Do you not hate shopping in stores that will not let you return
items? We have all purchased an item we were excited to acquire,
but then changed our mind and returned it the following day.
Return policies in retail stores vary from no returns
allowed, to bring us your battered and bruised item, without
receipt, anytime in the future, for a full refund or exchange, no
The securities law related to changing one's mind to acquire
securities from an issuer in a private placement offering varies
widely as well. This first article, of a two part series, discusses
under what circumstances purchasers can change their mind and
cancel their subscription for securities offered under the offering
memorandum exemption (the offering memorandum
exemption) in section 2.9 of National Instrument 45-106 Prospectus and
Registration Exemptions (NI45-106).
NI 45-106 Offering Memoranda
Issuers conducting a private placement offering under the
offering memorandum exemption must prepare an offering memorandum
in the required form (NI 45-106 OM).1
Issuers are required under subsection 2.9(6) of NI 45-106 to
include a two (2) day contractual right to cancel the purchase of
securities in the NI 45-106 OM if the securities legislation where
the purchaser resides does not provide a comparable right.
Notice of two day cancellation right
Purchasers must deliver a notice to the issuer no later than
midnight on the second (2nd) business day after the purchaser signs
the subscription agreement to purchase the securities offered under
the offering memorandum exemption to exercise this
statutory/contractual (depending on the jurisdiction) right of
cancellation. Purchasers may cancel their subscriptionfor
securities for any reason at all during this time. This is also
disclosed in the Risk Acknowledgement Form (Form 45-106F4) which
must be delivered to, and signed by, investors in connection with
the offering memorandum exemption.
Below is a chart illustrating which Canadian jurisdictions
provide investors with a two (2) day statutory right to cancel
their purchase of securities offered under the offering memorandum
exemption (the statutory cancellation right) and
which ones do not. The terms of each statutory cancellation right
are identical to the contractual right to cancel under the offering
memorandum exemption (see subsection 2.9(6) of NI 45-106).
Statutory Cancellation Right under Applicable Canadian
Issuers under the offering memorandum exemption (subsection
2.9(16) of NI 45-106) are required to hold funds received from a
purchaser in trust during this period of time that a purchaser has
this statutory/contractual cancellation right.
Part II of this article discusses the cancellation rights
involving the use of an offering memorandum voluntarily provided to
an investor in connection with any available prospectus exemption
under applicable Canadian securities law, other than the offering
memorandum exemption, and additional special cancellation rights
provided to investors of mutual fund securities.
1. The offering memorandum exemption is currently
unavailable in Ontario, however, the Ontario Securities Commission
has recently announced in December 2013 that it is considering
adopting a form of offering memorandum exemption in Ontario, along
with other proposed new capital raising exemptions, such as equity
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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