The Canadian Securities Administrators (CSA) recently published changes to harmonize the interpretation of the financial statement requirements for a long-form prospectus, such as in an issuer’s initial public offering (IPO) (the changes).
Specifically, the changes apply in situations where an issuer has acquired a business, or proposes to acquire a business, that a reasonable investor would regard as being the primary business of the issuer. The changes were informed by stakeholder feedback that certain inconsistent interpretations of the primary business requirements add time, cost, and uncertainty for issuers.
The changes provide additional guidance on the interpretation of primary business including in what situations and for which time periods, financial statements would be required. They provide guidance on the circumstances when additional information may be necessary for the prospectus to meet the requirement to contain full, true, and plain disclosure of all material facts relating to the securities being distributed. The changes also clarify when an issuer can use the optional tests to calculate the significance of an acquisition, and when the acquisition of a mining asset would not be considered an acquisition of a business for securities legislation purposes.
This new guidance will facilitate a harmonized approach for issuers across Canada, reducing the regulatory burden on issuers by giving them additional clarity on the historical financial information required in an IPO.
For more information, please call Barbara Hendrickson at BAX Securities Law (416) 601-1004.
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