The British Columbia Securities Commission (BCSC) recently
adopted an exemption that, subject to certain conditions, will
allow issuers listed on the Toronto Stock Exchange, TSX Venture
Exchange, and the Canadian Securities Exchange (collectively, the
"Exchanges") to raise money by issuing
securities to their existing security holders without the need for
a prospectus or offering document (the
The securities regulatory authorities in Alberta, Saskatchewan,
Manitoba, Québec, New Brunswick, Nova Scotia, Yukon,
Northwest Territories, Nunavut, and Prince Edward Island (with the
BCSC, the "Regulators") also adopted the
The Exemption which has been long-awaited by both issuers and
non-accredited investors, represents the Regulators' efforts to
afford smaller issuers an opportunity to access a wider pool of
capital, while maintaining investor protection.
The rationale underlying the Exemption is that an investor who
already holds a listed security of the issuer has previously made
an investment decision concerning the issuer and its securities and
therefore should be able to subscribe for the same security without
requiring the issuer to incur significant time and expense
associated with preparing a prospectus or offering document. In
essence, the Exemption represents a significantly streamlined
avenue for reporting issuers to raise funds from their existing
Previously, if an Exchange-listed issuer wanted to distribute
securities to existing shareholders who were not accredited
investors, the issuer would have to prepare and file a prospectus
or seek to rely on a prospectus exemption that required delivery of
a disclosure document, such as an offering memorandum or a rights
The Exemption now permits issuers to offer existing security
holders who are not accredited investors the opportunity to
participate in offerings of securities, which were previously only
available to accredited investors and close friends, family and
business associates. This broadens the pool of potential capital
available to issuers and allows ordinary retail investors who, for
all practical intents and purposes, were limited to participating
in the secondary market access to primary offerings.
To rely on the Exemption, an issuer must, among other
have a class of equity securities listed on one of the
have timely filed all continuous disclosure documents;
offer only a class of securities listed on the Exchange or
units comprising a listed security and a warrant to acquire the
issue a news release disclosing the proposed offering,
including that the issuer is relying on the Exemption, details of
the use of proceeds, the number and pricing of the securities to be
issued (including minimum and maximum amounts, if applicable), and
how the issuer intends to deal with any oversubscriptions;
make the offer available to all persons who, as of the record
date, held a listed security of the issuer of the same class and
series as the listed security to be distributed under the
provide investors with a right of action in the event of a
misrepresentation in the issuer's continuous disclosure, or in
an offering document it voluntarily provides to investors.
The Exemption limits each investor to acquiring no more than
$15,000 of the issuer's securities in any 12-month period
unless the investor has obtained advice as to the investment's
suitability from a registered investment dealer.
The Ontario Securities Commission has proposed to adopt a
similar security holder exemption based broadly on the Exemption
with some additional conditions. All comments on Ontario's
proposed exemption are due by June 18, 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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