CSA Propose Amendments to Shelf Prospectus Regime for WKSIs

Stikeman Elliott LLP

Stikeman Elliott LLP

On September 21, 2023, the Canadian Securities Administrators (“CSA”) announced proposed amendments to National Instrument 44-102 Shelf Distributions (“NI 44-102”) relating to well-known seasoned issuers ("WKSIs")as well as consequential amendments to other rules and policies that would formalize and modify in certain respects the previously introduced expedited shelf prospectus regime for WKSIs in Canada (the “Proposed Amendments”). The Proposed Amendments have been published for a 90-day comment period, which expires on December 20, 2023.


The CSA received feedback from market participants that certain base shelf prospectus requirements create unnecessary regulatory burdens for large, established issuers that have a strong market following and a complete public disclosure record. Stakeholders recommended that the CSA implement a Canadian version of the WKSI regime that exists in the United States to assist certain issuers with raising capital on a more expedited basis.

As we discussed in a previous post, in December 2021, members of the CSA issued local blanket orders 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 receipt for a final base shelf prospectus on an accelerated basis without first filing a preliminary base shelf prospectus.

Since January 2022, the CSA have reviewed the use of the Blanket Orders and considered feedback from stakeholders in order to determine how to implement a more permanent Canadian WKSI regime through amendments to the rules. The CSA considered replicating the provisions set out in the Blanket Orders but believe that the Proposed Amendments are more responsive to stakeholder feedback and would increase market efficiency to a greater extent. While the Blanket Orders remain in effect, they would be replaced by the Proposed Amendments, if adopted.

The Proposed Amendments

Under the Proposed Amendments, an issuer will be eligible to take advantage of the WKSI regime if it is not an investment fund and is and has been a reporting issuer in a jurisdiction of Canada for the preceding three years (such proposed seasoning period being significantly longer than the 12-month period under the Blanket Orders), it is eligible to file a short form prospectus and it has either: (i) qualifying public equity of at least C$500,000,000; or (ii) qualifying public debt of at least C$1,000,000,000.

The Proposed Amendments would permit issuers that satisfy the qualification criteria to:

  • file a final base shelf prospectus and be deemed to receive a receipt for that prospectus upon filing without first filing a preliminary base shelf prospectus or undergoing (at least generally) any regulatory review;
  • omit certain disclosure from the base shelf prospectus, including the aggregate dollar amount of securities that may be raised; and
  • benefit from a deemed receipt that will be effective for 37 months from the date of its deemed issuance, subject to annual confirmation of continued WKSI eligibility.

The CSA believe that the Proposed Amendments will provide more certainty regarding transaction timing and facilitate cross-border offerings, as the timing of filings in Canada and the United States will become more aligned.

The United States WKSI regime provides eligible issuers with a high degree of control over when their base shelf prospectus is made effective with the Securities and Exchange Commission and publicly available on EDGAR. Typically, such issuers would file their base shelf prospectus and a corresponding prospectus supplement after markets close in connection with the launch of a transaction, effectively giving such issuers immediate access to the market. That level of control over timing allows such issuers to avoid inadvertently alerting the market to a potential transaction prior to launch.

By contrast, while the Blanket Orders significantly reduced the timing delays associated with filing a base shelf prospectus, they did not provide a similar degree of control over when a base shelf prospectus would be receipted and made public. While Canadian regulators have historically been receptive to eligible issuers’ pre-filing requests to provide prospectus receipts at or around a specified time in an effort to better align Canadian WKSI filing procedures with those in the United States, the risks of misalignment in the context of the launch of an underwritten cross-border offering remained a material concern for many market participants. We believe that the control over timing resulting from the deemed receipt included in the Proposed Amendments is responsive to stakeholder feedback and significantly reduces existing concerns for eligible issuers seeking to coordinate the launch of a cross-border marketed offering using the WKSI procedures.

Differences between the Blanket Orders and the Proposed Amendments

Although the Proposed Amendments largely follow the Blanket Orders, there are certain differences between the Blanket Orders and the Proposed Amendments, which include:

Blanket Orders

Proposed Amendments

WKSI eligibility

“Public float” is defined as the aggregate market value of the issuer’s securities held by persons or companies that are not affiliated parties of the issuer and is calculated by using the price at which the securities were last sold in the principal market for the securities as of a date within 60 days preceding the date of filing the base shelf prospectus.

“Qualifying public equity” is defined as the aggregate market value of the issuer’s listed equity securities, excluding securities held by affiliates or reporting insiders of the issuer, and is calculated using the simple average of the daily closing price of the issuer’s equity securities on a short form eligible exchange for each of the trading days on which there was a daily closing price for the 20 trading days preceding the date of calculation (which must be within 60 days of the date of filing the base shelf prospectus).

An issuer that files a WKSI base shelf prospectus must have been a reporting issuer in at least one jurisdiction in Canada for the previous 12 months.

An issuer that files a WKSI base shelf prospectus must have been a reporting issuer in at least one jurisdiction in Canada for the previous three years.

Filing requirements

An issuer must file a letter in place of the preliminary prospectus that states: (i) its reliance on the Blanket Orders; (ii) its public float and the date of that determination; (iii) the provision under which it is short-form eligible; and (iv) if it has mining operations, the basis on which it satisfies the applicable requirements.

The letter must also certify that the issuer has satisfied all WKSI qualification criteria and filing requirements.

In addition to the qualification certificate required by section 4.1(1)(a)(ii) of National Instrument 44-101 Short Form Prospectus Distributions, the base shelf prospectus must disclose: (i) the issuer’s reliance on the WKSI rules; and (ii) the value of its qualifying public equity (or qualifying public debt) that establishes that the issuer is a WKSI and the corresponding date.

Timing of receipt

There is an accelerated receipt mechanism.

A receipt is deemed to be issued upon filing the base shelf prospectus. The automatic receipt mechanism was introduced to provide increased certainty regarding transaction timing and provide for better alignment with the procedures in the United States for making a registration statement effective.

The Blanket Orders do not contain specific provisions relating to receipt effectiveness. Under NI 44-102, a receipt is effective for up to 25 months.

The deemed receipt will be effective for up to 37 months.

Annual confirmation

There is no requirement to conduct an annual confirmation.

An issuer must confirm its WKSI eligibility each year by including a statement in its annual information form or in an amendment to its WKSI base shelf prospectus.

An issuer that is no longer eligible must publicly announce that it will not distribute securities under a prospectus supplement to the WKSI base shelf prospectus and withdraw its base shelf prospectus.

Some jurisdictions, including Ontario, are also contemplating amendments to local laws to allow for the automatic receipt mechanism contemplated by the Proposed Amendments.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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