In response to ongoing uncertainty in global capital markets, the Canadian Securities Administrators (CSA) recently published three coordinated blanket orders (the "Blanket Orders") intended to reduce the regulatory burden and provide increased flexibility for publicly-listed issuers in Canada. The Blanket Orders represent the first in a series of steps the CSA plan to implement to support the competitiveness of Canada's capital markets by making it easier and more cost-effective to raise capital in Canada without sacrificing investor protection.
The Blanket Orders, being, collectively, Coordinated Blanket Order 41-930 Exemptions from Certain Prospectus and Disclosure Requirements, Coordinated Blanket Order 45-930 Prospectus Exemption for New Reporting Issuers, and Coordinated Blanket Order 45-933 Exemption from the Investment Limit under the Offering Memorandum Prospectus Exemption to Exclude Reinvestment Amounts, came into force on April 17, 2025 and are subject to term limits in each jurisdiction, which may be extended by the CSA. In Ontario, the initial term for the Blanket Orders expires on October 16, 2026.
Key Regulatory Changes
The Blanket Orders include the following key regulatory changes:
- Reduced Historical Financial Statement Disclosure for IPOs
Under existing Canadian securities laws, issuers must include three years of audited financial statements and related management's discussion and analysis in their IPO prospectus, subject to limited exceptions. The Blanket Orders reduce this requirement to two years for all issuers conducting an IPO. The new two-year requirement also applies to financial statements required for an acquiror in a management information circular or take-over bid circular for a transaction involving the issuance of securities of the acquiror to target securityholders.
- New Prospectus Exemption for IPO Issuers
Under the Blanket Orders, during the 12 months following an underwritten IPO, issuers that meet certain conditions will be permitted to raise up to the lesser of $100,000,000 or 20% of the aggregate market value of the issuer's listed equity securities without filing a prospectus, provided the follow-on offering involves the same class of securities issued on the IPO and the offering price is not less than the IPO price. To rely on the exemption, the issuer must, among other conditions, be listed on a Canadian stock exchange and file a news release and offering document before soliciting offers to purchase. The offering document must include, among other information:
- details of the offering;
- disclosure of any material fact relating to the offering;
- description of the issuer's objectives, recent developments and use of proceeds;
- disclosure of the involvement of underwriters or dealers in connection with the offering, including details regarding compensation, fees, commissions and conflicts;
- if proceeds of the offering are to be allocated to a "significant acquisition", the disclosure that would be required in a prospectus; and
- if comparable rights are not otherwise available under applicable securities laws in the jurisdiction, contractual rights to cancel the agreement within two days of purchase and to rescind or sue for damages if there is a misrepresentation in the offering document or certain other documents.
It will be interesting to see how this new prospectus exemption is used by market participants in practice, and whether it will significantly modify the customary "bought deal" and other well-established processes.
- Other Changes
The Blanket Orders also implement changes to: (i) reduce the circumstances under which a promoter certificate is required in a prospectus; (ii) permit marketing materials utilized during the waiting period to include certain specified pricing information that is not disclosed in the preliminary prospectus (which gives issuers and dealers flexibility to change the size and pricing of an offering without filing an amendment to the preliminary prospectus); and (iii) in Alberta, Ontario, Québec, New Brunswick, Nova Scotia and Saskatchewan, increase the investment limit in the offering memorandum exemption for certain eligible investors to allow for reinvestment of proceeds within a 12-month period (there is no such limit in the other CSA jurisdictions).
Future Relief for Canadian Markets
The CSA's new measures, implemented against the backdrop of a general decline in activity across Canada's capital markets and protectionist trade measures by the U.S., are one step towards revitalizing Canada's capital markets. We are pleased the CSA are seeking to reduce the regulatory burden on Canadian public issuers and believe these changes are generally a positive development. However, more concrete steps are needed to encourage businesses to list and stay listed on Canadian stock exchanges.For additional insights into the problem and potential solutions, please see here.
For further information regarding these developments and how they impact your company, please contact any member of our Capital Markets Group.
The authors would like to thank Annie MacKinnon, Articling Student-At-Law, for her assistance in writing this Update.
The content of this article does not constitute legal advice and should not be relied on in that way. Specific advice should be sought about your specific circumstances.
