Originally published in Blakes Bulletin on Securities
Regulation, September 2011
On September 23, 2011, the British Columbia Securities
Commission (BCSC) published BC Instrument 45‑533
– Exemption from Form 45-106F6 requirements for
investment funds and foreign public issuers (BCI
45‑533). The instrument was adopted in response to
additional comments received by the BCSC in respect of its newly
adopted Form 45-106F6 – British Columbia Report of
Exempt Distribution (Form 45-106F6) which is scheduled to come
into effect on October 3, 2011.
The new Form 45-106F6 only applies in respect of private
placements made to purchasers located in, or made by issuers with a
significant connection to, British Columbia. Except as contemplated
in BCI 45-533, the current Form of Exempt Distribution (Form
45-106F1) will be repealed in British Columbia effective October 3,
2011, but will remain in effect in each of the other provinces and
territories of Canada. Accordingly, if a private placement occurs
in British Columbia and one or more other jurisdictions in Canada,
the issuer is required to file a Form 45-106F6 in British Columbia
and a Form 45-106F1 in the other applicable jurisdictions.
The new Form 45-106F6 places more onerous disclosure obligations
on issuers and underwriters involved in British Columbia private
placements than the current Form 45-106F1. In particular, Item 4 of
Form 45-106F6 requires that an issuer that is not a "reporting
issuer" in any jurisdiction in Canada disclose detailed
information regarding its insiders and promoters, including the
number of securities held by each insider and promoter and the
amount paid for such securities. The effect of this requirement is
to create a new insider reporting obligation for private companies
that are located in British Columbia, or that sell securities to
purchasers located in, British Columbia.
With the adoption of BCI 45-533, "foreign public
issuers" will now be exempt from the insider disclosure
obligations in Part 4 of Form 45-106F6 on the basis that such
insider information should be publicly available in the foreign
jurisdiction of the issuer. BCI 45-533 also exempts all investment
funds from the requirement to file the new form, even if the
investment fund manager is not registered in a jurisdiction in
Canada, provided that the investment fund instead completes and
files the current Form 45-106F1.
Under the current Form 45-106F1, issuers are required to
disclose the identity, contact information and investment details
of Canadian investors in a private placement, but this information
is only made available to the securities regulatory authorities and
is not made available to the public. Under the new Form 45-106F6,
all of that same information will be made available to the public
through the BCSC's website, unless the investor is an
individual, in which case certain of the information will be made
available in person at the BCSC's office. For British
Columbia-based issuers this means that the identity and investment
details of all investors in a private placement (whether or not
those investors are based in British Columbia) will be made
available to the pubic. For issuers based outside British Columbia,
the identity and investment details of any investors located in
British Columbia will be made available to the public.
While the amendments contained in BCI 45-533 have provided much
needed relief to "foreign public issuers" and investment
funds, it remains to be seen whether the private company insider
reporting obligations in Item 4 of Form 45-106F6 and the
requirement in Form 45-106F6 to publicly disclose the identity and
investment details of investors will have a dampening effect on
other inbound or outbound capital raising activity in British
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