In the face of the recent uncertainty in global markets, Canadian securities regulators have implemented legislation designed to facilitate capital formation and reduce regulatory burden for issuers. This legislation is in the form of three coordinated blanket orders, summarized below. The blanket orders are subject to time limits set by each jurisdiction, and in Ontario, they will expire on October 16, 2026, unless extended.
Less Historical Financial Disclosure – Coordinated Blanket Order 41-930
Under this blanket order, an issuer needs only to include audited financial statements for its last two completed financial years in its prospectus for an initial public offering, as compared to the previous requirement for the last three completed years. This reduction to the last two years of audited financials also applies to documents for certain other transactions, including information circulars where shares of an issuer are issued in exchange for the securities of a target entity and in take-over bid and issuer bid circulars. Additionally, the blanket order provides relief from the requirement to include a promoter's certificate in a prospectus in certain circumstances and permits marketing materials distributed to potential investors during the waiting period for a prospectus offering to include information on pricing and number of securities, which is different from such information as presented in the preliminary prospectus, without having to file an amendment to the preliminary prospectus.
New Prospectus Exemption for Private Placements by Public Entities in Their First Year – Coordinated Blanket Order 45-930
This blanket order creates a new prospectus exemption allowing new reporting issuers whose securities are listed to raise, via private placement, up to the lower of $100 million or 20% of the market cap of the issuer's listed securities. The prospectus exemption is time limited; it must be initiated by filing a prescribed press release, which describes the private placement offering, within 12 months following the reporting issuer's receipt for its long form prospectus for an underwritten IPO. Except for employees, insiders or consultants of the issuer, any investor can potentially purchase securities under this exemption as there are no investor criteria or dollar limit restrictions which are features of other prospectus exemptions such as the 'accredited investor' or 'offering memorandum' exemptions. An offering document containing certain information, including a description of the offering, the issuer's business and the intended use of funds, must be filed with securities regulators via SEDAR+ and posted on the issuer's website, where it will be available to prospective investors.
There are certain additional restrictions on the use of this exemption, including:
- It is not available for investment funds
- The securities issued must be the same as were issued under the IPO and must be priced at or above the IPO price
- The private placement offering cannot result in a new control person
- The proceeds of the private placement may not be allocated to a restructuring transaction, a transaction for which securityholder approval is required, or if the issuer is a venture issuer, to a significant acquisition as defined in Part 8 of National Instrument 51-102 – Continuous Disclosure Obligations.
Reinvested Funds Exempted from Investment Limit Under Offering Memorandum Exemption – Coordinated Blanket Order 45-933
Ontario, Alberta, Québec, Saskatchewan, Nova Scotia and New Brunswick have increased the investment limit under the offering memorandum prospectus exemption for individual eligible investors who have received suitability advice from a registrant. More particularly, this blanket order allows eligible investors who are individuals and who have received advice from a portfolio manager, investment dealer or exempt market dealer that the investment is suitable, to make an additional investment of up to $100,000 in securities of an issuer through the reinvestment of proceeds received from the disposition of that issuer's securities in the prior 12 months. In Ontario, the issuer must file a supplementary report with the Ontario Securities Commission relating to the use of the exemption under this blanket order, in addition to filing a report of exempt distribution in relation to the use of the offering memorandum exemption.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
