Last fall, the Canadian Securities Administrators (“CSA”) proposed sweeping changes to the Private Placement Rules through the Listed Issuer Financing Exemption (see our article HERE).

The CSA have received comments and announced the final version of The Exemption which is expects to come into force on November 2022.  (see HERE)

Following are the highlights of the new 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 simplified offering document that will not be reviewed by the regulators (Form 45-106F19)

A news release is to be issued announcing the offering and specific exemption including prescribed cautionary language.

Securities offered can be listed equity securities and units consisting of listed equity securities and warrants convertible into listed equity securities.
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 and not have been within the preceding 12 months a capital pool company (“CPC”) or a special purpose acquisition company (“SPAC”).
• The funds raised are limited to $5,000,000 or 10% of the issuer’s market capitalization to a maximum of $10,000,000 in any 12-month period.
• No more than 50% 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.
• A Form 45-106F1 Report of Exempt Distribution must be filed including a completed Schedule 1 with purchaser information.

While we expected that the Exemption would be enacted early in 2022, there was considerable discussion, principally from investment banks concerning the ability of companies to raise money without the need for the involvement of an investment bank and the accompanying due diligence review.

It is expected that the Listed Issuer Financing Exemption will come into effect on November 21, 2022.  We believe that it will become the principal method for junior public resource companies to raise funds.

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 choose to use private placements.  We are very pleased to see that the CSA is making 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.

Chuck Higgins Pilot Law LLP M: 416 616 8064 | O: 416 521 7200 E: chiggins@pilotlaw.ca Connect with me on LinkedIn

Evan Strong Associate Pilot Law LLP estrong@pilotlaw.ca Connect with me on LinkedIn