On March 5, 2020 the Canadian Securities Administrators (the “CSA“) introduced a harmonized process for full reviews of prospectuses on a confidential pre-filing basis for non-investment issuers (the “Pre-File Process“).
The concept of pre-filing a prospectus for comment is not new, however it was previously applied inconsistently by the various regulators. This prompted the CSA to respond by releasing its Staff Notice 43-310 ¾ Confidential Pre-File Review of Prospectuses (for non-investment fund issuers) (the “Staff Notice“) to help harmonize the pre-filing process, and to help issuers obtain more certainty and flexibility in prospectus offerings.
What are some of the benefits of participating in the Pre-File Process?
- The regulators will conduct the same level of review that they would for publicly filed preliminary prospectuses, which can help you:
- promptly respond to a regulator’s questions or concerns, as well as provide more time to remedy same; and
- expedite the review of the issuer’s proposed transaction.
- It can help establish a relationship between the issuer and the regulators.
- There is no additional cost to the issuer (in fact, Ontario is the only regulator that charges any fee at all, in the amount of $3,800, which will be then be credited against the filing fee for the publicly filed preliminary prospectus).
Quick Facts Relating to the Pre-File Process
| Who is permitted to file under the Pre-File Process? | Any non-investment fund issuer that intends to file a prospectus in Canada, including a preliminary prospectus for a proposed initial public offering. |
| At what stage in the prospectus process should the issuer pre-file the prospectus? | The CSA suggests participating in the Pre-File Process, only after: 1. the terms and conditions of the offering and any related party transactions have been determined; 2. the pre-filed prospectus is in the same form and quality as if it was the publicly filed preliminary prospectus; 3. the pre-filed prospectus contains the disclosure (including financial statements) prescribed under securities law and described in the form that the issuer intends to use; 4. pricing estimates can be provided, where practical; and 5. the underwriters have substantially completed their review of the pre-filed prospectus. The CSA encourages issuers to submit the pre-filed prospectus as soon as possible, and to provide the regulators with at least ten (10) business days before expecting initial comments. |
| What types of prospectuses can use the Pre-File Process? | Long Form Prospectus (pursuant to National Instrument 41-101 – General Prospectus Requirements) Short Form Prospectuses (pursuant to National Instrument 44-101 – Short Form Prospectus Distributions) Base Shelf Prospectuses (pursuant to National Instrument 44-102 – Shelf Distributions). |
| What types of prospectuses are excluded from the Pre-File Process? | Non-offering prospectuses, other than non-offering prospectuses filed in connection with cross-border financings Structured notes (distributed under the shelf prospectus system) Prospectuses filed solely to qualify the issuance of securities on conversion of convertible securities |
| In what jurisdictions should the prospectus be pre-filed? | The principal regulator’s jurisdiction only. If, following the principal regulator’s review, it is determined that the prospectus involves a novel and substantive issue or raises a novel policy concern, then the principal regulator may choose to involve non-principal regulators as well. |
What documents should accompany a pre-filed prospectus?
Generally a pre-filed prospectus should include all documents that are required to be filed with the publicly filed prospectus. The following chart provides a list of documents that should generally be included with a pre-filed prospectus (the “Accompanying Documents”).
| Long Form Prospectus (pursuant to National Instrument 41-101 – General Prospectus Requirements) | 1. A cover letter that includes: a. the information recommended by NP 11-202 , which includes1: i. identifying the principal regulator for the pre-filing application and the basis for the determination ii. identifying the non-principal regulators iii. describing the subject matter of the pre-filing application, set out any exemption sought, and provide supporting documentation b. when the issuer expects to file the public long form preliminary prospectus; 2. copies of any material contracts that have been entered into since the beginning of the last financial year ending before the date of the prospectus, or before the beginning of the last financial year ending before the date of the prospectus if that material contract is still in effect; and 3. if the issuer has a mineral project a technical report, in accordance with NI 43-1012. |
| Short Form Prospectuses (pursuant to National Instrument 44-101 –Short Form Prospectus Distributions) | 1. A cover letter that includes: a. the information recommended by NP 11-2021, which includes: i. identifying the principal regulator for the pre-filing application and the basis for the determination ii. identifying the non-principal regulators iii. describing the subject matter of the pre-filing application, set out any exemption sought, and provide supporting documentation b. when the issuer expects to file the public short form preliminary prospectus; c. which of the qualifying criteria the issuer is relying on in order to be qualified to file a short form prospectus; 2. copies of any material contracts that have been entered into since the beginning of the last financial year ending before the date of the prospectus, or before the beginning of the last financial year ending before the date of the prospectus if that material contract is still in effect; 3. if the issuer has a mineral project a technical report, in accordance with NI 43-1013; and 4. its annual information form, if the issuer is a Venture issuer that has not yet filed an annual information form for its most recently completed financial year4 . |
Let us help you
It is important for issuers to keep advisors (lawyers, accountants, etc.) informed of the issuer’s intention to conduct a transaction, and invite them to participate in the business discussions. We encourage issuers to provide advisors as much time as possible before the closing date of the anticipated offering, to help ensure that a closing will be possible on the intended date.
Please reach out to any member of our securities law group if you have any questions regarding the Staff Notice or if you are interested in hearing more about how we can help you with your next offering.
1 National Policy 11-202 – Process for Prospectus Reviews in Multiple Jurisdictions (“NP 11-202“).
2 National Policy – 43-101 – Standards of Disclosure for Mineral Projects (“NI 43-101“).
3 National Policy – 43-101 – Standards of Disclosure for Mineral Projects (“NI 43-101“).
4 Venture issuers are not generally required to file an annual information form.
