New Prospectus Exemption For Listed Issuers To Come Into Effect November 21, 2022

• Published date: 30 September 2022
• Subject Matter: Corporate/Commercial Law, M&A/Private Equity, Corporate and Company Law, Securities
• Law Firm: Bennett Jones LLP
• Author: Mr William Osler, Abbas Khan, Bosa Kosoric, Kim Lawton and Joshua Koop

The Canadian Securities Administrators (CSA) recently announced an amendment to National Instrument 45-106 Prospectus Exemptions (NI 45-106) that introduces a new prospectus exemption (the Listed Issuer Financing Exemption) for reporting issuers. As of November 21, 2022, the Listed Issuer Financing Exemption will allow eligible issuers to bypass prospectus requirements to raise capital more efficiently.

Who Can Use This Exemption?

A reporting issuer who wishes to use the exemption for an offering of securities must satisfy several requirements, including the following:

1. it must be a reporting issuer in at least one Canadian jurisdiction for the 12 months immediately preceding its announcement of the offering;
2. it must have equity securities listed on an exchange recognized by securities regulatory authorities in Canada;
3. it must not have ceased operations or held cash or cash equivalents as its primary asset within the previous 12 months (which excludes capital pool companies, special purpose acquisition companies and growth acquisition corporations);
4. it must not be an investment fund; and
5. it must be up-to-date on its continuous disclosure obligations and must reasonably expect to have sufficient funds to meet its business objectives and liquidity requirements for the 12 months following the distribution.

What Type of Distribution Can an Eligible Issuer Make?

An issuer who uses the Listed Issuer Financing Exemption is limited in the size, nature and purpose of a distribution. In any given 12-month period, the issuer can raise the greater of $5 million and 10 percent of the market value of its listed securities, to a maximum of $10 million. A distribution cannot increase the issuer's outstanding listed securities by more than 50 percent from 12 months prior to the distribution. The securities issued in reliance on the exemption must be either a listed equity security or a unit containing a listed equity security and a warrant convertible into a listed equity security. The issuer cannot use the funds from the offering for a significant acquisition (as defined in National Instrument 51-102 Continuous Disclosure Obligations (NI 51-102)), a restructuring or a transaction requiring securityholder approval.

What Must the Issuer Disclose and What Potential Liabilities Does an Issuer Incur?

Before soliciting any offers to purchase securities, an issuer must issue and file a news release that announces the offering and complete and file on SEDAR a Form 45-106F19...