The Canadian Securities Administrators (“CSA”) have released the much anticipated final amendments to National Instrument 44-102 Shelf Distributions (“NI 44-102”) as well as consequential changes to other policies to establish a permanent expedited shelf prospectus regime for well-known seasoned issuers (“WKSIs”) in Canada (collectively, the “Final Amendments”). The Final Amendments will come into force on November 28, 2025, provided that all necessary ministerial approvals are obtained. The Final Amendments mark a major leap forward in modernizing and streamlining capital raising for Canada’s most established issuers.
Background
As we discussed in a previous post, members of the CSA issued local blanket orders in December 2021 that provide temporary exemptions from certain base shelf prospectus requirements for qualifying WKSIs (the “Blanket Orders”). The Blanket Orders allow eligible issuers to file and receive a receive a receipt for a final base shelf prospectus on an accelerated basis without first filing a preliminary base shelf prospectus.
In September 2023, the CSA published for comment proposed amendments to NI 44-102 to formalize and modify in certain respects the relief provided in the Blanket Orders (the “Proposed Amendments”). The Proposed Amendments were designed to reduce unnecessary regulatory burden for large, established issuers that have a strong market following and a complete public disclosure record. The Proposed Amendments would also more closely align the timing of prospectus filings in Canada and the United States, facilitating cross-border offerings.
The Final Amendments
The Final Amendments permit eligible issuers to: (i) file a final base shelf prospectus and receive a deemed receipt without filing a preliminary base shelf prospectus or undergoing any regulatory review; (ii) omit certain disclosure from the base shelf prospectus such as the aggregate dollar amount of securities that may be raised under the prospectus; and (iii) benefit from a receipt that is effective for a period of 37 months from the date of its deemed issuance, subject to annual confirmation of continued WKSI eligibility.
The CSA have made the following notable changes to the Proposed Amendments in light of the comments received:
- Seasoning period: the length of time that an issuer is required to have been a reporting issuer in a jurisdiction of Canada before filing a WKSI base shelf prospectus has been reduced from three years to 12 months;
- Penalties and sanctions: the scope of the penalties and sanctions that would preclude an issuer from accessing the WKSI regime has been revised. The CSA have raised the threshold to convictions for offences related to bribery, deceit, fraud, insider trading, misrepresentation, money-laundering and theft. Issuers and their subsidiaries that are the subject of any order, decision or settlement agreement that imposes sanctions, conditions, restrictions or requirements as a result of a contravention of Canadian or U.S. laws respecting securities or derivatives during the preceding three years will also be excluded. A number of commenters suggested that a materiality qualifier should be introduced to ensure that an issuer is not disqualified in the event of a minor sanction. The CSA declined to incorporate this change and noted that an issuer may apply for exemptive relief where it is unable to satisfy this criteria. The companion policy has been updated to clarify that a late filing fee is not considered a penalty or sanction;
- New eligibility criteria: in order to use the WKSI regime, an issuer must not be the subject of any proceeding under securities law in respect of a prospectus relating to the issuer’s securities or a distribution of the issuer’s securities. During the preceding three years, a Canadian regulator cannot have refused to issue a receipt for a prospectus filed by the issuer. The issuer must also not have filed and recently abandoned a preliminary prospectus or an amendment to a preliminary prospectus;
- Additional participants: the regime has been expanded to permit successor issuers, credit support issuers and issuers with outstanding asset-backed securities to file a WKSI base shelf prospectus;
- Calculation of qualifying public equity: the CSA have clarified that an issuer may rely on information contained in an insider report that is filed on the System for Electronic Disclosure by Insiders (SEDI) in accordance with National Instrument 55-104 Insider Reporting Requirements and Exemptions or in a news release or report filed in accordance with the early warning requirements in National Instrument 62-103 The Early Warning System and Related Take-Over Bid and Insider Reporting Issues and National Instrument 62-104 Take-Over Bids and Issuer Bids when determining the issuer’s qualifying public equity;
- Withdrawal of WKSI base shelf prospectus: the requirement to file a news release upon the withdrawal of a WKSI base shelf prospectus has been removed;
- Personal information forms (“PIFs”): PIFs must be delivered to the regulator as soon as practicable upon request rather than concurrently with the filing of the WKSI base shelf prospectus;
- Exemptive relief: guidance has been added to the companion policy to explain factors that staff would consider in connection with an exemptive relief application from any of the requirements of the WKSI regime. These include, among others: (i) the nature of the conduct resulting in ineligibility; (ii) who was responsible for the conduct resulting in ineligibility; (iii) the duration of the conduct resulting in ineligibility; (iv) the effects of the conduct resulting in eligibility; (v) the issuer’s history of compliance with securities laws; (vi) remedial steps taken to address the conduct resulting in ineligibility; and (vii) disclosure of the conduct resulting in ineligibility; and
- Multijurisdictional disclosure system (“MJDS”) offerings: the companion policy has been updated to reflect that all jurisdictions that act as principal regulator pursuant to National Policy 11-202 Process for Prospectus Reviews in Multiple Jurisdictions are prepared to issue a notification of clearance on request to accommodate issuers seeking to use a WKSI base shelf prospectus to qualify securities for offer and sale in the United States under the MJDS. To avoid timing complications, issuers are encouraged to contact staff of their principal regulator in advance to discuss the filing and use the confidential prospectus pre-filing process.
The Blanket Orders that do not expire automatically on the coming into force of the Final Amendments and OSC Rule 44-503 Exemption from Certain Prospectus Requirements for Well-Known Seasoned Issuers will be revoked or repealed on the same date that the Final Amendments come into force.
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