LIFE prospectus exemption offers greater access to capital and broader retail investment choice

After significant collaboration within the Canadian Securities Administrators (CSA) and following a comprehensive public consultation process, Canada now has a new prospectus exemption aimed at providing a more efficient way for listed companies to raise capital.

The Listed Issuer Financing Exemption (LIFE) will reduce costs for companies raising smaller amounts of capital through the public markets. It will also allow listed companies greater access to retail investors and thereby also provide retail investors with a broader choice of investments.

The main benefit of this exemption is that it eliminates the need to file a prospectus for specific capital raising, reducing costs and enabling companies to raise capital more quickly.

Instead, companies file a short offering document that contains a risk statement, brief disclosure of the business, recent developments, business objectives and milestones, and the use of available funds.?

An eligible Canadian-listed company will be able to use this exemption to raise $5 million or 10 per cent of the company’s market capitalization, to a maximum of $10 million, annually.?

Securities issued under LIFE will trade freely on an exchange – no hold period, unlike securities distributed using most other prospectus exemptions.?

British Columbia (B.C.) is home to about half of Canada’s publicly listed companies, including many venture-stage public companies. LIFE is a cost-effective capital raising approach that also expands access to investors, which is especially important for smaller companies that are navigating recent market volatility.?

This new exemption fosters capital raising while protecting investors, as Stan Magidson, CSA Chair and Chair and CEO of the Alberta Securities Commission said back in September when the new exemption was published for adoption. To protect investors, the exemption is not available to shell companies, capital pool companies, special purpose acquisition companies (SPACs), or companies that have been reporting issuers for less than one year. Companies using the exemption must be up-to-date on all their continuous disclosure reporting. Also, the exemption is not available to fund a significant acquisition or restructuring transaction.

I’d like to thank CSA staff for their effort in developing LIFE, and in particular I’d like to thank Larissa Streu and Leslie Rose who work with me at the BCSC and who led the project. A lot of CSA effort went into developing this exemption, including considering the many comments received on CSA Consultation Paper 51-404 Considerations for Reducing Regulatory Burden for Non-Investment Fund Reporting Issuers, collecting data about the use of short-form prospectus offerings over the last several years, completing additional research on capital-raising requirements in other countries, and consulting with stakeholders about issuers’ use of the prospectus system.

At the B.C. Securities Commission, our staff are here to answer any questions you may have about the Listed Issuer Financing Exemption. Additional details on the final rule can be found here.

-Written by John Hinze , Director, Corporate Finance, BCSC