By:
Cameron Wm. Ferris,
Brett Kagetsu and
Irene Chen Effective October 3, 2011, the British Columbia Securities
Commission (the "BCSC") adopted Form
45-106F6 British Columbia Report of Exempt Distribution
(the "BC Form") to replace the existing
Form 45-106F1 Report of Exempt Distribution (the
"National Form") as the form of report
of exempt distribution required to be filed in British Columbia by
an issuer that distributes securities under certain exemptions from
the prospectus requirement. The BC Form is required to be used for exempt distributions of
securities to purchasers resident in British Columbia or by issuers
with a significant connection to British Columbia, unless an
exemption described below is relied on. If the distribution occurs
in British Columbia and one or more other Canadian jurisdictions,
then the issuer will be required to file the BC Form in British
Columbia and file the National Form in the other Canadian
jurisdictions, unless an exemption described below is relied
on. The BC Form requires enhanced disclosure that the National Form
does not require. In particular, an issuer that is not a reporting
issuer in Canada is required by Item 4 of the BC Form to disclose
information about each insider1 and promoter2
of the issuer, including (i) their name, municipality and country
of principal residence; (ii) their positions held with the issuer,
(iii) the number and type of securities of the issuer they
beneficially owned, or directly or indirectly controlled, on the
distribution date; and (iv) the total price they paid for the
securities of the issuer they beneficially owned, or directly or
indirectly controlled, on the distribution date
("Insider and Promoter
Information"). Under the National Form, issuers are required to disclose
information regarding the identity, contact information and
investment details of investors in an exempt distribution
("Investor Information") however this
information is only made available to the securities regulatory
authorities and is not made available to the public unless required
by freedom of information legislation. Under the BC Form, Investor
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 only be made available to the
public at the BCSC's office. For issuers based in British
Columbia or with a significant connection to British Columbia, this
means that the identity and investment details of all investors in
an exempt distribution (whether or not those investors are in
British Columbia) will be made available to the public. For issuers
based outside British Columbia, the identity and investment details
of only the investors in British Columbia will be made available to
the public. Market participants have expressed their concern with respect to
the requirement to file separate forms of exempt distribution and
to disclose Insider and Promoter Information. In response to those
concerns, effective October 3, 2011 the BCSC adopted BC Instrument
45-533 and varied that instrument on December 9, 2011, which
instrument provides: While the exemptions referred to above should alleviate many of
the concerns of market participants, it remains uncertain whether
the requirement to disclose Insider and Promoter Information or the
requirement to publicly disclose Investor Information will have a
chilling effect on exempt distributions in British Columbia. Footnotes 1. The definition of "insider" includes (a) a
director or an officer of an issuer, (b) a director or an officer
of a person that is itself an insider or a subsidiary of an issuer
and (c) a person that has (i) beneficial ownership of, or control
or direction over, directly or indirectly, or (ii) a combination of
beneficial ownership of, and control or direction over, directly or
indirectly, securities of an issuer carrying more than 10% of the
voting rights attached to all the issuer's outstanding voting
securities, excluding, for the purpose of the calculation of the
percentage held, any securities held by the person as underwriter
in the course of a distribution. 2. A "promoter" means, if used in relation to
an issuer, a person who (a) acting alone or in concert with one or
more other persons, directly or indirectly, takes the initiative in
founding, organizing or substantially reorganizing the business of
the issuer, or (b) in connection with the founding, organization or
substantial reorganization of the business of the issuer, directly
or indirectly receives, in consideration of services or property or
both, 10% or more of a class of the issuer's own securities or
10% or more of the proceeds from the sale of a class of the
issuer's own securities of a particular issue; but does not
include a person who (c) receives securities or proceeds referred
to in paragraph (b) solely (i) as underwriting commissions, or (ii)
in consideration for property, and (d) does not otherwise take part
in founding, organizing or substantially reorganizing the
business. 3. An "investment fund" means a mutual fund or
non-redeemable investment fund. 4. The definition of "permitted client"
includes a Canadian financial institution and any subsidiary
thereof; a person or company registered under the securities
legislation of a jurisdiction of Canada as an adviser, investment
dealer, mutual fund dealer or exempt market dealer; a
Canadian-regulated pension fund; the Government of Canada or a
jurisdiction of Canada, or any Crown corporation, agency or
wholly-owned entity of the Government of Canada or a jurisdiction
of Canada; an individual who beneficially owns financial assets
(cash, securities and certain other liquid securities) having an
aggregate realizable value that, before taxes but net of any
related liabilities, exceeds Cdn$5 million; and (c) a person or
company, other than an individual or investment fund, that has net
assets of at least Cdn$25 million as shown on its most recently
prepared financial statements. 5. A "foreign public issuer" means an issuer
(a) that has a class of securities registered under section 12 of
the United States Securities Exchange Act of 1934 (the
"1934 Act") or is required to file reports under section
15(d) of the 1934 Act, or (b) that is required to provide
disclosure relating to the issuer and the trading in its securities
to the public, to security holders of the issuer or to a regulatory
authority and that disclosure is publicly available in Australia,
France, Germany, Hong Kong, Italy, Japan, Mexico, the Netherlands,
New Zealand, Singapore, South Africa, Spain, Sweden, Switzerland or
the United Kingdom of Great Britain and Northern
Ireland. 6. An "executive officer" means, for an issuer,
an individual who is (a) a chair, vice-chair or president; (b) a
vice-president in charge of a principal business unit, division or
function including sales, finance or production; or (c) performing
a policy-making function in respect of the issuer. 7. A "control person" means (a) a person who
holds a sufficient number of the voting rights attached to all
outstanding voting securities of an issuer to affect materially the
control of the issuer; or (b) each person in a combination of
persons, acting in concert by virtue of an agreement, arrangement,
commitment or understanding, which holds in total a sufficient
number of the voting rights attached to all outstanding voting
securities of an issuer to affect materially the control of the
issuer, and, if a person or combination of persons holds more than
20% of the voting rights attached to all outstanding voting
securities of an issuer, the person or combination of persons is
deemed, in the absence of evidence to the contrary, to hold a
sufficient number of the voting rights to affect materially the
control of the issuer. The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
BC extends relief relating to BC Report of Exempt
Distribution