Shorter lead times and reduced transaction risk: CSA introduces new blanket orders

On December 6, 2021, the Canadian Securities Administrators (CSA) issued temporary exemptions from certain base shelf prospectus requirements for Qualifying Senior Issuers (WKSIs). The CSA implemented relief through local general ordinances that are fundamentally harmonized across the country and are expected to come into effect on January 4, 2022 (collectively, the general ordinances).

The General Orders were implemented by the CSA in response to comments that certain prospectus requirements in the context of the basic display create unnecessary regulatory burden for large established reporting issuers who keep track of the market. and up-to-date information packs. The comments recommended improving the current prospectus system by amending the base shelf prospectus regime to implement a Canadian WKSI regime, as base shelf prospectuses filed by these types of issuers are less likely to result in a loss. significant number of comments on significant deficiencies.

General Orders will be issued on a trial basis, and the CSA will consider how best to adopt the procedures set out in General Orders through future rule changes. Bulk orders are intended to stay up for up to 18 months. The CSA will use this time to determine whether these procedures should be adopted through rule changes and how best to adopt these procedures. During this period, it will be possible to identify the appropriate eligibility criteria, public interest and operational concerns.


General orders will significantly reduce the time required to complete pre-bids by allowing issuers who meet the conditions for general orders to file a final base shelf prospectus as the first step in a shelf placement instead of requiring a shelf prospectus. base is filed. It is important to note that this will allow qualifying WKSIs who have not yet obtained a final visa for a base shelf prospectus to forgo the comment process entirely.

In addition to eliminating the need to file, obtain a visa, and go through the comment process for a preliminary base shelf prospectus, the General Orders also simplify the form of the base shelf prospectus itself. The General Orders exempt a transmitter that meets the WKSI qualifications and certain other conditions from the following requirements:

  • disclose the total dollar amount of securities that may be raised under the base shelf prospectus;
  • include the number of titles eligible for distribution;
  • include a distribution plan;
  • describe the securities being distributed, except as necessary to identify the types of securities eligible for distribution under the base shelf prospectus; and
  • describe any bearer of seller securities.

Exemption Qualifications

In order to qualify as a WKSI for General Orders purposes, an issuer must have:

  1. outstanding listed equity securities that have a public free float of $ 500 million; Where
  2. at least a total of $ 1 billion in non-convertible securities, other than equity securities, distributed under a prospectus in primary cash offers, not in exchange, in the past three years.

In addition, the issuer:

  1. must also have obtained WKSI status by a date within 60 days of the date on which the issuer files the base shelf prospectus;
  2. is, and has been, a reporting issuer in at least one Canadian jurisdiction for at least 12 months; and
  3. is eligible to file a short form prospectus under National Instrument 44-101 respecting Short Form Prospectus Distributions.

In addition, the issuer cannot be an “ineligible issuer”. An Issuer will be an Ineligible Issuer if one of the following conditions apply:

  • the issuer has not filed with the securities regulator or the securities regulator of each jurisdiction in which it is a reporting issuer all the periodic and timely disclosure documents that it is required to file in this territory;
  • the issuer is or, during the past three years, the issuer or one of its predecessors has been,
    • an issuer whose operations have ceased; Where
    • an issuer whose principal asset is cash, cash equivalents or its stock exchange listing, including a capital pool company, a special purpose acquisition company, a growth acquisition company or any similar entity .
  • an issuer that has gone bankrupt within the past three years, has made a proposal under bankruptcy or insolvency law or has been the subject of or initiated a proceeding, arrangement or compromise with creditors or has appointed a receiver, receiver-manager or trustee to hold its assets;
  • an issuer that was, or any entity that was at the time a subsidiary of the issuer that was subject to penalties or sanctions, including restrictions on the use by the issuer of any type of prospectus, or an exemption, imposed by a securities law court or by a securities regulatory authority within the past three years;
  • an issuer that has been the subject of a trade ban in a Canadian jurisdiction or a trading suspension under section 12 (k) of the Securities Exchange Act of 1934 within the past three years;
  • the issuer is an investment fund; Where
  • the issuer has asset-backed securities outstanding.

Issuers with “mining operations” must pass additional financial tests. These issuers must have gross mining revenues of at least $ 55 million for the last completed fiscal year and gross revenues from mining operations of at least $ 165 million in total for the past three fiscal years. The issuer must also file any technical report required under National Instrument 43-101 – Disclosure standards for mining projectss. Although the General Orders use the term “mining operations”, no additional guidance has been provided at this time regarding the scope of these requirements and the types of mining emitters that may or may not be included.

Finally, an issuer must provide certain information in the prospectus as to its WKSI status and that it is availing itself of the exemption. A letter from an executive officer or director of the issuer must also accompany the filing of the base shelf prospectus and be dated the same date as the base shelf prospectus. The letter must confirm that the issuer relied on the exemption, specify the eligibility criteria on which the issuer relies and confirm that these criteria have been met by the issuer.

Shorter lead times and reduced transaction risk

Ultimately, blanket orders will allow qualifying WKSIs to conduct pre-prospectus offerings on an expedited basis, effectively reducing the potential transaction risk for these types of issuers. For current pre-offers, all issuers are required to file a preliminary base shelf prospectus with their principal regulator for comment before they can file and obtain a visa for a final base shelf prospectus. Although the comment period is generally limited to a period of three working days, the scope of any potential comment can be unpredictable and cause delays in filing prospectuses.

Bulk orders will dramatically increase the speed at which off-shelf offerings can be conducted by qualifying WKSIs by allowing those issuers to bypass the comment process altogether. General orders will, in most cases, allow qualifying WKSIs to file a final base shelf prospectus and receive a receipt on the same business day. Once a visa for the base shelf prospectus is obtained, issuers can draw on the base shelf prospectus by filing a prospectus supplement, which contains variable terms of the securities that are not known and cannot be determined in advance. when the base prospectus is filed. shelf prospectus. Since prospectus supplements are generally not subject to regulatory review, general orders will allow direct debits without having to undergo a comment period, significantly reducing the potential risks of the transaction for WKSIs and eligible underwriters.

Additional Considerations

Since general orders have the potential to significantly reduce the time between filing a base shelf prospectus and the closing of a preliminary debit, it is important that issuers intending to rely on general orders are working. with their advisors, as well as any agent or underwriter, well in advance of any offer to formulate a plan to take advantage of the accelerated timelines. For example, reduced lead times will require the need to formulate a plan to deal with standard deliverables that typically take some time, such as due diligence, underwriting or agency contracts, comfort letters, and any required legal advice.

Issuers seeking to avail themselves of the exemptions contained in the General Orders should also ensure that they are eligible for the short form format and that they meet the general requirements for interim distributions set out in National Instrument 44-102 respecting Ongoing Distributions. .

Martin E. Berry