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Redefining Significant Acquisitions: Amendments to the BAR Significance Tests

On August 20, 2020, the Canadian Securities Administrators (the “CSA”) published CSA Notice of Amendments to National Instrument 51-102 Continuous Disclosure Obligations and Changes to Certain Policies Related to the Business Acquisition Report Requirements (the “Notice”) setting forth important amendments to the Business Acquisition Report (the “BAR”) requirements. For reporting issuers (other than venture issuers), the amendments increase the threshold for each of the significance tests and adopt a two-trigger test to determine significance.

The amendments are the result of a consultation process initiated on April 6, 2017 by CSA Consultation Paper 51-404 Considerations for Reducing Regulatory Burden for Non-Investment Fund Reporting Issuers. The CSA first made the draft amendments to the BAR requirements available for review by and requested comments from stakeholders on September 5, 2019.

NI 51-102 Continuous Disclosure Obligations (“NI 51-102”) requires a reporting issuer that is not an investment fund to file a BAR after completing a “significant acquisition”. Prior to the amendments, an acquisition was a “significant acquisition” if the result of any one of the three significance tests set out in Part 8 of NI 51-102 (the asset test, the investment test and the profit or loss test) exceeded 20 per cent for a reporting issuer that was not a venture issuer, or, if the issuer was a venture issuer, if the result of either the asset test or the investment test exceeded 100 per cent.

The amendments alter the test used to determine whether an acquisition is a significant acquisition in two ways. First, the amendments increase the threshold of the significance tests for reporting issuers that are not venture issuers from 20% to 30%. Second, for reporting issuers that are not venture issuers, an acquisition is significant and requires a BAR only if at least two of the existing significance tests are triggered. There are no changes to the BAR requirements applicable to venture issuers.

During the consultation process leading up to the Notice, the CSA estimated that, if the amendments set out in the Notice had been in effect during the previous three years, the number of applications filed annually to request relief from the BAR requirements would decrease by approximately 56%, and the number of BARs filed annually would decrease by approximately 42%.

The amendments are expected to come into force on November 18, 2020.

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