On December 6, 2021, the Canadian Securities Administrators (CSA) published a notice regarding temporary exemptions from certain base shelf prospectus requirements for qualifying well-known seasoned issuers (WKSI). The exemptions allow an issuer that meets WKSI qualifications and certain conditions, to file a final base shelf prospectus with its principal regulator and obtain a receipt for that prospectus on an accelerated basis without first filing a preliminary base shelf prospectus.
The CSA has implemented the relief through local blanket orders (Blanket Orders). In Ontario, the Blanket Order is Ontario Instrument 44-501 Exemption from Certain Prospectus Requirements for Well-known Seasoned Issuers (OSC 44-501).
The changes follow the recommendations of the Ontario Capital Markets Modernization Taskforce (the Taskforce) that the OSC develop a WKSI model to streamline the prospectus process for issuers that meet certain eligibility criteria, similar to the US regime for well-known seasoned issuers set out in The Securities Act of 1933.
The Blanket Orders exempt an issuer that meets the WKSI qualifications and certain conditions from the requirements:
1. to file and obtain a receipt for a preliminary base shelf prospectus;
2. to limit distributions under the base shelf prospectus to the dollar value the issuer reasonably expects to distribute within 25 months after the date of the receipt for the base shelf prospectus;
3. to state the aggregate dollar amount of securities that may be raised under the base shelf prospectus;
4. to include the number of securities qualified for distribution under the base shelf prospectus;
5. to include a plan of distribution in the base shelf prospectus, other than to indicate that the plan of distribution will be described in the supplement for any distribution of securities;
6. to describe the securities being distributed, other than as necessary to identify the types of securities qualified for distribution under the base shelf prospectus; and
7. to describe any selling security holders in the base shelf prospectus.
Under OSC 44-501, a “WKSI” is an issuer that has either of the following:
a) outstanding listed equity securities that have a public float of C$500,000,000; or
b) at least C$1,000,000,000 aggregate amount of non-convertible securities, other than equity securities, distributed under a prospectus in primary offerings for cash, not exchange, in the last three years.
A WSKI issuer is exempt from the requirement to file and obtain a receipt for a preliminary prospectus in connection with the filing of a base shelf prospectus provided that, at the time the issuer files the base shelf prospectus; the issuer is not an investment fund; has no outstanding asset backed securities; and it satisfies a number of conditions including but not limited to the following:
a) the issuer meets the definition of a WKSI as of a date within 60 days preceding the date the issuer files the base shelf prospectus;
b) the issuer is and has been a reporting issuer in at least one jurisdiction of Canada for 12 months; and
c) the issuer is not an ineligible issuer.
The definition of “ineligible issuer” in OSC 44-501 includes the following issuers:
a) an issuer who has not filed with the securities regulator or securities regulatory authority in each jurisdiction in which it is a reporting issuer all periodic and timely disclosure documents that it is required to have filed in that jurisdiction;
b) the issuer is or, during the past three years, the issuer or any of its predecessors was, either of the following:
I. an issuer whose operations have ceased; or
II. an issuer whose principal asset is cash, cash equivalents, or its exchange listing, including, without limitation, a capital pool company, a special purpose acquisition company, or a growth acquisition corporation or any similar entity, as defined in the applicable stock exchange rules or policies;
c) the issuer has, in the past three years, become bankrupt; made a proposal under any legislation relating to bankruptcy or insolvency; or was subject to or instituted any proceedings, arrangement or compromise with creditors; or had a receiver, receiver manager or trustee appointed to hold its assets;
d) the issuer or any entity that, at the time, was a subsidiary of the issuer; or was the subject of any penalties or sanctions, including restrictions on the use by the issuer of any type of prospectus, or exemption, imposed by a court relating to securities legislation or by a securities regulatory authority within the past three years; and
e) the issuer has been the subject of any cease trade order in any Canadian jurisdiction or any suspension of trading under section 12(k) of the Securities Act of 1933 within the three years;
According to the CSA Notice “in the ordinary course”, for a final base shelf prospectus filed with the principal regulator before noon, local time, and in compliance with the requirements of NI 44-102 and the Blanket Orders, the accelerated procedures will permit the receipt to be issued on the same business day. If a final base shelf prospectus is filed with the principal regulator after noon, local time, and in compliance with the requirements of NI 44-102 and the Blanket Orders, the accelerated procedures will permit the receipt to be issued before noon on the next business day.
For more information, please call Barbara Hendrickson at BAX Securities Law (647) 403-4606.
This publication is not intended to constitute legal advice. No one should act on it or refrain from acting on it without consulting with a lawyer. BAX does not warrant or guarantee the accuracy or currency or completeness of the publication. No part of this publication may be reproduced without the prior written permission of BAX Securities Law.