On August 12, 2021, the Canadian Securities Administrators (CSA) are published for a 60-day comment period proposed changes (the Proposed Changes) National Instrument 41-101 General Prospectus Requirements (41-101CP)  and its Companion Policy 41-101CP. The proposed changes will amend Form 41-101F1 Information Required in a Prospectus (Form 41-101F1) which requires an issuer that is not an investment fund to include certain financial statements in its long form prospectus. These required inclusions include the financial statements of the issuer and any business or businesses acquired, or proposed to be acquired, if a reasonable investor reading the prospectus would regard the primary business of the issuer to be the business or businesses acquired, or proposed to be acquired (collectively, the Primary Business Requirements).

The Primary Business Requirements also apply to instances where securities legislation and exchange requirements refer to disclosure prepared in accordance with Form 41-101F1.

The Proposed Changes provide additional explanation in 41-101CP for both IPO venture and non-venture issuers regarding:

  • the interpretation of primary business and predecessor entity;
  • clarification on when an issuer can use an optional test to calculate the significance of an acquisition;
  • guidance as to when and for what time periods financial statements would be required in certain circumstances;
  • guidance on the circumstances when additional information may be needed to meet the requirement for full, true and plain disclosure and the nature of this information;
  • clarification of when the acquisition of mining assets would not be considered a business.

According to the Notice, the Proposed Changes seek to reduce inconsistent interpretation of requirements.  The number of pre-file applications is expected to decrease significantly if the proposed changes are implemented.

The comment period ends on October 11, 2021.

See: https://www.bcsc.bc.ca/about/media-room/news-releases/2021/58-canadian-securities-regulators-seek-comments-on-proposal-to-harmonize-the-interpretation-of-the-primary-business-requirements

For more information, please call Barbara Hendrickson at BAX Securities Law (647) 403-4606.

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