Canada: private placements, the Listed Issuer Financing Exemption and the Market Price floor

Canada permits convertibles but not a conversion price struck at a discount to a future market price. TSX Venture Policy 4.1 floors the conversion price at Market Price fixed on the reservation date; the CSE allows conversion at the market price on the day of conversion, not below it; and on the TSX anything else counts into a 25% shareholder-approval test. No standby equity facility exists here.

Key takeaways

• The TSXV floor is Market Price, and it ratchets. Policy 4.1 section 2.3(a): the minimum Conversion Price must never be less than the Market Price as of the Price Reservation Date, and after year one the greater of Market Price and C$0.10.
• The CSE names a market-referenced conversion price in terms. Policy 6 section 6.7(1)(c) allows a convertible debenture to convert at the market price at the time of conversion, on the closing price of the day of conversion — at market, not below it.
• On the TSX it is a counting rule, not a pricing rule. Section 607(f)(iii) treats the underlying shares as issued below market price unless conversion is priced at market at the time of conversion, pulling the deal toward the 25% approval threshold in 607(g)(i).
• Two subsections kill a drawdown cadence. Section 607(f)(i) requires closing within 45 days of the date the market price is established; 607(f)(v) aggregates placements within the preceding three months that share placees or a use of proceeds.

Three venues, three sentences about the conversion price

Canada is not one market here. Each venue writes its own rule on the conversion price, and they do not agree.

On the TSXV, Policy 4.1 section 2.3(a) is categorical: the minimum Conversion Price must never be less than the Market Price as of the Price Reservation Date, and beyond the first year the minimum becomes the greater of Market Price and C$0.10 — the policy's own example gives a C$0.07 floor in year one and C$0.10 after it. Policy 1.1 defines Market Price as the last closing price before the news release or the Form 4A — Price Reservation Form, so the reference stops moving the moment the price is reserved. Section 2.3(b) caps the conversion period at 5 years.

The same definition carries the hard floor beneath any Canadian equity-linked deal: other than for special warrants and subscription receipts, the Exchange will not permit a security convertible, exercisable or exchangeable into listed shares to carry an effective conversion or exercise price below C$0.05 per share. Sub-nickel relief exists for stock; it does not exist for a convertible debenture. On the shares themselves all three venues run the same bands against the closing price — 25% at C$0.50 or less, 20% from C$0.51 to C$2.00, 15% above C$2.00 — and TSX section 607(e) takes a lower price only with security holder approval.

The CSE is the one venue here whose rulebook names a market-referenced conversion price in terms. Policy 6 section 6.7(1)(c) lets a convertible debenture be fixed at issuance, “or at the market price at the time of conversion, determined by the most recent closing price of the underlying security on the day of conversion”. One day's closing price, at market, never below the C$0.05 minimum in section 6.7(1)(a). A discount to a trailing VWAP window is a different instrument, and the CSE has not written it.

On the TSX the discipline is arithmetic. Section 607(f)(iii) of the Company Manual treats the shares underlying a privately placed convertible as issued below market price, and counts them into the transaction, unless conversion is priced at at least market price at the time of conversion. Once counted, the deal runs at section 607(g)(i): approval where the aggregate issuable exceeds 25% of the securities outstanding on a non-diluted basis at a price below market.

Why nobody runs a standby equity facility here

The pricing rule is only half of the answer. The other half is a clock. TSX section 607(f)(i) requires a private placement to close no later than 45 days from the date the market price is established, extended to 135 days where a security holder vote is being sought. A facility drawn over 24 months cannot live inside a 45-day price.

Section 607(f)(v) closes the workaround: successive placements are aggregated for the 25% test where they fall within the three preceding months and share placees or a use of proceeds — a fair description of a drawdown schedule with one investor funding working capital. The TSXV applies the same instinct through the reservation itself, which lapses if the issuer has not filed for Exchange acceptance within 30 days of the Price Reservation Date.

No TSXV or CSE policy addressing equity lines, standby equity purchase agreements or committed equity facilities could be located, in either direction. That is an absence of published rule rather than a prohibition, and it should be treated as untested here, not available.

The at-the-market distribution is what Canada has instead

Where a US issuer signs an equity line, a Canadian issuer files an ATM. Amendments to National Instrument 44-102 Shelf Distributions effective 31 August 2020 codified the relief the CSA had granted case by case and removed the caps that made the product unattractive: the aggregate size limit and the daily volume cap. A qualifying issuer runs an at-the-market distribution off a base shelf through a registered dealer with no application for relief. It is on-demand equity, but not a committed facility, because nobody stands behind the undrawn balance.

The Listed Issuer Financing Exemption (LIFE), and what it will not carry

The phrase listed issuer financing means something specific in Canadian practice, and it is not a convertible. Part 5A of National Instrument 45-106 lets a reporting issuer that has reported for 12 months, is listed on a Canadian exchange, is current in its disclosure and has active operations raise off that record: a Listed Issuer Financing Document on Form 45-106F19, a news release before soliciting, and closing by the 45th day after it. The securities are freely tradeable and may reach retail investors.

Two conditions fail more deals than the eligibility list does. Section 5A.2(f) makes the exemption unavailable where available funds go to a significant acquisition, a restructuring transaction, or anything else requiring security holder approval. And the issuer may not close unless it reasonably believes it will have funds for its business objectives and liquidity requirements for the 12 months following. Part 5A carries no debenture, which is why the debenture stays a private-placement instrument here.

Resale: four months and a day, and the two ways out

Outside Part 5A, securities distributed under a prospectus exemption carry a restricted period under National Instrument 45-102: a legend, and no resale until four months and a day after the distribution date. Under Policy 4.1 the Exchange Hold Period starts on the distribution date to the placee — listed shares, warrants or convertibles alike — so a convertible does not restart the clock when it converts. Two routes give freely tradeable stock instead: Part 5A, and a prospectus distribution, including an ATM. An issuer also reporting in the United States should read Rule 144 and restricted securities, because the two holding periods run in parallel and neither cures the other.

Two numbers decide a Canadian conversation before any term does: which rulebook governs, and the shares outstanding on a non-diluted basis against everything already issuable. Send the listing, market capitalisation and trailing 12-month raise and we will come back with the structure the venue allows.

• All markets
• United States: no pricing rule at all
• New Zealand: an 85% floor
• Australia: capacity first, then discount
• Hong Kong: a 20% discount cap
• Private placements

Primary sources

• TSXV — Policy 1.1 Interpretation (as at 31 March 2026)
• TSXV — Policy 4.1 Private Placements (as at 26 January 2015)
• CSE — Policy 6 Distributions (as at 22 May 2025)
• TMX — TSX and TSXV issuer resources, where the Company Manual is published
• OSC — National Instrument 45-106
• CSA — Coordinated Blanket Order 45-935
• CSA — Amendments to NI 44-102 on at-the-market distributions

Financing Canadian listed issuers: frequently asked questions

Can a Canadian convertible be priced at a discount to a future VWAP?

No, and the reason differs by venue. On the TSX Venture Exchange the minimum conversion price may never be less than the Market Price fixed at the Price Reservation Date. On the CSE a convertible debenture may convert at the closing price on the day of conversion, which is market-referenced but is not a discount. On the TSX, pricing below market price at conversion counts the underlying shares into the 25% test.

Is there a Canadian equivalent of a standby equity purchase agreement?

No exchange policy addressing equity lines, standby equity distribution agreements or committed equity facilities could be located on the TSXV or the CSE, in either direction. Each drawdown would be a separate treasury issuance priced under the exchange's own rule, and on the TSX successive placements within three months that share placees or a use of proceeds are aggregated. Treat the structure as untested in Canada, not available.

Can a convertible debenture be issued under the Listed Issuer Financing Exemption?

No. Part 5A permits listed equity securities, or units consisting of listed equity securities and warrants convertible into listed equity securities. A convertible debenture falls outside that, so debenture financings on the TSXV and CSE continue to be done as private placements with a four-month hold on the underlying shares.

What are the current dollar limits under the exemption?

The base limits in Part 5A are the greater of C$5 million and 10% of market capitalisation, capped at C$10 million over 12 months. CSA Coordinated Blanket Order 45-935 raised those for issuers that opt in to the greater of C$25 million and 20% of listed market value, capped at C$50 million. Blanket orders are time-limited and differ by jurisdiction.