New public company financing exemption will simplify the process of raising capital

By Mani Saggu and Virgil Hlus

The Canadian Securities Administrators (the “CSA) approved a new prospectus exemption available to public companies listed on a Canadian stock exchange (the “New exemption”). The new exemption builds on the company’s continuous disclosure record, supplemented by a short offering document, and allows a public company to distribute freely tradeable listed securities to the public.

The new exemption allows public companies to issue freely tradable securities without filing a short form prospectus. This exemption should benefit public companies, especially venture companies, by providing a more cost- and time-efficient way to raise funds. However, purchasers benefiting from this exemption would have two options for recourse in the event of misrepresentation: rights of civil action in the secondary market and a right of contractual termination against the company. In addition, under this exemption, public companies and, in some jurisdictions, officers signing the offering document and directors of the company will be subject to legal liability if the offering document contains a misrepresentation. Therefore, management must be diligent in drafting and preparing the offering document to avoid such liability.

The new exemption will come into effect on November 21, 2022 through an amendment to National Instrument 45-106 Prospectus Exemptions.


To take advantage of the New Exemption, the company must have:

  1. securities listed on the Toronto Stock Exchange, TSX Venture Exchange, Canadian Securities Exchange or NEO Aequitas Exchange;
  2. been a reporting issuer for at least 12 months in at least one jurisdiction in Canada;
  3. filed all periodic and timely disclosure documents as required by continuous disclosure requirements; and
  4. active business operations.


The new exemption is subject to the following key conditions:

1. Press release and offer document

Prior to soliciting an offer to purchase from an acquirer, the company must issue and file a press release announcing the offer and indicating that an acquirer may access the offer document for distribution under the company’s profile on SEDAR and on the company’s website, if the company has a website.

Distribution must be made within 45 days of the release of the press release.

The company must prepare and file an abbreviated offering document using Form 45-106F19 Listed Issuer Finance Document (“Form 45-106F19”) containing the following:

  • offer details;
  • the required declaration as set forth in Form 45-106A19;
  • a summary description of the business, recent developments, material facts and business objectives and milestones;
  • the company’s financial situation;
  • how the product will be used;
  • how proceeds from any other offers in the previous 12 months were used;
  • the involvement of brokers or intermediaries and their fees, if any; and
  • the statutory rights of purchasers.

The new exemption is not available if the company plans to use the proceeds for a material acquisition or restructuring transaction that would require additional financial statements under the prospectus rules or for any other transaction that requires approval of a security holder.

Company is required to report use of new exemption within 10 days of distribution by filing Form 45-106A1 Declaration of exempt distribution.

2. Types of securities

The securities offered under the New Exemption must be listed equity securities and units comprised of listed equity securities and warrants convertible into listed equity securities.

3. Total dollar amount

Companies will be limited to raising the greater of the following amounts, up to a maximum aggregate amount of $10,000,000: (i) $5,000,000; and (ii) 10% of the market capitalization of the company.

4. Legal responsibility

Since the CSA will not be reviewing the offering documents, the CSA have imposed legal liability on the company. The offering document would be a source document, forming part of the company’s continuous disclosure record for secondary market liability purposes.

5. Underwriter and Exempt Market Dealer

Although investment dealers and exempt market dealers may participate, nothing requires an investment dealer to participate.

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