TSXV Extends Temporary Pricing Relief Measures for Private Placements 


April 2013

Securities Bulletin

The TSX Venture Exchange ("TSXV") has extended the temporary pricing relief measures (the "Relief Measures") it introduced last year relating to private placement financings. Until August 31, 2013, subject to certain conditions, TSXV listed companies will continue to be able to complete:

  • share and unit offerings at offering prices below $0.05;

  • debenture offerings at debenture conversion prices below $0.10; and

  • offerings involving warrants at warrant exercise prices below $0.10.

why are the relief measures needed?

The TSXV implemented the Relief Measures in August 2012 in response to the depressed market environment which has seen the share price of many of its listed companies fall below $0.05. Absent the Relief Measures, TSXV policies prohibit share and unit offerings to be priced below $0.05, thereby making it difficult for companies whose share price has fallen below $0.05 to raise money by way of private placement.

Mindful that private placement financings are the lifeblood of many of its listed companies, the TSXV has temporarily relaxed its pricing rules and introduced the Relief Measures to facilitate the ability of companies, particularly those companies subject to immediate or imminent financial hardship, to complete financings. The Relief Measures were initially set to expire on December 31, 2012, were previously extended to April 30, 2013 and have now been further extended to August 31, 2013.

what conditions must be satisfied?

The Relief Measures are subject to certain conditions:

(a)    a maximum of $500,000 may be raised in reliance on the Relief Measures;

(b)    the share (or unit) offering price must not be less than the last closing price of the company's shares before the private placement is announced (i.e. the offering price cannot be at a discount to such closing price);

(c)    the company must demonstrate that it is subject to immediate or imminent financial hardship and that it does not have the time or resources to complete a share consolidation prior to closing the private placement;

(d)    up to $50,000 (the "Excluded Amount") can be used for general working capital purposes, and the balance of the funds raised must be used to maintain or preserve the company's existing operations, activities and assets;

(e)    with the exception of the Excluded Amount, the company cannot use the proceeds to compensate or settle indebtedness with related parties of the company;

(f)    on closing, the company must issue a press release that contains an itemized breakdown of the use of proceeds of the private placement;

(g)    a certificate of the CEO or CFO must be provided to the TSXV confirming details relating to the company's financial hardship; and

(h)    if more than $200,000 is to be raised from related parties of the company, at least 75% of any additional amount above $200,000 must be subscribed for by persons that are not related parties of the company.

additional considerations regarding convertible debentures and warrants

The conversion price of a convertible debenture cannot be less than the last closing price of the company's shares before the private placement was announced, subject to a minimum conversion price of $0.05.

The exercise price of a warrant issued as part of a unit financing cannot be less than the greater of: (i) the offering price of the private placement; (ii) the last closing price of the company's common shares before the private placement was announced; and (iii) $0.05.

The TSXV will permit a conversion price or exercise price of less than $0.10 only for the first 12 months following closing of the private placement. At the end of 12 months, the conversion price or exercise price of unconverted debentures or unexercised warrants must automatically increase to a minimum of $0.10 for the remainder of the term of the debenture or warrant.

other considerations

Capital pool companies are not permitted to rely upon the Relief Measures.

Private placements undertaken in reliance upon the Relief Measures must close by August 31, 2013.

TSXV listed companies contemplating conducting a private placement in reliance upon the Relief Measures are advised to consult with their legal advisors to confirm full compliance with such measures.

by John Conway

a cautionary note

The foregoing provides only an overview and does not constitute legal advice. Readers are cautioned against making any decisions based on this material alone. Rather, specific legal advice should be obtained.

© McMillan LLP 2013