Among other limitations, the OM-form exemption will not be
available to issuers who are reporting issuers (either in a
jurisdiction of Canada or the equivalent in a foreign jurisdiction)
or to investment funds, mortgage investment entities or those
engaged in the real estate business.
Specifically, the orders will exempt certain types of private
issuers, under certain circumstances, from the requirements to
use Canadian GAAP applicable to publicly accountable
enterprises and to provide audited financial statements in order to
rely on the current OM exemption. To qualify for the new
OM-form exemption, issuers will have to limit the aggregate
amount raised under the exemption to $500,000 and the distributions
to an individual in reliance of the exemption may not exceed
$2,000 in a 12-month period. The issuer will also have to include
prescribed language regarding the risk of such investments on the
face page of each offering memorandum used in reliance of this
According to the staff notice, the exemption orders are not
intended to address securities-based crowdfunding. That said, the
staff notice states that the contemplated disclosure requirements
under the U.S. JOBS Act crowdfunding exemption
"seem similar" to those under the CSA's
we've discussed in the past, Ontario is currently engaged
in its own review of potential prospectus exemptions, with
a consultation paper on the subject currently out for
Interesting to note in relation to this new "OM-form
exemption" is the strict limitation imposed on participation
to no greater than $2,000 per purchaser over a 12-month period,
marking a clear departure from the approach of the existing OM
exemption under NI 45-106. The existing OM exemption limits
participation to no greater than $10,000 (in any one transaction
rather than over any period) and provides an exemption from such
monetary limitation entirely if the purchaser is an "eligible
investor". In effect, it would appear that the applicable
CSA members have implicitly valued the incremental risk to
purchasers associated with the lack of audited financial statements
and Canadian GAAP compliance. It remains to be seen if they
have struck the right balance, which will be borne out by its
usage. In light of the restrictive $2,000 subscription
threshold, it will be interesting to see if issuers will find the
new "OM-form exemption" a feasible capital-raising
alternative, necessitating as it does a significantly broader
participation than under the existing OM exemption and with no
ability to look to one or two key investors to effectively backstop
a capital raise.
The CSA have invited comment on the sufficiency of the
OM-form exemption until February 20, 2013. The interim orders will
be valid until December 20, 2014 and the participating
CSA members intend to monitor the use of the orders to
determine the scope of any further possible changes. For more
information, see Multilateral CSA Notice 45-311.
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.
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Under the Income Tax Act, the Employment Insurance Act, and the Excise Tax Act, a director of a corporation is jointly and severally liable for a corporation's failure to deduct and remit source deductions or GST.
Under the Income Tax Act, the Employment Insurance Act, the Canada Pension Plan Act and the Excise Tax Act, a director of a corporation is jointly and severally liable for a corporation's failure to deduct and remit source deductions.
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