Capital-Raising Limit Is Significantly Increased Under Listed Issuer Prospectus Exemption

Canadian securities regulators, including the Ontario Securities Commission, have significantly increased the limit on the amount of capital that can be raised by public entities under the ‘Listed Issuer Financing’ prospectus exemption, subject to certain conditions. The Listed Issuer Financing exemption under Part 5A of National Instrument 45-106 – Prospectus Exemptions, which was introduced in 2022 (the “LIF Exemption”), allows a public entity to issue freely-tradeable equity securities, of a class listed on a recognized exchange, to any type of investor, without having to file a prospectus. The increase to the capital-raising limit and the related conditions have been implemented under Coordinated Blanket Order 45-935 (the “Blanket Order”), which supplements, but does not replace, the existing LIF Exemption.

More particularly by opting to use the Blanket Order, entities may now raise up to the greater of (i) $25 million, and (ii) 20% of the market value of the entity’s listed securities, up to a maximum of $50 million, in a 12-month period. These capital-raising limits were previously restricted under the LIF Exemption to the greater of (i) $5 million and (ii) 10% of the market value of the entity’s listed securities, up to a maximum of $10 million, in a 12-month period.

To avail itself of the increased capital-raising limits pursuant to the Blanket Order, the entity must comply with the following conditions in its offering of listed securities:

• The offering may not result in a new control person;
• The offering may not result in a securityholder beneficially owning, or exercising control or direction over, listed securities entitling the securityholder to elect a majority of the directors of the entity; and
• The issuance of listed securities within a 12-month period (including listed securities under warrants convertible into listed securities within 60 days of closing) may not result in an increase of more than 50% of the entity’s outstanding listed securities, measured on the date of the first press release announcing an offering under the Blanket Order within the 12-month period.

An entity that opts to use the increased capital-raising limits and related conditions under the Blanket Order must also comply with other requirements of the LIF Exemption, including that the entity must file and deliver to investors a prescribed form of disclosure document (Form 45-106F19), the entity must issue a news release, the entity must have been a reporting issuer for at least 12 months and may not be an investment fund or have no active business, and the proceeds from the offering cannot be used for a significant acquisition, a restructuring transaction, or for a transaction submitted to the securityholders of the entity for approval.

The Blanket Order may be subject to a time limit set by each jurisdiction, and in Ontario it will expire on November 15, 2026, unless extended. The Blanket Order follows other recent blanket orders implemented by Canadian securities regulators in an ongoing effort to help public entities grow and to support the competitiveness of Canada’s capital markets.

For more information about these legislative changes to support capital markets, please reach out to Michael Hanley or another member of our Corporate Finance & Securities Group.