Getting Ready to Use the New Public Company Financing Exemption

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By Mani Saggu, Cam McTavish and Virgil Hlus

The new prospectus exemption available to public companies listed on a Canadian stock exchange (the “New Exemption”) comes into force on November 21, 2022. Our previous article summarizes the eligibility requirements and conditions that apply to use the New Exemption and can be found on our website.

Companies preparing to use the New Exemption should take steps now to ensure they are ready to use the New Exemption when it comes into force. Items to consider include the following:

  • Continuous Disclosure Record

Companies should now assess every document filed on or after the earlier of:                  (i) the date that is 12 months before the date of the offering document and                    (ii) the date the company’s most recently completed audited annual financial statements (the “Prescribed Period”) contains all material facts and does not contain a misrepresentation.

The Chief Executive Officer and the Chief Financial Officer must certify that the offering document, together with the company’s continuous disclosure documents filed for the Prescribed Period contains all material facts and does not contain a misrepresentation.

The Chief Financial Officer should work with its company’s accounting team to ensure the financial statements and the management’s discussion and analysis are accurate and do not contain misrepresentations, especially those financial statements that have not been reviewed by the company’s auditors.

Companies should ensure that all of the required disclosure documents have been filed and do not contain any misrepresentations. This includes the following:

  • Press releases required to be filed under National Instrument 51-102 Continuous Disclosure Obligations (“NI 51-102”) ;
  • Material change reports;
  • Interim and annual financial statements;
  • Management’s discussion and analysis;
  • Certifications;
  • Annual meeting materials;
  • Annual information form, if applicable;
  • Business acquisition reports, if applicable;
  • A current NI 43-101 technical report, if applicable;
  • Statement of executive compensation, if applicable; and.
  • Any other document required to be filed under NI 51-102 and applicable securities laws.

> Intended Use of Proceeds and the Use of Funds From Previous Financings

Companies should start preparing the intended use of proceeds for the offering. The use of proceeds must be a detailed breakdown of how the company will use the available funds. The available funds cannot be used for a significant acquisition or a restructuring transaction. Companies should ensure they have sufficient available funds to meet their business objectives and all liquidity requirements for a period of 12 months. In determining if the company has sufficient funds for the next 12 months, reference should be made to historical expenses to ensure such determinations are reasonable and can be justified.

Companies should also prepare an updated use of funds chart to disclose how proceeds from any financing in the past 12 months have been used by the company. Companies will be required to provide this disclosure in the offering document.

  • Business

Companies should assess their business to ensure that they have an active business. The company cannot be one whose operations have ceased or whose principal asset is cash, cash equivalents or its exchange listing.

Please reach out to any member of our Capital Markets, Securities, Mergers & Acquisitions Group if you have any questions or concerns about your company’s disclosure documents, or other factors related to the New Exemption.