A company seeking to list on the TSX must meet specified minimum financial, distribution and other standards. A company must file a listing application together with supporting data to demonstrate that the company is capable of meeting these minimum listing requirements. Further, the company must enter into a listing agreement with the TSX, committing it to comply with TSX requirements on an ongoing basis.
The minimum financial requirements and public distribution requirements vary with each category of applicant company. Applicant companies are placed in one of three categories: Industrial (General); Mining; or Oil and Gas. Special purpose issuers such as exchange traded funds (ETFs), split share corporations, income trusts, investment funds and limited partnerships are listed under the Industrial (General) category. If the primary nature of a business is not distinct, the TSX will place the company into a listing category following a review of its financial statements and other documentation. In general, an applicant company, once listed, must have at least one million freely trading public shares with an aggregate market value of at least C$4 million held by at least 300 public shareholders, each holding at least one board lot (100 shares).
An applicant company must also demonstrate that it has satisfactory management expertise and experience. This should relate not only to the company’s business and industry, but also to public company experience. For a management team, companies must have at least two independent directors, a chief executive officer, a chief financial officer and a corporate secretary. The stock exchange or securities commission may undertake background searches of a company’s officers and directors, either at the time of the IPO or when new members of management join the company.
At the time a company is approved for listing by the TSX, the company will be designated as either an “exempt issuer” or a “non-exempt issuer.” Exempt-issuer status can be attained when the applicant company is established, has net tangible assets (or in the case of an oil and gas issuer, proved developed reserves) of C$7.5 million or more and meets prescribed cash flow, pre-tax profitability and working capital requirements. Mining applicant companies must also have proven and probable reserves capable of providing a mine life of at least three years in order to be designated as exempt. For non-exempt issuers, sponsorship is usually required and can play a significant role in determining the suitability of a company for listing on the TSX, particularly where the company only narrowly meets the minimum listing requirements for non-exempt issuers. If the requirements for exempt status are not met at the time of original listing, the company may seek exempt status later, either on application in writing, accompanied by the applicable fee, or upon review by the TSX.