• D. Jeff Larkins

TSX Venture Exchange (TSXV) Amends and Improves Capital Pool Company (CPC) Policy

Updated: Feb 23


The Capital Pool Company ("CPC") program of the TSX Venture Exchange ("TSXV") is a unique listing vehicle exclusively offered by TSXV and accounted for almost 50% of new TSXV listings in the past 10 years. On December 1, 2020 the TSXV announced changes to its CPC policy that will take effect on January 1, 2021 – representing a substantive re-thinking and re-tooling of this popular program to further market participants' interest in the continued creation of new CPC’s and the use of CPC’s as public shells for future going public transactions.


Increased Flexibility


Changes to the CPC policy will provide for more time to consider Qualifying Transactions, an easing of residency restrictions and simplified spending restrictions, including:

  • CPC’s will no longer face significant consequences for failing to complete a Qualifying Transaction within 24 months of listing (including being transferred to the NEX board of the TSXV and having to cancel half of the pre-IPO seed shares) and therefore will have increased flexibility to scrutinize and complete a Qualifying Transaction.

  • Under the new regime only a majority, as opposed to all, of the directors and officers of the CPC need be either: (i) residents of Canada or the United States; and (ii) individuals who have a positive association as a director or officer with public companies that are subject to a regulatory regime comparable to that of a Canadian exchange and it is no longer a requirement that a majority of the directors and officers of any post-qualifying transaction issuer be either (i) residents of Canada or the United States; and (ii) individuals who have a positive association as a director or officer with public companies that are subject to a regulatory regime comparable to that of a Canadian exchange. In addition, the new regime will allow for the same person to be the CEO, CFO and secretary of a CPC.

  • CPCs can now spend up to an aggregate of $3,000 per month on reasonable general and administrative expenses rather than the previous limit of the lesser of 30% of the gross proceeds from the sale of securities issued by a CPC and $210,000.

Reduced Regulatory Burden


The changes to the CPC policy will also relax requirements on shareholder distribution and shareholder approval, and provide fewer restrictions on PRO subscriptions, including:

  • Under the new regime a CPC will only be required to have a public float of 500,000 shares following its IPO, held by a minimum of 150 public shareholders (each owning at least 1,000 shares) rather than the previous requirement of a public float of 1,000,000 shares, with at least 200 public shareholders.

  • “Majority of the Minority” approvals may be obtained at a meeting of the CPC shareholders or by written consent, instead of only at a meeting.

  • Agents and other pro group members benefit from changes that extend the exercise period for agent's options from 24 months to 5 years, no longer require shares acquired by pro group members (who are not principals of the CPC) at or above the IPO price be subject to escrow, and that no longer require that shares issued to pro group members as part of a Qualifying Transaction be subject to an exchange hold period.

Improved Economics


Changes to the CPC policy also will permit increased seed investment, permit stock option plan amendments, facilitate shorter escrow, including:

  • An increase to the maximum amount of seed capital that can be raised prior to a CPC’s initial public offering at a price below the initial public offering price from $500,000 to $1,000,000 and the maximum amount of aggregate gross proceeds from a CPC’s issuance of seed capital, shares on its initial public offering, and any common shares issued pursuant to a private placement will be increased from $5,000,000 to $10,000,000.

  • Instead of fixed stock option plans not exceeding 10% of the common shares outstanding on the date of the closing of the CPC’s initial public offering, CPCs can now adopt 10% rolling stock option plans pursuant to which the total number of common shares reserved under option cannot exceed 10% of the common share outstanding on the date of grant.

  • The 36 month escrow period applicable to post Qualifying Transaction issuers that qualified as Tier 2 Issuers on the TSXV following completion of their Qualifying Transaction has been eliminated and now all escrowed securities will now be released over a period of 18 months, with 25% released on the date of the final Qualifying Transaction Exchange Bulletin and 25% on the 6, 12 and 18 month anniversaries of that date.

While benefiting future CPC’s, the amended CPC policy also contains a number of transition provisions applicable to: (i) issuers that have filed their CPC prospectus but that will not have not completed their initial public offering as at December 31, 2020; (ii) existing CPCs as at January 1, 2021, including CPCs listed on the NEX Board of the TSXV; and (iii) Resulting Issuers that will be listed on the TSXV or the Toronto Stock Exchange as at January 1, 2021.


Endeavor Law can assist on all aspects of the CPC program including the formation, initial financing and listing of a CPC; to the due diligence, documentation and completion of a Qualifying Transaction (on behalf of either the CPC or the target company). Endeavor Law will always seek to provide competitive pricing for any legal services requested and is pleased to discuss fee arrangements that suit any potential client.

Does not constitute legal or other advice and must not be used as a substitute for legal advice from a qualified legal professional in your jurisdiction who has been fully informed of your specific circumstances. Information may not be up-dated subsequent to its initial publication and may therefore be out of date at the time it is read or viewed. Always consult a qualified legal professional in your jurisdiction.