In the Canadian Securities Administrators’ (CSAs’) ongoing efforts to reduce regulatory burden and better provide for cost-effective capital raising mechanisms, the CSA has developed the Listed Issuer Financing Exemption (Exemption), a prospectus exemption aimed at providing reporting issuers, and particularly smaller issuers, the ability to raise capital through smaller-sized offerings. The Exemption was created in response to the impediments noted by many market commentators who highlighted that the short form prospectus regime created to facilitate capital raising for reporting issuers was often seen as a barrier and too costly, particularly for smaller issuers. The Exemption balances investor protection and the fostering of capital formation and efficient capital markets by incorporating the continuous disclosure regime for reporting issuers while also allowing eligible issuers to raise a limited amount of capital through the filing of a more cost-effective offering document (Form 45-106F19 Listed Issuer Financing Document or the Offering Document).

We previously reported on some of the features of the Exemption in our August 2021 bulletin. Since then, the following changes to the Exemption have been made:

  • Restricting certain issuers from using the exemption, including investment funds and issuers that are or had been capital pool companies, among others.
  • Reducing the dilution limit on distributions using the exemption from 100% to 50% of the issuer’s outstanding securities.
  • Limiting the type of securities that can be distributed using the exemption to listed equity securities and units consisting of listed equity securities and warrants convertible into listed equity securities.
  • Requiring that the news release announcing an offering using the Exemption contain prescribed language on where an investor can access the Offering Document (e.g., on their website).
  • Requiring that the Offering Document contain prescribed language on the risks of investing, on its cover page.
  • Requiring that the Offering Document be signed by the chief executive officer and chief financial officer of the issuer.
  • Requiring that the Form 45-106F1 Report of Exempt Distribution filed in connection with distributions using the Exemption include a completed Schedule 1 with purchaser information.

The exemption will come into effect on November 21, 2022. If you have any questions or are interested in learning more, please contact us. For additional insights from BLG’s Capital Markets team, please refer to the article under “BLG’s Resource Corner” below.

September 28, 2022