Canadian Securities Regulators Amend Financial Statement Disclosure Requirements For IPOs

Summary

On April 14, 2022, the Canadian Securities Administrators (CSA) published amendments to the Companion Policy to National Instrument 41-101 General Prospectus Requirements that harmonize the interpretation of financial statement disclosure requirements for acquisitions completed before or in connection with an IPO.

Background

IPO prospectuses are required to include three years¹ of audited financial statements and MD&A of the issuer and for any business acquired if a reasonable investor reading the prospectus would regard the "primary business" of the issuer to be the acquired business. Historically, these requirements have been inconsistently interpreted by the different provincial securities commissions, with certain regulators taking a stricter view than others as to when an acquisition constitutes the "primary business" of an issuer. Through the amendments, the CSA reached a consensus on a harmonized approach to the interpretation of the