Canadian securities regulators in all provinces and territories
except Ontario and Newfoundland and Labrador (the
"Regulators") have published for comment a proposed
prospectus exemption that would permit certain TSX Venture Exchange
("TSXV") listed issuers to distribute securities to
existing security holders without a prospectus (the "proposed
exemption"). A copy of the Regulators' notice is available
here. The prospectus exemption is being considered by the
Ontario Securities Commission in the commission's suite of
proposed capital raising prospectus exemption reforms (see our
Cassels Brock e-LERT on this topic
Research conducted by the Regulators reveals that TSXV issuers
generally do not use prospectus offerings or avail themselves of
prospectus exemptions to distribute securities to existing
non-accredited retail investors. This is because of the time and
cost associated with preparing the necessary documents. As a
result, retail investors are limited to making additional
investments in TSXV issuers via the secondary market, a practice
the Regulators feel disadvantages the retail investors relative to
accredited investors due to potentially higher transaction costs
and relatively disadvantageous pricing/investment terms.
The proposed exemption considers allowing TSXV issuers to
distribute securities to existing security holders in reliance on
the issuer's continuous disclosure record, based on the
the issuer must have a class of securities listed on the
the issuer must have a current and compliant timely and
periodic disclosure record;
any offering can consist only of the class of equity securities
listed on the TSXV (or units consisting of the listed security and
a warrant to acquire that security);
the issuer must publicly disclose the proposed offering in a
news release and provide details on the use of proceeds, but no
additional offering document (such as a prospectus) would be
investors would need to confirm that they are holders of the
listed security subject to a proposed offering as of a specified
investments would be limited to an aggregate of $15,000 per
investor per 12 month period, unless the investor has obtained
advice regarding the investment's suitability from a registered
the investor must be provided with certain rights of action in
the event of a misrepresentation in the issuer's continuous
disclosure record; and
where an offering document is voluntarily provided by the
issuer to an investor, the investor will have certain rights of
action in the event of a misrepresentation in that document.
As an additional investor protection measure, issuers relying on
the proposed exemption would be required to represent to
prospective purchasers that there are no material undisclosed facts
or changes that relate to the issuer. As proposed, securities
issued under the exemption would be subject to a four month hold
There is currently some difference in approach between
Regulators as to how the proposed exemption would be brought into
force on the provincial/territorial level. Some regulators favour
the adoption of the proposed exemption as a blanket order, while
others favour its adoption by way of a local rule. The method by
which the proposed exemption is brought into force will have
implications for statutory secondary market civil liability and on
the length of time the proposed exemption remains in force.
Regulators implementing by way of a blanket order would impose an
"expiry" date of December 31, 2015, and would monitor its
use during that period.
Regulators are seeking comment on, among other things, the
timing of the record date, the nature of the resale restrictions,
and whether other markets such as the TSX should also have the
benefit of the exemption.
The comment period for these proposed changes closes
on January 20, 2014.
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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