TSXV launches passport listing process to accelerate access to markets

In response to a rapidly evolving market and following consultation with market participants, the Toronto Stock Exchange’s (“TSX”) Venture Exchange (the “TSXV”) has introduced a new passport listing process for companies seeking to go public (the “Passport Listing Process”). The goal of the Passport Listing Process is to identify advanced new listing applicants, provide them with greater certainty, accelerate their listing and capital-raising timelines and reduce costs associated with the listing process. Applicants seeking to list on the TSXV pursuant to the Passport Listing Process benefit from greater access to TSXV staff and expedited reviews.

Pre-filing requirements

New listing applicants that wish to take advantage of the Passport Listing Process are required to submit a pre-file letter with detailed analysis demonstrating that they meet the qualification requirements for the Passport Listing Process. Following the TSXV’s receipt and review, a pre-filing conference is held with the TSXV who will confirm the applicant’s eligibility to file under the Passport Listing Process within three business days thereafter.

A prospective applicant to the TSXV must demonstrate in its pre-file letter that it has the ability to meet the following criteria to qualify for the Passport Listing Process:

Listing requirements:

• satisfies the Initial Listing Requirements applicable to it under TSXV Policy 2.1 (Initial Listing Requirements) without requiring any waiver of such requirements. These requirements vary based on whether the applicant is seeking to list as a “Tier 1” or “Tier 2” issuer;
• has a minimum of $500,000 in unallocated funds;
• either:
  • completes a minimum $10 million majority arm’s length equity financing in connection with the listing application; or
  • has a market capitalization of at least $50 million at the time of listing, and:
    • has a minimum of $5 million of revenue in the most recent financial year, or
    • completes a majority arm’s length equity financing representing not less than 10 percent of the number of issued and outstanding shares at the time of listing.

Financial statements: is able to identify and provide an analysis of the financial statements proposed to be included in the applicant’s disclosure documents, including the expected level of auditor engagement;

Public distribution requirements: meets the public distribution requirements identified in TSXV Policy 2.1 (Initial Listing Requirements). The public distribution requirements vary based on whether the applicant is seeking to list as a “Tier 1” or “Tier 2” issuer;

Directors and Officers: the applicant’s directors and officers meet the following criteria:

• satisfies the requirements of TSXV Policy 3.1 (Directors, Officers, Other Insiders & Personnel and Corporate Governance);
• a majority have at least a two-year positive track record with TSX- or TSXV-listed companies during the ten years preceding the application for listing;
• the Chief Financial Officer has a Certified Public Accountant designation or at least two years recent experience as Chief Financial Officer of a public company; and
• a majority are resident in Canada or the United States;

Not an Emerging Market Issuer: the applicant is not an “Emerging Market Issuer” as defined in TSXV Policy 2.10 (Listing of Emerging Market Issuers). An Emerging Market Issuer is an issuer whose principal business operations or operating assets are primarily located in or conducted from any jurisdiction outside of Canada, the United States, Western Europe, Australia and New Zealand. However, the applicant may be an Excluded Resource Issuer as defined in TSXV Policy 2.10 (Listing of Emerging Market Issuers). Excluded Resource Issuers are mining issuers or oil & gas issuers for which a majority of each of the senior officers and directors and a Control Person (as defined in TSXV Policy 1.1 (Interpretation)) have either: (i) been resident in Canada, the United States, Western Europe, Australia or New Zealand for a majority of the ten years preceding the application for listing, or (ii) have an aggregate of not less than five years of experience as directors or senior officers of TSX or TSXV listed companies during the ten years preceding the application for listing and have demonstrated a positive corporate governance and regulatory history; and

Qualifying transaction, takeover or change of business: where the applicant is seeking to list with the TSXV through a Qualifying Transaction, Reverse Takeover or Change of Business, as defined in TSXV policy 2.4 (Capital Pool Companies) or Policy 5.2 (Changes of Business and Reverse Takeovers), as applicable, the applicant must meet the following further criteria:

• such transaction must not be a Related Party Transaction, as defined in Multilateral Instrument 61-101 - Protection of Minority Security Holders in Special Transactions; and
• all information required to be included in a comprehensive news release is available for same pursuant to Policy 2.4 (Capital Pool Companies) or Policy 5.2 (Changes of Business and Reverse Takeovers), as applicable.

Application requirements

Following confirmation of eligibility from the TSXV for the Passport Listing Process, the applicant is required to submit a detailed TSXV Passport Initial Submission Letter (the “Initial Submission Letter”) requesting that the application be reviewed under the Passport Listing Process and discussing the applicant’s eligibility criteria. The Initial Submission Letter must be accompanied by a draft of the disclosure document and other disclosure materials including financial statements, a completed Form 2J listing securityholder information, if the applicant is a mining or oil and gas issuer, geological reports in accordance with applicable national instruments, personal information forms, copies of all material agreements, and if the applicant’s Principal Properties, as defined in TSXV Policy 1.1 (Interpretation), or assets are located outside of Canada or the United States, draft title or corporate opinions.

All application materials and due diligence must be substantially completed at an early stage. Following submission of the required documentation, the TSXV commences its review on an expedited basis and provides an initial comment letter within five to seven business days. Passport Listing Process applicants can expect regular meetings with the TSXV to discuss comments and the status of their application.

Applicants should be wary that their eligibility for the Passport Listing Process may be reviewed by the TSXV on an ongoing basis where the applicants’ response times to TSXV staff are consistently delayed or where there are material challenges in meeting TSXV listing requirements.

For more information on the TSXV’s Passport Listing Process, please contact the authors of this article or any member of the DLA Piper (Canada) LLP capital markets team.