On August 1, 2024, the Canadian Securities Administrators (the "CSA") issued a Notice and Request for Comment (the "Notice") regarding a variety of proposed amendments and changes to certain national instruments and policies (the "Proposed Amendments").
The Proposed Amendments are primarily intended to address the treatment of issuers listed on the Canadian Securities Exchange's ("CSE") new senior tier (the "CSE Senior Tier") under Canadian securities legislation. The CSE Senior Tier was implemented by the CSE on April 3, 2023 through an amendment to the CSE's listing policies. Please see our previous legal update for further information on the amendments to the CSE's listing policies: Amendments to the CSE Listing Policies.
The Proposed Amendments
The Proposed Amendments aim to align the treatment of CSE Senior Tier issuers under Canadian securities legislation with the treatment of issuers listed on non-venture exchanges, such as the Toronto Stock Exchange and Cboe Canada Inc.
1. Updated Definitions of "Venture Issuer" and "IPO Venture Issuer"
The Proposed Amendments include updates to the definitions of "venture issuer" and "IPO venture issuer" in Canadian securities legislation to exclude issuers with securities listed (or intended to be listed) on the CSE Senior Tier. In accordance with the revised definitions, issuers listed (or applying to list) on the CSE Senior Tier will be required to comply with the securities legislation applicable to non-venture issuers.
2. Employee, Executive Officer, Director or Consultant Exemption
The Proposed Amendments include an amendment to National Instrument 45-106 – Prospectus Exemptions which will allow issuers listed on the CSE to rely on the applicable exemption from the prospectus requirements for distributions to employees, executive officers, directors or consultants.
3. Short Form Prospectus Eligibility Requirement
The Proposed Amendments include an amendment to National Instrument 44-101 – Short Form Prospectus Distributions which will permit issuers listed on the CSE to rely on a CSE Listing Statement filed by an issuer in connection with a fundamental change in place of the Annual Information Form that would otherwise be required to be incorporated by reference in a short form prospectus.
4. Exemption from Escrow Requirements
The Proposed Amendments include an amendment to certain definitions in National Policy 46-201 – Escrow for Initial Public Offerings to align the escrow requirements and escrow release schedule for issuers listed on the CSE Senior Tier with the requirements for issuers listed on non-venture exchanges, such as the Toronto Stock Exchange and Cboe Canada Inc.
5. Unavailability of Certain Exemptions under Multilateral Instrument 61-101
The Proposed Amendments include an amendment to Multilateral Instrument 61-101 – Protection of Minority Security Holders in Special Transactions ("MI 61-101") which will treat issuers listed on the CSE Senior Tier as non-venture issuers, preventing such issuers from being able to rely on certain exemptions from the formal valuation and minority approval requirements. Such exemptions from the formal valuation and minority approval requirements under MI 61-101 are only available for issuers with securities listed on venture exchanges, which previously included all CSE issuers. While issuers listed on the CSE Senior Tier will be excluded, issuers listed on the CSE (other than the CSE Senior Tier) may still be able to rely on these exemptions.
The public comment period on the Proposed Amendments will expire on October 30, 2024.
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