CSA takes steps to expand the LIFE prospectus exemption

On May 14, the CSA published harmonized blanket orders (the LIFE Blanket Orders) that significantly increase the amount of capital that may be raised in reliance on the listed issuer prospectus exemption (the LIFE Exemption) contained in National Instrument 45-106 Prospectus Exemptions (NI 45-106).  The LIFE Blanket Orders are intended to support the competitiveness of the Canadian capital markets and reduce the cost of an issuer undertaking a LIFE private placement. 

Qualification of the current LIFE Exemption

The LIFE Exemption was introduced in 2022 and provides an efficient cost-effective method for listed issuers, other than investment funds, to raise equity capital.  Given the limited amount of capital permitted to be raised it was mainly used by smaller listed issuers, including as a form of bridge financing before a prospectus offering. To rely on the LIFE Exemption contained in NI-45-106, an issuer must, among other things:

• before soliciting an offer to purchase securities offered under the LIFE Exemption, issue and file a news release and file a completed Form 45-106F19 Listed Issuer Financing Document announcing the offering and containing certain prescribed information;
• have securities listed on a Canadian stock exchange recognized by Canadian securities regulators, and have been a reporting issuer for 12 months immediately prior to announcing the transaction in at least one Canadian jurisdiction;
• have an up-to-date continuous disclosure record; 
• have active business operations (its principal asset must not be cash or its exchange listing); 
• prepare a short offering document for investors in the prescribed form (not a prospectus). This document will be considered a “core” document that attracts statutory civil liability in the secondary market; 
• not use the proceeds of the private placement to finance a significant acquisition, restructuring or a transaction requiring shareholder approval; and 
• reasonably expect to have at the time of the distribution available funds to meet its business objectives and liquidity requirements for 12 months following the distribution.  

The amount raised under the LIFE Exemption in connection with the distribution, combined with other distributions made in reliance on the LIFE Exemption during the 12-month period immediately before announcing a transaction, may not exceed the greater of (i) $5 million; or (ii) 10% of the issuer’s market capitalization to a maximum of $10 million.  In addition, the distributions of securities made under the LIFE Exemption during the 12-month period preceding the announcement of the offering will not result in more than 50% shareholder dilution.

How do the LIFE Blanket Orders change the LIFE Exemption?

If the LIFE Exemption is relied upon by an issuer in conjunction with the LIFE Blanket Orders, an issuer can increase the amount of capital that may be raised through the issuance of shares that are free trading.  Listed issuers can now raise the greater of (i) $25 million; and (ii) 20% of the aggregate market value of their listed securities to a maximum of $50 million in a 12-month period subject to certain conditions described below. This represents a significant increase from the current limits provided for in the LIFE Exemption. 

The LIFE Blanket Orders do not amend the LIFE Exemption contained in NI 45-106, which still can be relied upon on its own. Issuers contemplating an exempt offering may choose to rely upon the current LIFE Exemption alone (with the lower capital raise) or on the LIFE Exemption combined with the relevant LIFE Blanket Order(s). 

Conditions of the LIFE Blanket Orders 

While the LIFE Blanket Orders allow a significantly greater capital raise, they contain certain additional conditions that the LIFE Exemption does not. These conditions include:

• a 50% dilution limit on the issuer’s existing equity securities, the calculation of which must be made on one of two dates depending on the circumstances, being: (i) the date of the release announcing the securities offering if the issuer has not raised funds in reliance on the LIFE Exemption or the LIFE Blanket Orders in the last 12 months; or (ii) the date of the release announcing the first offering of securities completed in reliance on the LIFE Exemption or the LIFE Blanket Orders in the last 12 months. In calculating dilution, warrants that are convertible within 60 days of completing the offering must be included. The LIFE Exemption required all warrants to be considered in the dilution calculation; and
• the LIFE Blanket Orders may not be relied upon if completing the offering would result in a new control person of the issuer or allows any person or company to acquire securities that would give them the right to elect the majority of the issuer’s board of directors.

No resale restrictions

Securities issued under the LIFE Exemption and/or LIFE Blanket Rulings are not subject to resale restrictions under securities legislation. When the LIFE Exemption was introduced in 2022, the TSX Venture Exchange indicated it would not impose an exchange hold period on securities issued under the exemption other than on insiders. The Toronto Stock Exchange has indicated it will consider offerings under the LIFE Exemption as bona fide public offerings. 

While a number of TSX-listed issuers have utilized the LIFE Exemption either alone or alongside standard private placement offerings to offer a mix of restricted and unrestricted securities to raise greater amounts of capital, the increased capital limits may result in the exemption being used more readily by TSX-listed issuers.  

Next steps

The LIFE Blanket Orders became effective in all CSA jurisdictions on May 15, 2025, and, unless extended, will expire on the usual term for blanket orders in the specific CSA jurisdiction. In Ontario, the LIFE Blanket Order will expire on October 16, 2026, unless extended. Expanding the LIFE Exemption through the LIFE Blanket Orders is a positive step in easing the regulatory burden of accessing the Canadian capital markets and, while offerings will still be limited to shares, warrants and units of listed issuers, the increased limits should allow a quick and efficient method for Canadian issuers to raise capital.