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New Listing: Amendments to CSE Form 2A Listing Statement

June 27, 2023 Capital Markets Bulletin 4 minute read

On May 19, 2023, CNSX Markets Inc., operating the Canadian Securities Exchange (the “CSE”), announced the approval and implementation of changes (the “Amendments”) to the CSE Form 2A Listing Statement (“Form 2A” or “listing statement”) which has replaced the prior form requirements. The new Form 2A references disclosure requirements in a narrative format pursuant to Form 41-101F1 Information Required in a Prospectus (“Form 41-101F1”) and came into effect on May 18, 2023.[1]

Background

On March 2, 2023, the CSE proposed the Amendments to clarify the purpose of Form 2A and certain disclosure requirements therein.[2] The Amendments were implemented following the end of the comment period on April 3, 2023 (pursuant to which no comments were received), and approval by the Ontario Securities Commission and British Columbia Securities Commission.

Form 2A is required for initial listing applications and all listing applications resulting from a fundamental change (as defined under the CSE policies).[3] Its purpose is to provide investors with full, true, and plain disclosure of the issuer at the time of listing, or at the time of the fundamental change, as the case may be. Although Form 2A provides the same comprehensive disclosure as Form 41-101F1, it is a CSE document rather than a document prescribed by securities laws. Accordingly, Form 2A does not replace disclosure documents such as an information circular for a shareholders’ meeting or an offering prospectus that qualifies securities for distribution; however, securities documents such as circulars and prospectuses may be incorporated by reference into an issuer’s Form 2A, as discussed below under “Filing and Disclosure Requirements”.[4]

Applications to the CSE may proceed by way of a direct listing, such as in connection with an initial public offering (IPO) or the filing of a non-offering prospectus, a reverse takeover (RTO) or other type of business combination with an issuer listed on the CSE, or existing reporting issuers moving their listing to the CSE.[5]

Amendments

Cover Page

Form 2A now includes a cover page with the issuer name, date, and the disclaimer below that Form 2A is not a prospectus:

This Listing Statement is intended to provide full, true and plain disclosure about the Issuer. It is not, and is not to be construed as, a prospectus. It has not been reviewed by a securities regulatory authority and no securities are being sold or qualified for distribution by the filing of this Listing Statement.[6]

The cover page also provides for additional risk disclosure concerning the issuer and its business, as applicable.

Reference to Prospectus

The new Form 2A specifies in its introduction that it “is intended to provide the same disclosure as that required by Form 41-101F1” to emphasize that the purpose of Form 2A is to have identical disclosure requirements to what a prospectus would offer.[7] This is not a deviation from the CSE’s previous position since prior language in the Form 2A requirements stated “the [CSE] requires prospectus level disclosure”.[8]

Issuers seeking to make a listing on the CSE should note that, by incorporating the disclosure requirements of Form 41-101F1, the CSE also incorporates prospectus level disclosure as it relates to financial statement requirements.

General Instructions

Previously, Form 2A had very prescriptive requirements for each section, including some which were outside of what would be provided in a prospectus (e.g., capitalization tables indicating the ranges of security ownership by various categories of securityholders, or public float calculations). Form 2A now describes its disclosure requirements in lieu of providing prescriptive instructions. This does not mean that substantive disclosure has been reduced since, as discussed above, the disclosure obligations of a prospectus continue to be explicitly incorporated into Form 2A.

Filing and Disclosure Requirements

While Form 2A requires that the disclosure requirements of Form 41-101F1 be included, it does allow those requirements to be met in specific circumstances through the incorporation by reference of existing disclosure documents, such as a prospectus or an information circular.[9] For issuers completing a listing concurrently with another transaction for which a prospectus filing or shareholder approval may be required, this means that they would be able to produce one primary disclosure document to rely on.

If the disclosure documents that an issuer wishes to rely on are not current as at the date of the listing statement, the issuer must provide the supplemental disclosure necessary to ensure that the listing statement is current as of that date.[10] For example, the issuer or a reverse takeover acquirer must include the financial statements of its most recently completed period if such financial statements have not been provided in the disclosure documents.[11]

Impact

The requirement to provide prospectus level disclosure in the listing statement is aligned with the requirements of other stock exchanges in Canada, and is consistent with prior listing standards of the CSE.[12] The new Form 2A follows substantive changes to the policies of the CSE, which came into effect on April 3, 2023. Issuers seeking to list on the CSE – whether through a direct listing or a reverse takeover, or by moving their listing from another stock exchange to the CSE – will need to be aware of these listing standards, and the changes that have been implemented to Form 2A as well as the recent policy amendments. For more information related to the policy amendments, please see our past bulletin.

Please contact the authors if you have any questions with respect to the implementation of the CSE’s new Form 2A, the impact of the Amendments, or a planned listing on the CSE.

[1] Notice 2023-007 – Amendments to CSE Form 2A Listing Statement – Notice of Approval, CSE (19 May 2023), online.
[2] Notice 2023-004 – Proposed Amendments to CSE Form 2A Listing Statement – Notice and Request for Comments, CSE  (2 March 2023), online.
[3] Per CSE Policy 8 – Fundamental Changes and Changes of Business, a fundamental change effectively results in a new issuer and includes business combinations, reverse takeovers and changes in the principal business of an issuer.
[4] Supra note 2.
[5] Ibid.
[6] Form 2A Listing Statement, CSE (18 May 2023), at 1, online.
[7] Ibid.
[8] Form 2A Listing Statement, CSE (January 2015), at 1, online.
[9] Supra note 6 at 1-2.
[10] Supra note 6 at 2.
[11] Ibid.
[12] Supra note 2.

by Sasa Jarvis, Marina Tran, Michelle Wong

A Cautionary Note

The foregoing provides only an overview and does not constitute legal advice. Readers are cautioned against making any decisions based on this material alone. Rather, specific legal advice should be obtained.

© McMillan LLP 2023

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