CSA Proposed Amendments to expedited shelf prospectus program

On September 21, 2023, the Canadian Securities Administrators (“CSA”) published a request for comments on proposed amendments to National Instrument 44-102 - Shelf Distributions, Companion Policy 44-102CP - Shelf Distributions and National Policy 11-202 - Prospectus Reviews in Multiple Jurisdictions (collectively, the “Proposed Amendments”) to create a permanent expedited shelf prospectus regime for “well-known seasoned issuers” (“WKSIs”). The Proposed Amendments are intended to foster capital-raising by WKSIs in the public markets ‎and aim to reduce the unnecessary regulatory burden for issuers that are well-known reporting issuers and have a strong market following, a complete public disclosure record and sufficient public equity. The Proposed Amendments follow a trial period implemented by the CSA in December 2021 through a series of local blanket orders (the “Blanket Orders”).

The Proposed Amendments

To qualify as a WKSI under the Proposed Amendments, the issuer must:

• have outstanding qualifying public equity of at least $500 million or qualifying public debt of at least $1 billion during the preceding 60 days;
• be a reporting issuer in at least one Canadian jurisdiction for the preceding three years;
• be qualified to file a short form prospectus under National Instrument 44-101 - Short Form Prospectus Distributions; and
• have no outstanding asset-backed securities.

Under the Proposed Amendments, the qualifying public equity or debt thresholds remain unchanged from the Blanket Orders, however the calculation method has been revised to a simple 20-day average closing price of the securities on the applicable stock exchange. The issuer seasoning period has been increased from 12 months under the Blanket Orders to three years under the Proposed Amendments.

An issuer would be ineligible to qualify as a WKSI under the Proposed Amendments if either the issuer or any of its subsidiaries has been subject of a decision by, or has entered into a settlement ‎agreement with or approved by, a court or a securities regulatory ‎authority in Canada or abroad related to a claim based on fraud, ‎theft, deceit, misrepresentation, conspiracy, insider trading, unregistered activity or illegal distribution within the preceding three years.‎

Notably, the Proposed Amendments provide that a base shelf prospectus will be effective upon filing, as a receipt will be deemed to be issued in all jurisdictions in Canada when the issuer files a WKSI base shelf prospectus in its principal jurisdiction. This would eliminate an issuer’s need to file and clear a preliminary base shelf prospectus with securities regulators and to obtain a receipt from the regulators. Additionally, issuers would be permitted to make amendments to a WKSI base shelf prospectus without issuance of a receipt by the issuer’s principal regulator.

Under the Proposed Amendments, issuers would benefit from a longer effectiveness period as a deemed receipt for a WKSI base shelf prospectus will be effective for 37 months from its date of issuance, an increase from the limit of 25 months under the Blanket Orders.

The Proposed Amendments also introduce an annual confirmation requirement whereby an issuer that has filed a WKSI base shelf prospectus must annually confirm whether it continues to qualify as a WKSI, either through a statement in its annual information form or by filing an amendment to its WKSI base shelf prospectus. If an issuer ceases to qualify as a WKSI, the issuer will be required to publicly announce it will not distribute securities under a prospectus supplement to the WKSI base shelf prospectus and has withdrawn the WKSI base shelf prospectus.

Next steps

Comments on the Proposed Amendments are due on or before December 20, 2023.

Issuers may continue to rely on the Blanket Orders until their expiry, or such time as the Proposed Amendments are implemented.