On August 12, 2021, the Canadian Securities Administrators (the “CSA”) published a notice and request for comment on their proposed changes to Companion Policy 41-101CP to National Instrument 41-101 General Prospectus Requirements (“Companion Policy 41-101CP”).[1] The goal of the proposed changes is two-fold: (1) to provide a uniform interpretation of issuers’ “primary business” financial statement reporting requirements in long form prospectuses across all CSA jurisdictions, and (2) to clarify what historical financial information is required in an initial public offering (“IPO”) prospectus.


In April 2017, the CSA sought industry consultation to identify and consider areas of securities legislation that would benefit from regulatory change. Specifically, industry stakeholders suggested that the CSA revisit the requirement imposed by Form 41-101F1 – Information Required in a Prospectus (“Form 41-101F1”) that an issuer include historical financial statements for each entity considered the “primary business” of said issuer.[2] The CSA’s proposed changes in August 2021 were informed by this commentary, as well as the U.S. Securities and Exchange Commission’s May 2021 amendments to financial disclosure requirements.[3]

Currently, Form 41-101F1 requires an issuer that is not an investment fund to include certain financial statements in its long form prospectus. This required disclosure includes financial statements of the issuer and any business or businesses acquired, or proposed to be acquired, if a reasonable investor reading the prospectus would regard the primary business of the issuer to be the business or businesses acquired, or proposed to be acquired (collectively, the “Primary Business Requirements”). The objective of these Primary Business Requirements is to provide investors with the financial history of the issuer’s business, even if this financial history spans multiple legal entities. The Primary Business Requirements necessitate two years of historical financial information for IPO venture issuers, and three years for non-venture issuers.

In practice, when venture/non-venture issuers have made acquisitions in the two/three years preceding a long form prospectus filing, they (together with their advisors) will often consult with CSA staff to determine what historical financial statements must be included based on the above Primary Business Requirements. By the CSA’s own admission, these consultations have sometimes resulted in inconsistent interpretations that add time, cost, and uncertainty for issuers. The CSA anticipates that these proposed changes will reduce the regulatory burden imposed on issuers by eliminating the time and cost of some of the pre-filing discussions and applications involved in adhering to the Primary Business Requirements, in their current form.

Substance of the Proposed Changes

The CSA is proposing to amend Companion Policy 41-101CP. This amendment aims to clarify when the Primary Business Requirements will require historical financial statements to be included in long form prospectuses by relying on the existing “significant acquisition” test contained in National Instrument 51-102 – Continuous Disclosure Obligations (“NI 51-102”).[4] Under NI 51-102, a reporting issuer that is not an investment fund is required to file a Business Acquisition Report (a “BAR”) after completing a “significant acquisition” as determined by a three-part significance test. Briefly, an acquisition is considered significant (thereby requiring a BAR) if: (1) the issuer’s proportionate share of the consolidated assets of the business or related businesses being acquired exceeds 30% of the issuer’s consolidated assets, (2) the issuer’s proportionate share of the consolidated investments in and advances to the business or related businesses being acquired exceeds 30% of the issuer’s consolidated assets, or (3) the issuer’s proportionate share of the consolidated specified profit or loss of the business or related businesses being acquired exceeds 30% of the issuer’s consolidated specified profit or loss.[5] Therefore, the CSA is proposing that when a BAR is required as per the above “significant acquisition” test, the long form prospectus historical financial statement reporting obligations of the Primary Business Requirements are likely triggered as well.

The CSA supplemented this guidance by providing five examples of when a reasonable investor would regard the acquired business or related businesses to be the primary business of the issuer:

  • An acquisition that is less than the 100% significance threshold calculated under the BAR requirements but still changes the primary business of the issuer, as disclosed in the prospectus;
  • An acquisition that exceeds the 100% significance threshold calculated under the BAR requirements (failing which, the BAR requirements must be followed, where applicable);
  • A Qualifying Transaction for a Capital Pool Company under the policies of the TSX Venture Exchange;
  • A Qualifying Acquisition or Qualification Transaction by a Special Purpose Acquisition Corporation under the policies of a recognized exchange; or
  • A reverse take-over.

Key Considerations Moving Forward

Unfortunately, this additional guidance, while instructive, has not removed the need to consult the CSA on a case-by-case basis under certain circumstances. For example, the CSA indicated that consultation would still be required if an issuer has completed several acquisitions over the relevant 2-3 year historical period – even if such acquisitions are not material and individually did not trigger the Primary Business Requirements. Additionally, the CSA has made it clear that based on the types of businesses involved, there may be additional financial information required in order for the relevant prospectus to constitute full, true and plain disclosure of all material facts. Uncertain issuers are still expected to utilize the pre-filing procedures in National Policy NP 11-202 – Process for Prospectus Reviews in Multiple Jurisdictions to determine whether additional disclosure is required.[6]

The notice and request for comments issued by the CSA on August 12, 2021 provides a 60-day comment period, inviting written comments on the proposed instrument no later than October 11, 2021. We encourage stakeholders to communicate to us any comments or concerns they may have with respect to the proposed amendments.