LESS RED TAPE – CHEAPER AND FASTER ACCESS TO FUNDS
- By Pilot Law LLP
SECURITIES REGULATORS PROPOSE A NEW WAY TO FINANCE JUNIOR MINING AND ENERGY COMPANIES
The Canadian Securities Administrators (“CSA”) recognize that the current private placement rules create significant cost and timing barriers for junior companies raising money. They are proposing sweeping changes to the private placement system through the use of a new Listed Issuer Financing Exemption (see here).
Following are the highlights of the proposed exemption:
• No hold period for securities issued.
• Securities can be sold to any investor – no need to look for an investor specific exemption.
• Use of a simple disclosure document that will not be reviewed by the regulators.
• No need to complete and file a Schedule 1 — Confidential Purchaser Information (check here).
There are a few restrictions on the use of the new exemption:
• The Issuer must be a Reporting Issuer in good standing for at least 12 months.
• The funds raised are limited to $10 Million or 10% of the issuer’s market capitalization if the market capitalization is great than $5 Million.
• No more than 100% dilution will be permitted
• The funds cannot be used for a major acquisition or a restructuring
• The securities issued must be equity securities listed on a Canadian Stock Exchange, or convertible into such securities.
We expect that the new exemption, once adopted, will become the principal method for junior public resource companies to raise funds. The proposed changes are open for comments until October 26, 2021, and it is expected that the Listed Issuer Financing Exemption will be implemented early in the New Year.
At Pilot Law we specialize in Mining and Energy financing. Many of our clients have used a prospectus to raise funds as there are many benefits to this choice (for further information on the best way to issue securities through a prospectus, check this article).
However, many more have resorted to private placements. We are very pleased to see that the CSA will make raising money through private placements even more cost effective and timely.
To discuss your company’s best financing strategy, call us or send an email.