Canadian Securities Regulators Adopt Exemptions from Certain Base Shelf Prospectus Requirements

December 14, 2021

Written By John Piasta, Harinder Basra, Kristopher Hanc and Jason Wang

On December 6, 2021, the Canadian Securities Administrators (CSA) announced temporary exemptions providing for the adoption of a "well-known seasoned issuer" (WKSI) program applicable to certain issuers filing base shelf prospectuses. The exemptions, effective January 4, 2022, will exempt WKSIs that satisfy certain conditions from the requirement to file and obtain a receipt for a preliminary base shelf prospectus, making the process more efficient and streamlined for WKSIs to raise capital in Canada. The proposed exemptions are a further step in the CSA's initiative to reduce the regulatory burden on capital market participants and the changes are expected to make the process for raising capital more efficient and streamlined for WKSIs.

The CSA has indicated that this pilot project will assist in evaluating the appropriateness of the eligibility criteria and conditions, and identifying any potential public interest concerns that should be addressed in any future rule amendments to permanently implement a Canadian WKSI regime.

Description of Blanket Orders and the Canadian WKSI Regime

The temporary exemptions—implemented through local blanket orders—are intended to (i) reduce the regulatory burden for well-known reporting issuers; (ii) have a strong market following; (iii) complete public disclosure record; and (iv) sufficient public float. These temporary exemptions allow a non-investment fund issuer that meets certain qualifications and conditions to file a final base shelf prospectus and obtain a receipt for that prospectus on an accelerated basis without first filing a preliminary base shelf prospectus.

The Blanket Orders further exempt an issuer that meets the WKSI qualifications and certain conditions from the requirements to include specific information from its base shelf prospectus, including: (i) the number and aggregate dollar amount of securities qualified under the base shelf prospectus; (ii) the plan of distribution; (iii) descriptions of the securities being qualified for distribution other than as necessary to identify the types of securities qualified; and (iv) to describe any selling security holders. The temporary exemptions will come into effect on January 4, 2022, and expire on July 4, 2023, unless extended.

Qualification as a WKSI

A WKSI is an issuer that has either of the following:

1. outstanding listed equity securities that have a public float of C$500 million; or
2. at least C$1 billion aggregate amount of non-convertible securities, other than equity securities, distributed under a prospectus in primary offerings for cash in the last three years.

To be eligible as a WKSI, an issuer must also be, and have been, a reporting issuer in at least one Canadian jurisdiction for at least 12 months and meet the definition of a WKSI as of a date within 60 days preceding the date it files the final base shelf prospectus and be eligible to file a final short form prospectus under National Instrument 44-101 – Short Form Prospectus Distributions (NI 44-101).

Issuers with mining operations must meet additional financial criteria pursuant to the Blanket Orders. These issuers must have gross revenue derived from mining operations of at least C$55 million for the issuer's most recently completed financial year and gross revenue, derived from mining operations, of at least C$165 million in the aggregate for the issuer's three most recently completed financial years.

Practical Applications

The exemptions will allow an issuer that meets the qualification criteria as a WKSI to file a final base shelf prospectus and obtain a receipt therefore on an accelerated basis (the same or next business day) without being required to first file a preliminary base shelf prospectus or the prospectus being subject to period of review by the applicable securities regulators in advance of being able to issue securities thereunder. By contrast, under the current regime, issuers typically budget between four or five working days for the completion of regulatory review of a preliminary base shelf prospectus and the settlement of any comments thereon prior to being able to file a final base shelf prospectus.

Under the Blanket Orders, in place of the preliminary base shelf prospectus, the issuer must file a letter, executed on behalf of the issuer by one of its executive officers or directors stating that the issuer is relying on the Blanket Order and setting out that the issuer is a WKSI, based on the WKSI qualifications. The letter must also certify that the issuer is eligible to file a short-form prospectus pursuant to NI 44-101.

Issuers taking advantage of the WKSI program must still pay the fees otherwise required for the filing of a preliminary short form prospectus and deliver to the principal regulator any personal information forms (PIFs) that would be required under Section 4.1 of NI 44-101 as if the issuer were filing a preliminary short-form prospectus. Issues and deficiencies with any PIFs filed are to be addressed in the ordinary course and would not impact the issuance of a receipt for the final base shelf prospectus by the principal regulator. The accelerated procedures will permit a receipt to be issued on the same business day for a final base shelf prospectus filed with the principal regulator before noon, local time, and in compliance with the requirements of the Blanket Orders and National Instrument 44-102 – Shelf Distributions (NI 44-102). If a final base shelf prospectus is filed with the principal regulator after noon, local time, and in compliance with the requirements of the Blanket Orders and NI 44-102, the accelerated procedures will permit the receipt to be issued before noon on the next business day.

The WKSI program will allow issuers to access capital markets more readily and will significantly reduce the regulatory burden on large, well-known reporting issuers who meet the WKSI criteria and conditions, making it more efficient for these issuers to raise capital.

For further details, please see the CSA's Staff Notice and the related local Blanket Orders implemented by the securities regulators in each of the Canadian provinces and territories.

If you have any questions regarding the WKSI regime, please contact a member of the Bennett Jones Capital Markets group.

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