The current CPC Directive provides restrictive trust terms for securities held by directors, executives and other holders of seed shares acquired at a discount to the IPO price prior to the closing of an IPO. The securities held by these fiduciary shareholders are generally subject to transfer restrictions until the conclusion of a qualifying transaction, after which these securities are released for 18 months for Tier 1 issuers or (more often) for Tier 2 issuers. The resulting issuers may amend their existing CPC trust agreement to follow the trust terms permitted under the CPC Directive amendments, provided they first obtain the selfless agreement of the shareholders. The current CPCs may, in their choice, implement all facets of the revised Directive 2.4, with the exception of certain mandatory amendments that require shareholder approval at a shareholder meeting or with the written agreement of shareholders holding more than 50% of the listed shares issued. Changes that require the agreement of disinterested shareholders include, among other things, amending trust terms to follow changes to the revised Policy 2.4 agreement and the CPC Fiduciary Agreement, adopting a 10% option plan for rail vehicles, and removing the consequences of non-compliance with a qualified transaction within 24 months of listing. In order to make an amendment, the CPC must issue a press release prior to the entry into force of an amendment requiring the selfless agreement of shareholders, in which its intention to do so, including summaries of substantial changes, and to obtain acceptance of the TSXV for a change requiring shareholder agreement. For clarity reasons, CPC shares that were cancelled as part of the CPC transfer to the NEX chamber of the TSXV should not be re-evaluated. As a result, an issuer may amend its existing CPC trust agreement, to follow the terms of loyalty permitted by the revised Directive 2.4 and the revised CPC trust agreement, including the 18-month release plan and the immediate release of fiduciary securities that are no longer subject to the trust, provided that the CPC first seeks the agreement of disinterested shareholders (at the shareholders` meeting or with the written agreement). In addition, the resulting issuer must issue a press release indicating its intention to amend the CPC trust agreement no later than seven business days before the amendment comes into force and request the adoption of the TSXV. Once a CPC has submitted its CPC prospectus but has not yet completed its IPO, it may choose to comply with the new directive, provided it reviews its prospectus and trust agreement; or may submit its final prospectus and close its IPO in accordance with the previous policy and continue to be determined by the previous policy, with the possibility of complying with the following transitional provisions for existing CPCs. While the amendments to the CPC Directive do not eliminate trust requirements, they will significantly reduce the burdens imposed by the current CPC fiduciary system. In particular, there will no longer be a multi-step approach to the definition of the fiduciary framework.
Following a qualifying transaction, all loyal CPC securities are subject to an 18-month trust plan (the current rules provide for a distinction between Tier 1 and Tier 2 issuers), with 25% of the remaining CPC securities released on that date, the TSXV will issue a final bulletin for the CPC Qualified Transaction (“Final QT Exchange Bulletin”) and 25% on each of the 6 12 and 18 months following that date. In addition, CPC`s stock options and shares issued as part of the stock option exercise will be published on the day TSXV publishes its final QT, unless these securities were issued prior to the IPO and at an exercise price below the IPO price.