In March 2014, certain members of the Canadian Securities Administrators proposed amendments to National Instrument 45-106 Prospectus Exemptions (NI 45-106) with the aim of allowing business enterprises, with a focus on small and medium size enterprises, to benefit from greater access to capital from investors. On October 29, 2015, the securities authorities in Alberta, New Brunswick, Nova Scotia, Ontario, Québec and Saskatchewan (Participating Jurisdictions) announced final amendments to NI 45-106 (Final Amendments) which will introduce an offering memorandum (OM) exemption in Ontario (OM Exemption) and substantially harmonize the OM exemption in the other Participating Jurisdictions.  Subject to ministerial approvals, the Final Amendments will come into force in Ontario on January 13, 2016 and in the other Participating Jurisdictions on April 30, 2016.

The Final Amendments substantially mirror the amendments proposed in March 2014 with some exceptions.  Among other matters, key features of the OM Exemption include the following requirements:

  • the issuer must deliver a comprehensive OM in the prescribed form to investors at the point of sale which incorporates the issuer’s marketing materials and is subject to statutory liabilities in the event the document contains a misrepresentation;
  • investment limits of between $10,000 and $100,000 for investors who are individuals dependant on whether the investor is an eligible investor, but such limitations do not apply to investors who qualify as an eligible investor under the accredited investor or family, friends and business associates exemption;
  • investors must sign a risk acknowledgement form including two new schedules which confirm the investor’s status as either an eligible investor, non-eligible investor, accredited investor or an investor who would qualify to purchase securities under the family, friends and business associates exemption; and
  • non-reporting issuers must provide to investors on-going disclosure, specifically, audited annual financial statements, an annual notice on how the proceeds raised under the exemption have been used and notice in the event of a discontinuation of the issuer’s business, a change in the issuer’s industry or a change of control of the issuer.