing would include the issuer's year-end financial statements, MD&A, CEO & CFO certifications and corporate governance disclosures (including executive compensation).
There are also amendments being made to material-change reports to expand their scope. One of the more significant amendments involves the Business Acquisition Report (BAR). Under the proposed amendments, BARs would be replaced by material-change reports.
One of the final amendments relates to IPOs and prospectus filings, where it has been proposed to limit the historical financial statements to two years and also streamline certain disclosure obligations.
Overall, these proposals have generally been accepted positively by venture issuers because they would simplify the current reporting process. The CSA has received a number of comments on these proposals and is in the process of completing the final rule.
For more information on National Instrument 51-103 or related queries, please contact the author, Maruf Raza, or another member of our Public Markets group.
Maruf Raza, CA, is an Audit and Assurance Partner (Public Markets) in the Toronto office of Collins Barrow.
Information is current to February 2, 2012. The information contained in this release is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act upon such information without appropriate professional advice after a thorough examination of the particular situation.