The Canadian Securities Administrators have proposed amending the trigger for filing a business acquisition report (BAR) by reporting issuers that are not venture issuers or investment funds (the “Proposed Amendments”).
Currently, the requirement to file a BAR for these reporting issuers is triggered if an acquisition is deemed “significant”. Part 8 of National Instrument 51-102 - Continuous Disclosure Obligations currently sets out the three applicable significance tests: the asset test, the investment test and the profit or loss test. If the acquisition results in any one of these three tests exceeding the 20% significance threshold, then the requirement to file a BAR is triggered.
The Proposed Amendments would amend the trigger for filing a BAR by raising the significance threshold from 20% to 30% and requiring that two out of the three significance tests have to be met instead of only one. The hope of the CSA is that the Proposed Amendments will be effective in removing anomalous results, which can sometimes occur when making the calculations under the different tests, and better capture only those acquisitions that are significant without compromising investor protection. The Proposed Amendments will not change the BAR trigger requirements for venture issuers, which already have a much higher significance threshold of 100%.
The Proposed Amendments are part of the CSA’s previously stated goal of lessening the regulatory burden on Canadian market participants. The CSA started on this important regulatory initiative when they published various position papers for public comment in 2018. The Proposed Amendments are the latest step in this CSA initiative and seek to address previous concerns expressed in the CSA’s public consultation process regarding the requirements for BARs.
The public comment period for the Proposed Amendments expires on December 4, 2019.
It will be interesting to follow the ongoing efforts by the CSA to reduce the regulatory burden for Canadian public companies.
If you have any questions about this bulletin or would like further information about the Proposed Amendments, please contact the authors.
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