Adjustments To Capital Pool Firm (CPC) Program – Company/Business Regulation

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The TSX Venture Exchange (“TSXV”) recently made changes to its Capital Pool Company (“CPC”) program. The CPC program is offered exclusively by the TSXV and provides an alternative way for an operating company to list its shares on such an exchange. The CPC, a financial instrument with no assets other than cash and no commercial activity, is created by experienced corporate executives and completes an initial public offering (an “IPO”) to raise funds. After the IPO, the CPC seeks to complete a transaction with an operating company that will access the capital, shareholders and expertise of the CPC to complete a listing on the TSXV (the “Qualifying Transaction”).

Considered a more flexible listing process for an operating company than a traditional IPO, the CPC program is similar to a reverse takeover listing transaction, with the important difference that the CPC is a clean slate shell company with cash. The CPC program made up nearly 50% of new TSXV listings for the past 10 years. However, in recent years there has been a decrease in the use of this program, so it was decided to update the CPC program to make it more attractive.

The changes to the CPC program include a revision of Policy 2.4 – Capital Pool Companies (the “New CPC Policy”) and changes to the form of the Trust Deed and Disclosure Document to be used in a Qualifying Transaction. The new CPC guideline came into force on January 1, 2021. The main changes are described below.

Increasing the maximum size of the financing rounds

The new CPC policy increases the maximum amount the CPC can raise from $ 5 million to $ 10 million, increasing the amount available to fund a qualifying transaction. In addition, the maximum value of shares that can be issued as part of the IPO at a price below the price per share (so-called seed shares) has been increased from USD 500,000 to USD 1 million, so that the founders and first-time shareholders have more capital in Can bring in the CPC if they want to do it. The new CPC policy also removes the cap on the allowable costs of the CPC that are incurred in completing a qualifying transaction.

Removal of certain restrictions on agents

The current CPC program imposes certain restrictions on agents ‘participation in the CPC process, which have been viewed as limiting the agents’ ability or interest to participate. These restrictions included a maximum number of shares that may be issued to members of the Pro Group (as that term is defined in the policies of the TSXV) and a ban on paying finder fees to agents involved in the process to identify a suitable target for the qualifying transaction (the “Target”).

In addition to the removal of these restrictions (in the case of the limitation of the finder fees, as long as the agent acts on market terms both towards the CPC and towards the target), the new CPC policy extends the maximum duration of the options that can be granted to agents (from 2 to 5 years) and offers the opportunity to grant options to agents through private placements conducted by the CPC.

Reduced trust duration

The new CPC policy standardizes the escrow period to 18 months from the publication of a final bulletin by the TSXV in connection with the qualifying transaction, while the current program allows for a escrow period of up to 36 months for Tier 2 issuers.

Coordination of certain requirements with securities laws

In order to reduce the regulatory and disclosure effort for CPCs, the new CPC guideline also aligns disclosure obligations and requirements with regard to holding periods to the applicable securities laws. Accordingly, the disclosure document form required for a qualifying transaction has been modified to refer to the relevant requirements on Form 41-101F1 – Information Required in a Prospectus, and the TSXV no longer requires securities to be issued to principals of the CPC and the CPC The target issued in connection with the qualifying transaction is subject to a holding period of 4 months in addition to a blocking period applicable under securities laws.


Existing CPCs and issuers who have already completed their qualifying transaction may benefit from the relaxed requirements of the new CPC policy in certain situations, provided that the consent of disinterested shareholders is obtained before changes are made to reduce the length of an escrow period in effect, including changing the terms of any outstanding brokerage option.

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