On June 2, 2025, the TSX Venture Exchange (the “TSXV”) updated Policy 5.4 through a series of amendments intended to simplify the listing process. Now titled Policy 5.4 – Capital Structure, Escrow and Resale Restrictions (the “Revised Policy”), the revised policy introduces changes to: (i) how an Issuer may establish an acceptable capital structure, (ii) the escrow provisions applicable to principals’ securities, and (iii) the rules governing seed share resale restrictions (“SSRRs”).
Capital Structure
The TSXV has revised and broadened the methods by which an Issuer can demonstrate that its capital structure is acceptable for the purposes of a “New Listing” as defined in TSXV Policy 1.1 which includes: initial public offerings (IPOs), reverse takeovers (RTOs), change of business (COB), qualifying transactions (QT), and direct listings. Issuers now have eight options to satisfy this requirement, including any of the following:
- Contemporaneous Equity Financing: A contemporaneous equity financing in which the majority of the securities are issued to non-arm’s length parties, and either (i) the number of Listed Shares of the Issuer to be issued pursuant to the financing is not less than 10% of the number of issued and outstanding Listed Shares of the Issuer upon completion of the Transaction and the Financing (previously Issuers were required to meet a threshold of 20%), or (ii) the financing generates gross proceeds of at least $5,000,000.
- Appraisal or Valuation: An appraisal or valuation supports at least 50% of the consideration.
- Expenditures: In relation to an asset, expenditures incurred within the five previous years that support at least 50% of the consideration.
- Net Tangible Assets of Target Company: The net tangible assets of the target company are equal to at least 50% of the Consideration as defined in the Revised Policy.
- Operating Cash Flow of the Target Company: Ten times the average annual cash flows from operating activities of the target company (calculated over the last eight fiscal quarters) is equal to at least 50% of the consideration.
- Securities issued by Target Company: At least 50% of the outstanding equity securities of the target company have been issued either (i) at or above prices which would constitute the discounted market price of the issuer’s listed shares: or (ii) at least 12 months prior to the dissemination of a news release announcing the transaction at prices that are at least %50 of the current market price of the issuer’s listed shares.
- Current Listing: The Issuer has been listed and trading on another recognized stock exchange for at least one year and has not during that same one year period completed a RTO, QT, COB, or similar analogous transaction.
- Initial Public Offering: The New Listing involves an IPO that includes a financing (i.e. not by way of non-offering Prospectus).
Escrow for Principals’ Securities
Another noteworthy change in the Revised Policy is the removal of the surplus securities escrow regime. As a result, all securities held by the principals of the issuer (“Principal Securities”) will now fall under the value securities escrow regime and will be released from escrow according to the same schedule outlined in NP 46-201 – Escrow for Initial Public Offerings (see table below). While the elimination of the surplus securities regime will not change the overall length of the escrow which remains either eighteen months for Tier 1 issuers or 36 months for Tier 2 issuers, it will amend its schedule by amending the release percentages throughout the term.
| Tier 1 Issuers: | Tier 2 Issuers (excluding CPC’s) | ||
| % | Release Date | % | Release Date |
| 25 | On the Bulletin Date | 10 | On the Bulletin Date |
| 25 | 6 months following the Bulletin Date | 15 | 6 months following the Bulletin Date |
| 25 | 12 months following the Bulletin Date | 15 | 12 months following the Bulletin Date |
| 25 | 18 months following the Bulletin Date | 15 | 18 months following the Bulletin Date |
| 15 | 24 months following the Bulletin Date | ||
| 15 | 30 months following the Bulletin Date | ||
| 15 | 36 months following the Bulletin Date | ||
The Revised Policy also introduces the concept of the “Below 1% Holder” and states that unless an exemption applies all non-IPO transactions will generally be subject to TSXV escrow requirements which are substantially the same as those required by NP 46-201. Although the escrow requirements will generally not apply to principals that satisfy the definition of a “Below 1% Holder” (as defined in the Revised Policy), the TSXV may impose escrow requirements if the combined holdings of all Below 1% Principals of the issuer exceeds 5% of the issuer’s listed shares post-transaction. Further, where an Issuer has a market capitalization of at least $100 million immediately after the completion of a non-IPO transaction, such Issuer may request an exemption from the escrow requirements.
Seed share resale restrictions (SSRRs)
The Revised Policy clarifies the applicable hold period restrictions for seed shares held by non-principals. Unless exempted, securities are subject to SSRRs if:
- they were issued, or issued in exchange for a security that was originally issued (or are convertible or exercisable at a price per security), that is less than the lesser of $0.05 and 50% of the transaction price (the “Minimum Price”); or
- they were issued or issued in exchange for a security that was originally issued, within 12 months immediately preceding the date of the TSXV’s conditional acceptance letter for the transaction at a price or deemed price per security (or are convertible or exercisable at a price per security) that is less than 25% of the transaction price; or
- they were issued or issued in exchange for a security that was originally issued within 3 months immediately preceding the date of the TSXV’s conditional acceptance letter for the transaction at a price or deemed price per security (or are convertible or exercisable at a price per security) that is less than 50% of the transaction price
The release schedule for securities subject to SSRRs has been simplified such that any securities subject to SSRRs will have a one-year hold period with 20% of such SSRR securities released every 3 months, with the first release on the date the TSXV issues its bulletin confirming final acceptance of the New Listing transaction.
Transitional Provisions for Amending Existing Escrow Agreements and SSRRs
The Revised Policy includes transitional provisions recognizing that certain securities under resale restrictions may already be eligible for release under the Revised Policy. Issuers may update their existing escrow agreements and SSRRs to reflect the new requirements. To amend escrow agreements, the TSXV requires disinterested shareholder approval and the submission of an application, including a filing fee. While most SSRR amendments do not require shareholder approval, issuers must nonetheless submit an application to the TSXV detailing the proposed changes and meet other filing requirements, including payment of a fee.
