TSX Venture Exchange – Security Based Compensation Policy Change
Written by: Ryan Amaral
On November 24th 2021, the Toronto Stock Exchange Venture Exchange (TSXV) announced amendments to their policies regarding security based compensation. These changes will allow greater flexibility to issuers in terms of their ability to offer a variety of security-based compensation options. As the TSXV is focused on early-stage and growth companies, these amendments are particularly relevant to start-ups who frequently utilize security-based compensation as a mechanism to attract and retain employees. While a number of changes were made, some of the key changes are outlined below.
Additional Forms of Security Based Compensation
The former policy (Policy 4.4 – Incentive Stock Options) only addressed traditional stock options, whereas the new policy (Policy 4.4 – Security Based Compensation) now covers other forms of security-based compensation such as:
By expanding upon the previous policy, these additions will effectively allow TSXV issuers greater ability to tailor their compensation plans to the specific needs and peculiarities of their organizations.
Additionally, a key change in relation to these incentives is that they may not vest for a period of at least 12 months from the date of grant or issuance, subject to limited circumstances which may provide for acceleration.
Security Based Compensation Plan Changes
Further, the new policy expands upon the previous one by providing for two additional types of security-based compensation plans, while also amending the previous stock option plans to include the new forms of security-based compensation. These four new categories include:
Categories (i) and (ii) are unchanged from the previous policy, except as to including the new additional types of Security Based Compensation. Category (iii) is termed by the TSXV to be a “hybrid” category, designed to provide additional flexibility to Issuers. Category (iv) is a subset of (ii) in that it permits a fixed number up to 10% only, and it is further limited only to Stock Options.
Cashless Exercise and Net Exercise
Formerly, the exercise price of a stock option was required to be paid in cash where the option holder would pay the issuer the strike price at the time of exercise. The new policy now allows for these options to be exercised under either a “cashless” or “net” method. A "cashless exercise" is one where a brokerage firm facilitates the exercise of an option, and the issuer still receives the exercise price in cash. A "net exercise" is one where the participant receives the shares based on a five-day volume weighted average trading price calculation, provided that the participant is not an investor relations service provider.
These amendments took effect as of November 24th, 2021. For further information regarding these changes, check out the TSXV’s bulletin notice here.
Ryan is a member of the BLG Business Venture Clinic and is a 2nd year student at the University of Calgary Faculty of Law.
 TMX Security Based Compensation Bulletin Notice (2021), online: <https://www.tsx.com/resource/en/2758>
 John E Piasta et al, “TSX Venture Exchange Updates Security-Based Compensation Policies”, (December 10, 2021), online: <https://www.bennettjones.com/Blogs-Section/TSX-Venture-Exchange-Updates-Security-Based-Compensation-Policies>
 Supra note 1
 Rick Moscone and Sabrina Alaimo, “Canada: TSX Venture Exchange Announces Amendments to Security-Based Compensation Policies”, (December 16, 2021), online: <https://www.mondaq.com/canada/shareholders/1142220/tsx-venture-exchange-announces-amendments-to-security-based-compensation-policies>
Blog posts are by students at the Business Venture Clinic. Student bios appear under each post.