Written By Brent Kraus, Andrew Disipio, Osie Ukwuoma, Hayden Logan and Jonathan Berg

Public Comment on the Proposed Amendments is Open Until May 5, 2025

The Toronto Stock Exchange (TSX) has published for comment proposed amendments to the TSX Company Manual (the Manual). The amendments are intended to support capital markets by: 

1. moving away from sector-specific listing requirements to industry agnostic tests for Industrial Companies; 
2. revising the specialized listing categories for Mining Companies and for Oil and Gas Companies; 
3. updating sponsorship requirements; and 
4. removing requirements applicable to Non-Exempt issuers. The TSX is seeking public comment on the proposed amendments until May 5, 2025.

Original Listing Requirements

Industrial Companies (Section 309)

The original listing requirements (OLRs) for Industrial Companies are currently divided into five subcategories. However, TSX analysis has revealed that the current subcategories do not always align with the business of the applicant. Therefore, the TSX is proposing to rename the Industrial Category to "Diversified" and replace the five current subcategories with three new subcategories: (1) Income & Revenue Producing; (2) Pre Income-Producing; and (3) New Enterprise (excluding SPACs). The proposed amendments introduce new requirements related to operations, funding and market support.

Proposed Amendments 

1. Replacing "Profitable Companies" requirements with "Income & Revenue-Producing Companies".

a. Operations: Either (1) annual audited pre-tax net income from continuing operations of C$750,000 (the Income Test), or (2) annual audited revenue of C$10 million (the Revenue Test).

b. Funding: If the Income Test is met, evidence of an appropriate capital structure, or if the Revenue Test is met, (1) positive pre-tax cash flow from operations in the most recently completed audited annual and interim financial statements, or (2) 12-month run rate calculation demonstrating sufficient funding for the period.

c. Market Support: Market capitalization of at least C$100 million.

An issuer listed under this category would be an Exempt issuer.

2. Replacing "Technology Companies" requirements with "Pre Income-Producing Companies".

a. Operations: Either (1) an audited income statement demonstrating at least one year of operating expenses to advance the business (exceptions may be made if an issuer has not operated for one year) (the Expenses Test), or (2) assets under construction reported in an audited balance sheet along with signed imminent leases (the Lease Test).

b. Funding: If the Expense Test is met, a 24-month run rate calculation demonstrating sufficient funding for the period, or if the Lease Test is met and the primary business is to generate revenue from constructed assets, a 12-month run rate calculation demonstrating sufficient funding for the period.

c. Market Support: Market capitalization of at least C$50 million.

An issuer listed under this category would be a Non-Exempt issuer.

3. Replacing "Research and Development Companies" requirements with "New Enterprise Companies".

a) Operations: Management experience and expertise, and proof of business concept.

b) Funding: Either (1) an equity raise of C$10 million in the six months preceding the filing of the listing application along with a 12-month run rate calculation demonstrating sufficient funding to advance the project per stated targets identified in a feasibility report (the 12-Month Test), or (2) a 24-month run rate calculation demonstrating sufficient funding to advance the project as per stated targets identified in a feasibility report (the 24-Month Test).

c) Market Support: If the 12-Month Test is met, market capitalization of at least C$100 million, or if the 24-Month Test is met, market capitalization of at least C$200 million.

An issuer listed under this category would be a Non-Exempt issuer.

4. Removing the subcategory "Companies Forecasting Profitability" (Non-Exempt) in its entirety.

5. Removing the subcategory "Profitable Companies" (Exempt) in its entirety.

Mining Companies (Section 314)

The TSX believes that its proposed amendments for Mining Companies would: (1) clarify certain terms within the requirements; (2) modernize certain requirements to better align with NI 43-101 – Standards of Disclosure for Mineral Projects (NI 43-101); (3) update certain monetary requirements for inflation and increase the required work program spend to better account for current project costs; and (4) remove the minimum working capital requirement for Mineral Exploration and Development-Stage Companies.

Proposed Amendments

1. Amend the OLRs for "Producing Mining Companies" to: (1) clarify proven and probable reserves must be for a "Qualifying Property¹", together with evidence satisfactory to the TSX indicating a reasonable likelihood of future profitability supported by a feasibility study or documented historical production and financial performance; (2) either be in production or have made a production decision on the Qualifying Property referred to above; (3) submit an 18-month run rate calculation demonstrating sufficient funding to (a) bring the Qualifying Property into commercial production and (b) meet sufficient working capital needs to fund all budgeted capital expenditures and carry on the business, signed by a qualified person; (4) replace the net tangible assets requirement with evidence of an appropriate capital structure; and (5) require market capitalization of at least C$50 million.
2. Amend the OLRs for "Mineral Exploration and Development-Stage Companies" to: (1) consider a Qualifying Property to be sufficiently advanced, as detailed in a report prepared by an independent qualified person, if it has or is supported by a current mineral resource estimate and/or a current reserve estimate as defined in NI 43-101; (2) increase the amount of the planned work program of exploration and/or development to C$5 million that is satisfactory to the TSX, will sufficiently advance the property and is recommend by a qualified person; (3) submit an 18-month run rate calculation demonstrating sufficient funding to (a) complete the planned program of exploration and/or development on the company’s property and (b) meet estimated working capital needs for the period, signed by a qualified person; (4) replace the working capital requirement with evidence of an appropriate capital structure; and (5) require market capitalization of at least $50 million.
3. Amend the OLRs for "Senior Mining Companies" to: (1) annual audited pre-tax net income from continuing operations in the fiscal year immediately preceding the filing of the listing application; (2) increase the pre-tax cash flow requirements to from $750,000 to $1,250,000 in the fiscal year immediately preceding the filing of the listing application; (3) increase the average pre-tax cash flow from operations from $500,000 to $900,000 for the two fiscal years immediately preceding the filing of the listing application; (4) establish proven and probable reserves to provide a mine life of at least three years, detailed in a report prepared by an independent qualified person; (5) adequate working capital to carry on business and an appropriate capital structure; and (6) require market capitalization of at least $100 million.

Oil and Gas Companies (Section 319)

The TSX is the of the view that maintaining specific listing requirements for Oil and Gas Companies provides the issuers in those industries and the capital markets with clear guidelines. Revisions to this section are aimed at updating the existing OLRs to maintain relevance in the current economic environment. The TSX is of the view that current requirements for proved developed reserves are insufficient and look to increase the requirement on the basis that since 2012, only a single issuer has listed on the TSX with less than $50 million in proved developed reserves. Further, the TSX is proposing to expand qualifying reserves to include proven and probable reserves (2P), as opposed to only proven reserves (1P). Finally, the TSX proposes to update the OLRs to include requirements for operations, funding and market support, as they did with Industrial Companies.

Proposed Amendments

1. Replacing "Producing Oil and Gas Companies" requirements with "Oil and Gas Companies".

a. Operations: Proved and probable reserves of $100 million, the majority of which is proved.

b. Funding: Either (1) positive pre-tax cash flows from operations evidenced in the most recently completed audited annual and interim financial statements, or (2) a 12-month run-rate calculation demonstrating sufficient funding for the period.

c. Market Support: Market capitalization of at least $50 million.

An issuer listed under this category would be a Non-Exempt issuer.

2.Replacing "Exempt Oil and Gas Companies" requirements with "Senior Oil and Gas Companies".

a. Operations: Proved reserves of $100 million.

b. Funding: Both (1) average production rate of 10,000 boepd for the most recently completed quarter, and (2) positive pre-tax cash flow from operations evidenced in the most recently completed audited annual and interim statements.

c. Market Support: Market capitalization of at least $100 million.

An issuer listed under this category would be an Exempt issuer.

3.Removing the subcategory "Oil and Gas Development Stage Companies" (Non-Exempt) in its entirety.

Sponsorship (Section 326)

The proposed amendments seek to make sponsorship requirements easier for issuers while also offering a more targeted approach by decoupling sponsorship from a determination by the TSX of whether an issuer is Exempt/Non-Exempt.

Proposed Amendments

The TSX is proposing to require sponsorships for all applications:

1. Submitted without the applicant having filed a prospectus for an offering of securities underwritten by a Participating Organization of the TSX within six months prior to the date of listing, unless graduating from the TSX Venture Exchange;
2. Related to an emerging market jurisdiction;
3. That involve governance issues for which the TSX requires additional commentary;
4. That, based on the TSX's review of management personal information forms and experience, require additional commentary; or
5. That, based on the TSX's review of title and ownership of a resource property, require additional commentary.

The TSX reserves discretion to require sponsorship for other reasons.

Removal of Special Requirements for Non-Exempt Issuers (Part V)

Currently, the TSX bifurcates issuers into Exempt and Non-Exempt issuers. An applicant listing under an Exempt category must comply with more stringent OLRs and are classified as Exempt for the duration of their listing on the TSX. The classification of Exempt or Non-Exempt has the following implications:

1. Exempt issuers are exempt from escrow requirements; and
2. Exempt issuers are exempt from Part V of the Manual, which requires (1) prompt notice to the TSX of any proposed material change to the issuer's business or affairs, and (2) obtaining TSX acceptance for certain transactions involving insiders or other related parties with respect to transactions that do not involve the issuance or potential issuance of listed securities of the issuer (Cash Transactions).

The TSX has considered the efficacy of imposing additional requirements for Non-Exempt issuer Cash Transactions when such transactions for all listed issuers are subject to Multilateral Instrument 61-101 – Protection of Minority Security Holders in Special Transactions (MI 61-101). One of the main reasons for the proposed removal of Part V is that all TSX issuers are deemed to be reporting issuers in Ontario and, therefore, already subject to MI 61-101 under applicable securities laws. 

Despite the foregoing, the TSX must continue to differentiate between Exempt and Non-Exempt issuers as it relates to escrow under Canadian securities laws.

Next Steps

Bennett Jones invites clients to contact the firm with any questions or comments and is available to assist clients who wish to submit comments on the proposed amendments to the TSX. We will also continue to monitor the proposed amendments and provide updates on any further developments. We have previously written about the chilling of the Canadian IPO market in our blog, What's Shaping Canada's IPO Market in 2024?

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