TSXV Introduces Modifications to Capital Pool Firm Program


On December 1, 2020, the TSX Venture Exchange (“TSXV” or the “exchange“) Announced changes to its Capital Pool Company (“CPC“) Program, valid from January 1, 2021.[1] Revisions to TSXV Policy 2.4 – Capital Pool Companies (the “New guidelines“) Were introduced to renew interest in the CPC program. In particular, the exchange noted that the changes:

  • Flexibility by easing residence restrictions and simplifying spending restrictions;
  • Reducing regulatory burdens by easing shareholder distribution and approval requirements and reducing restrictions on certain subscriptions; and
  • Create value for attendees by increasing seed investment, relaxing discovery fee recipients requirements, and shortening certain escrow requirements.

Overview of the program

The CPC program is a listing vehicle that supports private companies wishing to complete a go-public transaction. A qualifying transaction (“Qualifying transaction“) Similar to a reverse takeover, where an operating company takes over a CPC and then has access to the capital, shareholders, and expertise of the CPC to complete a listing. According to the exchange, this is the most common way companies go public on the TSXV.[2]

Overview of changes to the CPC program

The main policy changes are summarized below. For a complete overview, see the TSXV bulletin announcing the changes. Capitalized terms that are not specifically defined in this article have the meanings assigned to them in the Exchange’s Corporate Finance Manual.

  • Removal of the 24 month period for the qualifying transaction: If a CPC does not complete its Qualifying Transaction within 24 months of listing, it will no longer need to obtain shareholder approval to transfer the CPC to NEX and cancel certain seed capital shares.
  • Directors and officers: Under the new policy, only a majority, not all, of directors and officers must be Canada or the United States or have experience in public companies. In addition, under the new policy, one person can serve as CEO, CFO and secretary at the same time.
  • Start-up capital and total funds: The new guideline increases the maximum total gross proceeds from the issue of shares as part of their IPO (“initial public offering“), Seed stocks and stocks issued in a private placement from $ 5 million to $ 10 million.
  • Public distribution requirements: The requirement that a CPC must have 200 public shareholders at the time of the CPC’s IPO has been reduced to 150 public shareholders in the new policy – although at the time of the qualifying transaction the issuer still has to have 200 shareholders according to the standard listing requirements . In addition, under the new policy, CPCs must have a public free float of at least 500,000 shares instead of 1,000,000. The new directive also introduces a new requirement that public shareholders must collectively hold at least 20% of the shares outstanding.
  • Shortening the trust periods: Under the new policy, after a qualifying transaction is completed, all CPC trusts are subject to an 18 month trust plan – regardless of whether the CPC is a Tier 1 or Tier 2 issuer – with 25% of the trusts being released on the day on which the TSXV files a bulletin for the qualifying transaction of the CPC, and 25% on each of the 6, 12 and 18 months after that date. In addition, CPC stock options and stocks issued upon exercise of stock options will be published on the day the TSXV publishes the final bulletin, unless these securities were granted prior to the IPO and at an exercise price below the IPO price.
  • Shares are subject to the deed of transfer: Certain stocks are no longer subject to fiduciary requirements under the new policy, including stocks acquired by the Pro Group at or above the IPO price and stocks acquired by a controller in the secondary market. However, the escrow requirements will continue to apply to seed equity shares issued below the IPO price, shares purchased from homeowners by non-market parties of the CPC, CPC stock options, and shares issued upon exercise of CPC stock options at a lower exercise price were considered the IPO price.
  • Use of proceeds: General and administrative expenses under the new policy will be capped at $ 3,000 per month – instead of the previous limit of less than 30% of gross proceeds from the sale of securities issued by a CPC and $ 210,000 – with new guidelines on allowances Use of proceeds and payments to non-arm’s length parties.
  • Finder’s fees: A non-market-based party may receive a finder’s fee under the new policy if certain criteria are met, including obtaining uninterested shareholder approval.
  • Stock options: CPCs are now entitled to enact 10% Rolling Stock Option plans that do not allow the total number of common shares reserved under the option to exceed 10% of the common shares outstanding at the time of grant.
  • Disclosure requirements: Form 3B1 / 3B2 – The information required in a circular / filing statement for a qualifying transaction has been revised to better meet NI 41-101 requirements and to reduce duplication and regulatory burden.

Transitional provisions

The new guideline also contains tailor-made transitional provisions, depending on the level of the CPC.

CPC applicant

If a CPC has filed its CPC prospectus but has not yet completed its initial public offering, it may choose to adhere to the new policy provided that it revises its prospectus and trust agreement. or it may file its final prospectus and complete its initial public offering in accordance with the previous policy and continue to be subject to the previous policy with the option to comply with the transitional provisions applicable to existing CPCs set out below.

Existing CPCs

Existing CPCs can implement certain changes immediately, e.g. B. Increase the maximum gross revenue that the CPC can earn to $ 10 million.

However, the following changes require disinterested shareholder approval to implement:

  • Eliminating the consequences if a Qualifying Transaction is not completed within 24 months of being listed;
  • Extension of the term of the outstanding broker options from two years to five years;
  • Modifying the escrow terms to track the terms allowed under the new policy;
  • Allowing a finder fee to be paid to a party who is not on market terms; and
  • Adoption of a 10% option plan for vehicles.

Resulting Issuers

The resulting issuers may amend existing CPC escrow agreements to pursue the escrow terms permitted under the new policy and revised CPC escrow agreement, including the 18 month release plan and the immediate release of escrow securities that are no longer subject to escrow for as long as that results The issuer receives the approval of the uninterested shareholder at a general meeting or through written consent.


This article provides a high-level overview of some, but not all, of the changes to the CPC program. For more information on changes to the CPC program, please contact a member of our Securities Practice Group.