Canada: New "Existing Securityholder" Prospectus Exemption For TSXV-Listed Issuers

On November 21, 2013, the securities regulators in each jurisdiction of Canada other than Ontario and Newfoundland (the "Participating Regulators") published Multilateral CSA Notice 45-312 for comment. The notice contemplates a new capital raising prospectus exemption (the "Proposed Exemption") for issuers listed on the TSX Venture Exchange (the "TSXV").

The core concept of the new exemption is that an investor who holds (as of a specific record date) a security of an issuer that is listed on the TSXV (the "Listed Security"), however acquired, may subscribe for additional securities of same type or units (with each unit comprised of the Listed Security and a warrant to acquire the Listed Security) without the need for the issuer to prepare a prospectus or other offering document.

The Proposed Exemption marks an additional attempt by securities regulatory authorities to open up the financing avenues available to issuers, in particular smaller issuers, while still aiming to provide a sufficient degree of protection for ordinary investors.

The Proposed Exemption applies only to the prospectus requirement. Issuers may still be required to involve a dealer in a transaction pursuant to the Proposed Exemption to address the registration requirement.


The Participating Regulators are of the view, based on research, that after their initial public offering most venture issuers avoid preparing a prospectus for fear of incurring the associated costs without any guarantee that the offering will be successful or will close at all. This could result in significant time and expense being incurred with no return for the issuer.

While venture issuers are able to rely on other prospectus exemptions, the Participating Regulators have found that the main exemption being relied on is the accredited investor exemption. The use of this exemption limits financings to a small group of potential investors. The other main available exemptions, being the offering memorandum exemption, rights offering exemption, and TSXV short form offering document, are being used rarely. Accordingly, ordinary retail investors are

denied the opportunity to invest in companies on the discounted private placement market, and instead are restricted to open market purchases. The Participating Regulators believe that venture issuers should have access to such investors for capital raising purposes.

In addition, the Participating Regulators are of the view that an investor who has previously acquired Listed Securities has already taken the time to make an investment decision about the issuer. This means the investor most likely is familiar with the issuer and its continuous disclosure, and has some investment experience. Accordingly, such an investor requires less regulatory protection than an investor that has had little to no exposure to the issuer.


The conditions to Proposed Exemption include:

1. The issuer must have a class of equity securities listed on the TSXV;

2. The issuer must have filed all timely and periodic disclosure requirements as required under applicable securities laws;

3. The offering can only consist of the Listed Securities or units comprised of Listed Securities and warrants to acquire Listed Securities;

4. The issuer must issue a news release disclosing the proposed offering, including details of the use of proceeds, and the number and pricing of the securities to be issued (including minimum and maximum amounts, if applicable);

5. The investor must confirm in writing that as of the "record date" the investor held the Listed Security;

6. If the investor has not received advice as to the suitability of the investment from a registered dealer, the investor must not invest more than $15,000 in the aggregate in securities of the issuer using the Proposed Exemption in any 12 months;

7. The issuer must provide the investor with rights of action in the event of a misrepresentation in the issuer's continuous disclosure record;

8. If the issuer voluntarily provides an offering document in connection with the offering, the issuer must provide the investor with rights of action in the event of a misrepresentation in the offering document;

9. The purchase price has to be paid in cash at the time of distribution; and

10. The subscription agreement for the offering must contain a certificate of the issuer that declares that the issuer's continuous disclosure does not contain a misrepresentation, and must certify that there are no material changes or material facts related to the issuer that have not been generally disclosed.

Any securities issued pursuant to the Proposed Exemption would be subject to a 4-month hold period, and the issuer would be required to file a report of exempt distribution within 10 days of completion of the offering.


The Participating Regulators have not yet settled on the timing for when the investor must have held the Listed Security in order to be able to rely on the Proposed Exemption. They are currently contemplating two possibilities – either the day immediately prior to the distribution of the

news release announcing the related offering, or a requirement that the investor has held the securities for a longer period prior to the announcement (such as at least 30 days).

The concern with the shorter time period is that it could easily make the Proposed Exemption available to any potential investor, as the investor could make a purchase of a single share on the open market the day before the announcement and then be able to subscribe in the private placement without the benefit of the protection offered by a prospectus. The Participating Regulators are concerned this could result in unsophisticated investors being pressured into taking these steps without due consideration of the investment opportunity.


Currently, the securities regulatory authorities in Alberta, Quebec and New Brunswick are intending to adopt the Proposed Exemption as a rule, on a permanent basis. For each of the other Participating Regulators, they intend to adopt the Proposed Exemption as a blanket order that would expire on December 31, 2015. The Participating Regulators do leave open the possibility of renewing the Proposed Exemption or adopting it as a permanent rule after that time, after conducting an analysis on the actual use and effects of the Proposed Exemption.

The conditions regarding contractual rights of action are included in the Proposed Exemption because the statutory rights of action will not apply in certain of the jurisdictions that are adopting the Proposed Exemption as a blanket order.


The Proposed Exemption is only in draft form, and the Participating Regulators are seeking comment from interested parties. The comment period is open until January 20, 2014. The Participating Regulators have also included several questions regarding the Proposed Exemption in the notice, which is available here.

We expect that the Proposed Exemption will receive broad support and, if implemented, there will be demand for it to be expanded to the remaining Canadian jurisdictions and made available to issuers generally.

We would be pleased to assist you in formulating and providing your comments to the Participating Regulators on the Proposed Exemption.

If you would like more information about the Proposed Exemption, please contact the authors or your usual contact in Borden Ladner Gervais' Securities & Capital Markets Group.

About BLG

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.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Similar Articles
Relevancy Powered by MondaqAI
Thompson Dorfman Sweatman LLP
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Thompson Dorfman Sweatman LLP
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions