TSXV Refreshes Its Capital Pool Firm Program – Company/Business Regulation

Effective January 1, 2021, the TSX Venture Exchange (TSXV) Capital Pool Company program (the CPC program) will experience several important policy changes (the CPC Changes), reflecting the first major update in 10 years.

The CPC changes improve access to capital for capital pool companies (CPCs) and growth companies alike by increasing the flexibility of the CPC program while reducing the associated regulatory burden on both the IPO of the issuer and the resulting issuer after the qualifying transaction (the Resulting Issuer).


The CPC program, with its origins in the junior mining, oil and gas industries, has long been a preferred tool for early access to public capital and facilitates the growth and development of projects through the skilled transaction process of the CPC. The CPC program enables experienced directors and officers to set up businesses or CPCs with no assets (other than cash) and no business operations, but with a mandate to conduct transactions over a 24 month period. The combination of the TSXV listing, a free cash pool and an experienced board makes CPCs attractive for private companies and offers an option for going public with lower risk due to the qualified transaction.

Important changes to the CPC

On December 1, 2020, the TSXV announced a series of policy changes to the CPC program that will take effect on January 1, 2021. The updated guidelines have been developed in consultation with the TSXV stakeholders and are aimed at improving access to capital and removing regulatory barriers to various stages of the CPC process. The main changes are listed below.

Increased limits for CPC Seed and Aggregate Capital Raise

The CPC changes double the caps on funds CPCs receive through launch rounds and initial public offerings as follows:

  • $ 1,000,000 to raise capital by issuing seed capital below the IPO price.
  • $ 10,000,000 for gross proceeds generated by the CPC.

These changes are likely to put more capital in the hands of CPCs with stronger boards and management.

No deadline for completing a qualifying transaction; No cancellation of Seed Share

CPCs are no longer subject to the time pressure to complete a qualified transaction within 24 months. Under the earlier policy, the TSXV could suspend or delist its shares if a CPC fails to complete a qualifying transaction within 24 months of listing. Alternatively, CPCs could transfer their listing to NEX. This measure has often been criticized by market participants as it imposed artificial time pressure on CPCs to complete qualified transactions in the pursuit of the best possible transaction. The CPC changes eliminate the need to complete a qualified transaction within 24 months, the associated cancellation of seed capital shares and the transfer to NEX.

Reduced public distribution requirements

As part of the updated policy, the TSXV relaxes the requirements for the public distribution of CPCs. Under the new rules, after an IPO, a CPC only needs to have a free float of 500,000 shares held by at least 150 public shareholders (each of whom owns at least 1,000 shares). A public free float of 1,000,000 shares with at least 200 public shareholders is currently required. With the CPC changes, the CPC program requirements for public distribution will be better aligned with the Canadian Stock Exchange. The policy changes also require that at least 20% of the outstanding shares of the CPC be held by public shareholders.

Relaxed demands on directors and officers

The CPC changes will reduce residence restrictions for directors and officers of the CPC and the resulting issuer. Indeed, the current policy required all directors and officers of CPCs to be resident in Canada or the United States. The policy changes require that only a majority of CPC directors and officers be Canadian or US residents and completely remove the residency requirements for directors and officers of the resulting issuer.

The CPC changes also allow a single CPC agent to serve as CEO, CFO, and company secretary at the same time, recognizing the limited requirements for all of these roles until a qualified transaction is completed.

Benefits for agents and Pro Group members

Agents and Pro-Group Members (ie, members of the TSXV and their employees, partners, affiliates, etc.) will receive new incentives to participate in the CPC program.

  • The exercise period for the broker’s options is extended from 24 months to 5 years.
  • Shares that were acquired by Pro-Group members (who are not clients of the CPC) at or above the IPO price are no longer subject to escrow. Effective January 1, 2021, CPCs and resulting issuers may amend their escrow agreements to release all of these shares immediately.
  • Shares that are issued to Pro-Group members as part of a qualifying transaction are no longer subject to a conversion period.

Reduced size and duration of the escrow

The CPC changes streamline the escrow structure of the CPC program and establish universal schedules.

  • Under the current policy, the trust terms followed a tiered approach with different trust terms for shareholders of Tier 1 and Tier 2 issuers (with Tier 2 holders being subject to a 36 month trust plan). The CPC changes eliminate this approach and provide that all securities on deposit, regardless of the tier of the issuer, will be held on an 18 month schedule that is released upon completion of the qualifying transaction and every six months thereafter in increments of 25%.
  • CPC stock options and shares issued upon exercise of CPC stock options are also held in escrow. However, these shares will be released upon completion of the qualifying transaction, unless those shares were granted prior to the IPO and at a price below the IPO price.

Qualified fees for the transaction finder

Suitable finders will also receive new incentives in the form of reduced restrictions on finder fees.

  • Not completely customary parties that were previously completely prohibited are entitled to payment of finder fees in connection with a qualifying transaction if:
    • The qualifying transaction is not an unmatched qualifying transaction.
    • The qualifying transaction is not a transaction between the CPC and an existing public company.
    • The finder’s fee is only payable in cash, listed shares and / or warrants.
    • The amount of concurrent funding is not included in the value of the measurable benefit that is used to calculate the finder fee. and
    • The consent of the shareholders with a simple majority (without the votes of the recipient of the finder’s fee and its associated companies and affiliated companies) is obtained.

Transitional provisions

Flexible transitional arrangements will allow CPC applicants, existing CPCs and resulting issuers to benefit from the CPC changes alike. CPC applicants who have not yet completed an IPO can choose to adhere to the revised policy or complete their IPO under the existing framework.

Existing CPCs may take certain actions without shareholder consent, including increasing their maximum gross proceeds under the new cap and issuing new broker options in connection with a private placement. Some changes, e.g. B. The elimination of the consequences of failing to complete a qualifying transaction within 24 months, expanding the options of the existing broker and changing the terms of trust in accordance with the revised policy, but require uninterested shareholder approval.

Finally, subject to the approval of the uninterested shareholder, the resulting issuers may amend their CPC escrow arrangements to align them with the provisions of the revised policy. This includes the immediate release of shares that no longer need to be deposited.


Overall, the CPC changes represent promising progress for the CPC program. Essentially, the policy changes create additional incentives for various stakeholders to participate in the CPC process, whether by reducing the regulatory burden on the CPC itself or by improving the Flexibility of the CPC’s fundraising activities and keeping track of qualified transactions. We anticipate that these changes will make the CPC program even more attractive to qualified boards of directors and management teams, growth companies and investors alike, and will encourage the growing participation of a wide range of stakeholders.

This article was written with the assistance of Sebastian Maturana, a student.

The content of this article is intended to provide general guidance on the subject. A professional should be obtained about your particular circumstances.