The Canadian Securities Administrators (“CSA”) recently published for comment proposed amendments and changes to certain national instruments and policies to: (i) address the Canadian Securities Exchange’s (“CSE”) creation of a senior tier; (ii) codify blanket orders that were put in place to accommodate the Canada Business Corporations Act (“CBCA”) “majority voting” amendments; (iii) remove the requirement for escrow agreements to be signed, sealed and delivered by securityholders in the presence of a witness; and (iv) make housekeeping amendments. The comment period will end on October 30, 2024.
CSE-related Changes
In April 2023, the CSE amended its listing policies to create a senior tier with listing requirements that are similar to those of other non-venture exchanges. Notwithstanding the foregoing, CSE senior tier issuers are currently only required to comply with requirements under securities law that apply to venture issuers. The CSA therefore propose to revise the definitions of “venture issuer” and “IPO venture issuer” in various national instruments to exclude CSE senior tier issuers to ensure that they are treated in the same manner under securities law as issuers on other non-venture exchanges. In addition, the CSA propose:
- an amendment to section 2.22 of National Instrument 45-106 Prospectus Exemptions (“NI 45-106”) to add the CSE to the definition of “listed issuer.” Section 2.24 of NI 45-106 provides a prospectus exemption for distributions to employees, executive officers, directors and consultants; however, in certain circumstances the exemption is not available to an issuer that is not a “listed issuer” unless the issuer provides prescribed disclosure and obtains securityholder approval;
- an amendment to section 2.7 of National Instrument 44-101 Short Form Prospectus Distributions to allow CSE-listed issuers to qualify to file a short form prospectus by relying on a CSE Listing Statement filed in connection with a fundamental change instead of an annual information form;
- a change to National Policy 46-201 Escrow for Initial Public Offerings (“NP 46-201”) to revise the meaning of “exempt issuer” to include certain CSE senior tier issuers and to include CSE senior tier issuers that are not “exempt issuers” in the meaning of “established issuer”; and
- an amendment to Multilateral Instrument 61-101 Protection of Minority Security Holders in Special Transactions to prevent CSE senior tier issuers from relying on certain exemptions from the formal valuation and minority approval requirements.
Majority Voting
In August 2022, the CBCA was amended to require “majority voting” for each director nominee in uncontested elections. The form of proxy for CBCA issuers must provide securityholders with the option to specify whether their vote is to be cast “for” or “against” each candidate, rather than “voted” or “withheld” as required by National Instrument 51-102 Continuous Disclosure Obligations (“NI 51-102”). As a result, CSA members issued substantively harmonized local blanket orders that exempt CBCA issuers from the proxy requirement in NI 51-102 when there is an uncontested director election (the “Blanket Orders”). The proposed amendments are intended to codify the Blanket Orders.
Escrow Agreements
Pursuant to NP 46-201, securities regulators may require that an issuer making an initial public offering (“IPO”) enter into an escrow agreement with its principals that restricts their ability to sell their securities for a period of time following the IPO. The CSA propose to amend Form 46-201F1 Escrow Agreement to remove the requirement that the agreement be signed, sealed and delivered by securityholders in the presence of a witness. The CSA have indicated that they believe this requirement to be outdated, incompatible with electronic signing and overly burdensome when numerous principals are required to sign.
Housekeeping Amendments
The CSA also propose certain housekeeping amendments to reflect the name changes of the PLUS markets to “AQSE Growth Market” and Aequitas Neo Exchange Inc. to “Cboe Canada Inc.”
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