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Message: Annual Info Form filed for a reason...

Annual Info Form filed for a reason...

posted on Oct 08, 2009 03:15AM

On September 9, 2009 ACT filed a notice declaring its intention to be qualified under national instrument 44-101 short form prospectus distributions. [Note that there is a requirement for notice – i.e., at least 10 days prior tofiling a short form prospectus, an issuer must file a notice ofintention to be qualified. This is a one-time filing that remains ineffect until withdrawn by the issuer.] To gain use the short form prospectus system, the "Issuer" (i.e., ACT) must have a current Annual Information Form (AIF). As everyone knows, ACT filed its AIF on September 30, 2009. Could this be an indication that ACT has succeeded in lining up some institutional support for the stock? Time will tell...

Here's some background information concerning NI 44-101 sourced from a Canadian law firm:

POP System Expanded to Include Most Listed Companies

The Canadian Securities Administrators have announced the adoption of a replacement instrument for National Instrument 44-101 Short Form Prospectus Distributions(“New 44-101”). New 44-101 is scheduled to come into effect onDecember 30, 2005, and will significantly change the current short formprospectus system, known as “POP”, to enable most listed issuers to beable to use it to issue free-trading shares in a few weeks, assumingtheir continuous disclosure record is up to date and fully compliant.

Background

New 44-101 harmonizes the current short form prospectus regime with National Instrument 51-102 Continuous Disclosure Obligationsby eliminating duplications, and improves the integration of primaryand secondary market disclosure systems, by allowing issuers to rely ontheir continuous disclosure records in accessing capital markets.

New 44-101 increases significantly the number of issuers who will beeligible to access capital markets quickly and efficiently through thePOP system. It is estimated that the number of eligible issuers willincrease four-fold under New 44-101.

Major Changes

Expanded Eligibility – anyissuer with operations listed on the TSX, TSX-V (Tier 1 or 2), or CNQthat has a current AIF and a current continuous disclosure record iseligible to use the short form prospectus system. In particular:

  • there is no longer any minimum market capitalization;
  • there is no longer any "seasoning period”;
  • there is not necessarily a review of the initial AIF.

The issuer’s principal asset cannot be cash, cash equivalent or anexchange listing; New 44-101 will not be open to “shell” companies.

Requirement for Notice – at least 10 days prior tofiling a short form prospectus, an issuer must file a notice ofintention to be qualified. This is a one-time filing that remains ineffect until withdrawn by the issuer. Points to note are:

  • under transition provisions, all issuers with a current AIF under old 44-101 at December 29, 2005 will be deemed to have filed a notice on December 14, 2005 (10 business days before December 29);
  • issuers previously not POP-eligible with a currently-filed AIF (including a Form 20-F) need to check exactly how their AIF was filed on SEDAR and in some cases will need to refile it with additional filing fees;
  • venture issuers without an AIF should consider whether they wish to voluntarily prepare and file an AIF so as to be eligible for New 44-101.

Financial Statements – New 44-101 requires auditorreview of interim financial statements contained in the preliminaryshort form prospectus, but there is no acceleration of financialstatement filing deadlines. In some cases additional financialstatements for acquisitions may be required in the short formprospectus.

Extended Pre-Marketing Time for Bought Deals – New44-101 has increased the time period for permitted solicitation ofexpressions of interest prior to the filing of the preliminaryprospectus from two to four business days after the signing of anenforceable agreement with an underwriter for a “bought deal”, to allowmore time for pre-marketing, due diligence and prospectus preparation.

Practice Points

Smaller issuers contemplating a POPfinancing should consider what changes they should make now to theirprocedures for the preparation and review of continuous disclosuredocuments to avoid lengthy comments from the agents’ counsel andsecurities commissions. Such issuers should talk to their auditors aswell as their lawyers well before the proposed financing to ensure thatthe required financial statements and technical reports will becompleted in time to avoid delay.

In the past, the preparation, review, final receipt and closing of aPOP financing took weeks rather than months, and smaller issuers withwell-prepared continuous disclosure records may expect the sametreatment. The process will be accelerated in part because the timeperiod for the principal regulator under National Policy 43-201 Mutual Reliance Review System for Prospectusesto send a comment letter on a short form prospectus is three workingdays rather than ten, partially because there is so much less to reviewin a short form prospectus, and partially because the larger,previously POP-eligible issuers had well-prepared documentation.

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