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Global rules on foreign direct investment (FDI)
Cross-border acquisitions and investments increasingly trigger foreign direct investment (FDI) screening requirements.
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Canada | Publication | May 19, 2023
Broad-reaching and significant amendments to the Canadian Securities Exchange (CSE) policies took effect April 3, 2023 (the Amendments). In part 1 of this update we discussed the creation of a two-tier CSE by the introduction of a new class of senior issuers known as non-venture issuers (NV Issuers), which will be subject to more stringent continuous disclosure and governance requirements. The Amendments also introduce the following key changes to the CSE’s policies:
In this update we discuss highlights of these key changes.
The process for listing on the CSE has been amended by introducing an eligibility review. Issuers intending to list must provide the CSE with a document that allows the CSE to determine whether the issuer is eligible for listing prior to the actual listing. A draft prospectus that includes all necessary information will satisfy this requirement. Natural resource issuers will need to file the necessary accompanying technical reports. The CSE will review and confirm eligibility or will identify those issues that must be met prior to listing.
An ongoing public float requirements for a listing of equity securities of an NV Issuer has been introduced. Such issuers must have a public float of at least 1 million freely tradeable securities and at least 300 public holders each holding a board lot.
Security Holder Approvals
A number of new security holder approval requirements have been added to the CSE corporate governance policy for private placement and public offerings, acquisitions and dispositions, rights offerings, share consolidations and other transactions. In several instances, the requirements are triggered on different thresholds for NV Issuers than for issuers that are not NV Issuers (Non-NV Issuer(s)). The following are the approvals required for certain transactions:
Private Placements and Prospectus Offerings:
Where securities are proposed to be privately placed or sold by way of prospectus, security holders must approve the transaction if:
NV Issuers must also seek security holder approval if the securities issuable under the transaction or that have been issued to related parties in the last 12 months exceed 10% of the securities or votes outstanding. The Amendments provide an exemption from the approval requirements where an issuer is in financial difficulty.
Acquisitions and Dispositions
Shareholder approval is required for an acquisition where:
Acquisitions that materially affect control of any listed issuer will require shareholder approval. Dispositions of assets that are more than 50% of any listed issuer’s assets will also require shareholder approval.
Other Transactions
Other transactions that may require shareholder approval include rights offerings, shareholder rights plans, the establishment and amendment of any security-based compensation arrangements or shareholder rights plans, rights offerings, related-party transactions and certain share consolidations.
The Amendments to the CSE policy on distributions that are applicable to all listed issuers:
The CSE has expanded its incentive stock option policy to cover all security-based compensation arrangements (SBCA), not just stock options. The pre-approval of the CSE is required to establish all SBCAs. The Amendments require three-year shareholder approval for “rolling” or “evergreen” plans (i.e. self-replenishment plans) for such plans to continue. The CSE has also formalized rules relating to the exercise price of options. These changes bring the CSE in line with other Canadian exchanges.
The Amendments introduce comprehensive requirements for listing SPACs and related qualifying transactions similar to those of other exchanges. A SPAC seeking to list on the CSE must:
Publication
Cross-border acquisitions and investments increasingly trigger foreign direct investment (FDI) screening requirements.
Publication
On February 2, 2024, the Belgian Presidency of the Council of the European Union confirmed that the Committee of Permanent Representatives had signed the Artificial Intelligence (AI) Regulation, referred to as the AI Act. Approval by the EU Parliament followed on 13 March 2024, and the AI Act is likely to appear in the EU’s Official Journal around May 2024. The AI Act aims to establish a stringent legal framework governing the development, marketing, and utilisation of artificial intelligence within the region, thereby marking a significant advancement in the regulation of this burgeoning domain.
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The private credit market and direct lending have grown and diversified immensely in the past decade, offering alternative sources and terms of debt compared to those historically provided by the syndicated leveraged loan and public issuance markets. Consequently, they are fast becoming pivotal components in the capital ecosystem, so much so that the Bank of England consider that the private credit market is currently responsible for approximately $1.8 trillion of debt issuance, which is four times its size in 2015. This growth has been particularly pronounced in Europe and the US but there has also been significant activity in Asia.
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