Canadian Securities Administrators introduce blanket orders exempting “well-known seasoned issuers” from certain base shelf prospectus requirements
On December 6, 2021, the Canadian Securities Administrators (“CSA”) published CSA Staff Notice 44-306 Blanket Orders Exempting Well-known Seasoned Issuers from Certain Prospectus Requirements (the “Staff Notice”), which provides the CSA staff’s views on the novel temporary exemptions from certain base shelf prospectus requirements (the “Relief”) for qualifying well-known seasoned issuers (“WKSIs”). The Relief has been implemented through local blanket orders (collectively, the “Blanket Orders”) in all of the provinces and territories of Canada (the “Jurisdictions”). Subject to certain conditions, qualifying WKSIs will be able to file and obtain a receipt for a final base shelf prospectus with an unspecified amount of different classes of securities without having to first file and obtain a receipt for a preliminary base shelf prospectus. As a result, a base shelf prospectus filed by a WKSI will not be reviewed in substance by a Canadian securities regulator.
How to Qualify as a WKSI under the Blanket Orders
An issuer is a WKSI if it has:
a. outstanding listed equity securities that have a public float of C$500,000,000 (to be calculated excluding securities held by affiliated parties of the issuer); or
b. at least C$1,000,000,000 aggregate amount of non-convertible securities, other than equity securities, distributed under a prospectus in primary offerings for cash, not exchange, in the last three (3) years.
The Relief will be available to issuers that meet all the criteria provided in the relevant Blanket Orders, including the following:
a. the issuer is a WKSI as of a date within 60 days preceding the date the issuer files the base shelf prospectus;
b. the issuer has been a reporting issuer in at least one jurisdiction of Canada for 12 months;
c. the issuer is not an “ineligible issuer” (an issuer will be an “ineligible issuer” if, among others, (i) it has not filed all periodic and timely disclosure documents that it is required to file, (ii) its principal asset is cash, cash equivalents or its exchange listing, including, without limitation, a capital pool company or a special purpose acquisition company, or (iii) it has been the subject of any cease trade order in any Canadian jurisdiction within the past three (3) years);
d. the issuer is not an investment fund;
e. the issuer has no outstanding asset-backed securities;
f. the issuer pays the fee required for the filing of a preliminary short form prospectus; and
g. the issuer files, in place of a preliminary base shelf prospectus, a letter that, among other things, (i) is dated as of the date of the base shelf prospectus, (ii) is executed on behalf of the issuer by one of its executive officers or directors, (iii) states that the issuer is relying on a Blanket Order, and (iv) sets out, as applicable, the public float of outstanding listed equity securities or aggregate amount of non-convertible securities, other than equity securities, that the issuer has distributed under a prospectus within the last three (3) years that satisfy the definition of WKSI and the date of that determination.
Benefits of the Relief
Subject to certain conditions, pursuant to the Blanket Orders, a WKSI qualified for the Relief will be exempted from certain requirements of Form 1 of National Instrument 44-101 Short Form Prospectus Distributions and of National Instrument 44-102 Shelf Distributions (“NI 44-102”), including the following requirements:
a. to file and obtain a receipt for a preliminary base shelf prospectus included in each jurisdiction’s local legislation;
b. to limit distributions under the base shelf prospectus to the dollar value the issuer reasonably expects to distribute within 25 months after the date of the receipt for the base shelf prospectus; and
c. to state the aggregate dollar amount of securities that may be raised under the base shelf prospectus.
In the ordinary course, for a final base shelf prospectus filed with the principal regulator before noon, local time, and in compliance with the requirements of NI 44-102 and the Blanket Orders, CSA staff expect that the accelerated procedures will permit the receipt to be issued on the same business day. If a final base shelf prospectus is filed with the principal regulator after noon, local time, and in compliance with the requirements of NI 44-102, CSA staff expect that the accelerated procedures will permit the receipt to be issued before noon on the next business day.
The Blanket Orders are providing the Relief on a trial basis, which will provide the CSA with the opportunity to evaluate the appropriateness of the eligibility criteria for a WKSI and to identify any potential public interest concerns or operational considerations. The CSA will then evaluate whether rule amendments to implement such a WKSI regime in Canada would be appropriate.
The Blanket Orders are substantially harmonized among the Jurisdictions, and any rule amendments to be adopted by the CSA would also be done on a coordinated basis.
The Blankets Orders will come into effect on January 4, 2022.
If you have any questions regarding this Staff Notice, we invite you to contact any of the authors or any other member of our Capital Markets team.
 In its consideration of implementing a WKSI regime in Canada, the CSA has also studied the WKSI regime that has been in force for several years in the United States.