On December 6, 2021, pursuant to Staff Notice
44-306 Blanket Orders Exempting Well-known Seasoned
Issuers from Certain Prospectus Requirements (the
Notice), the Canadian Securities Administrators (CSA) announced
temporary exemptions from certain base shelf prospectus
requirements for qualifying well-known seasoned issuers (WKSIs),
including an exemption from the requirement to file and obtain a
receipt for a preliminary base shelf prospectus before filing a
base shelf prospectus and an exemption from the requirement to
state the aggregate dollar amount of securities that may be raised
under a base shelf prospectus (collectively, the WKSI Exemptions).
The WKSI Exemptions are intended to streamline the shelf prospectus
process for large, established reporting issuers with up-do-date
disclosure records and provide quicker and more efficient access to
the Canadian capital markets for such issuers.
The exemptions are being implemented through local blanket orders
in each of the provinces and territories of Canada (the Blanket
Orders). The Blanket Orders come into effect on January 4, 2022 and
will be effective until July 4, 2023 (unless extended by the CSA)
or such earlier date on which amendments are made to National
Instrument 44-102 Shelf Distributions (44-102)
to address the accommodations for WKSIs contemplated by the Blanket
Orders.
The Blanket Orders are substantially harmonized across the
provinces and territories of Canada. The Blanket Orders applicable
in Ontario and Alberta are contained in Ontario Instrument 44-501
and Alberta Securities Commission Blanket Order 44-501,
respectively. The Blanket Order applicable in British Columbia
(B.C.) is expected to be contained in B.C. Instrument 45-503. The
Notice contains a comprehensive list of the Blanket Orders enacted
in each province or territory.
KEY TAKEAWAYS
A WKSI is an issuer that has either of the following:
- outstanding listed equity securities that have a public float of C$500,000,000; or
- 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 three years preceding the date of the base shelf prospectus.
Subject to the satisfaction of certain other conditions (see
"Qualification Criteria" below), an issuer that has been
a reporting issuer in at least one jurisdiction of Canada for 12
months and meets the definition of a WKSI within 60 days preceding
the date the issuer files a base shelf prospectus are exempt from
the requirement to file and obtain a receipt for a preliminary base
shelf prospectus in connection with the filing of a base shelf
prospectus.
An issuer that satisfies the WKSI qualification criteria will also
be exempt from certain of the form requirements with respect to a
base shelf prospectus, including:
- the requirement to state the aggregate dollar amount of securities that may be raised under a base shelf prospectus;
- the requirement to limit distributions under a final base shelf prospectus to the dollar value the issuer reasonably expects to distribute within 25 months after the date of the receipt for the final base shelf prospectus;
- the requirement to include a plan of distribution, other than to indicate that the plan of distribution will be described in the supplement for any distribution of securities;
- the requirement to describe the securities being distributed, other than as necessary to identify the types of securities; and
- the requirement to describe any selling securityholders.
By streamlining the base shelf prospectus process and permitting a
base shelf prospectus to be filed for an unspecified amount of
securities, the WKSI Exemptions will afford issuers that satisfy
the WKSI qualification criteria with greater flexibility in
accessing the Canadian capital markets and a quicker and more
efficient process for raising capital (with a reduced chance for
delay) as compared to non-WKSI issuers.
Specifically, the CSA has indicated that, in the ordinary course,
WKSIs which comply with the Blanket Order and file a base shelf
prospectus with the local securities commission before noon, local
time, can expect a receipt to be issued on the same business day.
The Blanket Orders also eliminate the need for WKSIs to file a new
or amended base shelf prospectus prior to the expiry of the
25-month effective period as would be necessary for non-WKSI
issuers in circumstances where the issuer has exhausted the dollar
amount specified in the original base shelf prospectus through
prospectus supplement financings.
BACKGROUND
The Blanket Orders are responsive to feedback received by the
CSA to its Consultation Paper 51-404 Considerations for
Reducing Regulatory Burden for Non-Investment Fund Reporting
Issuers that the current regulatory regime with respect
to the filing and clearance of a base shelf prospectus (which
requires the filing of a preliminary base shelf prospectus subject
to securities commission review) creates unnecessary regulatory
burden for large, established reporting issuers that have a strong
market following and a complete public disclosure record.
Similarly, the final report of the Capital Markets Modernization
Taskforce (established by the Government of Ontario in February
2020) included a recommendation that the Ontario Securities
Commission develop a WKSI model in Ontario, similar to the U.S.
approach, to streamline the prospectus process for issuers that
meet certain eligibility criteria. The U.S. WKSI regime, which is
codified in the General Rules and
Regulations under the Securities Act of 1933 and has been
in place since 2005, permits issuers qualifying as a WKSI to, among
other things, register securities offerings on shelf registration
statements that become effective automatically upon filing.
QUALIFICATION CRITERIA
The Blanket Orders provide that an 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, it satisfies certain conditions, including the following:
- 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;
- the issuer is and has been a reporting issuer in at least one jurisdiction of Canada for 12 months;
- the issuer is eligible to file a short form prospectus under National Instrument 44-101 Short Form Prospectus Distributions (44-101) under the basic qualification criteria contained in Section 2.2 of that instrument, or the alternative qualification criteria set out in Section 2.3, 2.4 or 2.5 of that instrument;
- if the issuer has mining operations:
- the issuer's most recent audited financial statements disclose (i) gross revenue, derived from mining operations, of at least C$55,000,000 for the issuer's most recently completed financial year and (ii) gross revenue, derived from mining operations, of at least C$165,000,000 in the aggregate for the issuer's three most recently completed financial years, in each case preceding the date of the base shelf prospectus; and
- the issuer files any technical reports that would be required to be filed with a preliminary short form prospectus under National Instrument 43-101 Standards of Disclosure for Mineral Projects;
- the issuer is not an "ineligible issuer" (which includes, among other things, an issuer that (a) has not filed in each jurisdiction in which it is a reporting issuer all periodic and timely disclosure documents required to have been filed in that jurisdiction, (b) is, or during the three years preceding the date of the base shelf prospectus was, (i) an issuer whose operations have ceased, or (ii) an issuer whose principal asset is cash, cash equivalents, or its exchange listing, including a capital pool company, a special acquisition company or any similar entity, or (c) has in the three years preceding the date of the base shelf prospectus become bankrupt or insolvent);
- the issuer is not an investment fund;
- the issuer has no outstanding asset-backed securities;
- the base shelf prospectus includes certain specified cover page disclosure confirming that the issuer qualifies as a WKSI and the date of that determination; and
- the issuer files, in place of a preliminary base shelf prospectus, a letter, dated as of the date of the base shelf prospectus and executed on behalf of the issuer by one of its executive officers or directors stating that the issuer is relying on the applicable Blanket Order, and, among other things, certifying that the issuer has satisfied the other qualification criteria.
NEXT STEPS
The CSA intends to use the 18-month trial period contemplated by the Blanket Orders to evaluate the appropriateness of the WKSI eligibility criteria set out in the Blanket Orders and to identify any public interest concerns or operational considerations that should be addressed in any amendments, including to 44-102.
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