Stewart McKelvey

A NEW REGIME FOR VENTURE ISSUERS By Gavin Stuttard and Tauna Staniland stage technology companies with Atlantic Canada based businesses or projects. Venture issuers generally have less complex busi- T nesses, more limited financial resources and are rela- tively thinly staffed. This means that investors may not require the same level of disclosure in order to sufficiently assess a venture issuer's business, while the cost and administrative burden of complying with disclosure requirements is relatively-speaking much larger. Current disclosure rules already recognize this difference by exempting or modifying some disclosure obligations for venture issuers. However, the new pro- posals are intended to further streamline and tailor venture issuer disclosure by eliminating certain disclo- sure obligations and requiring supplemental disclosure on topics seen to be of greater relevance to venture is- suer investors. In addition, as a result of the proposed changes venture issuers would be automatically quali- fied for short-form prospectus offerings. Proposed National Instrument 51-103 Ongoing Governance and Disclosure Requirements for Venture Issuers ("NI 51-103") introduces a modified definition of "venture issuer". Generally, all issuers listed solely on the TSX Venture Exchange, NEX, AIM, PLUS-SX or other designated venture markets will continue to be venture issuers. However, debt-only, preferred share-only and asset-back security issuers listed on the above exchanges will be "senior issuers" and will con- tinue to be subject to the current disclosure regime. STREAMLINED DISCLOSURE The key disclosure changes contained in NI 51-103 in- 4 FALL 2011 DOING BUSINESS IN ATLANTIC CANADA he Canadian Securities Administrators have proposed significant changes to the disclosure rules applicable to ven- ture issuers, which should reduce dis- closure burdens for the large number of junior mining companies and early clude the introduction of annual and mid-year reports, elimination of three- and nine-month interim financial reports, simplification of information circular disclo- sure and modified material acquisition, related party transaction and material change reporting. NI 51-103 introduces an annual report requirement that is intended to provide stand-alone, comprehen- sive disclosure for venture issuers. The annual report would incorporate annual audited financial statements and auditor's report and management's discussion and analysis ("MD&A") of the annual financials. In addi- tion, it would feature a description of the venture is- suer's business including corporate structure, business overview, and a two-year history, and a discussion of performance targets and milestones of the issuer. For mining issuers, the required disclosure about mate- rial mineral projects would not automatically trigger a technical report under National Instrument 43-101 Standards of Disclosure for Mineral Projects ("NI 43- 101"); however, the mineral project disclosure would have to be prepared by or under the supervision of a qualified person. Under NI 43-101, a technical report would be required if the annual report contained first time disclosure of mineral resources, reserves or a pre- liminary economic assessment, or a material change to such disclosure. The annual report would also provide an overview of outstanding securities and trading information and provide biographical and executive compensation dis- closure for directors and executive officers. The pro- posed rules would amend the current compensation disclosure requirements, including revised stock option disclosure and enhanced discussion of compensation- related performance goals. Governance disclosure, including new substantive disclosure requirements relating to conflict of interest, ethical conduct, related party transactions, facilitation of independent judgment and insider trading, would also move to the annual report, as would board and

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