Effective September 8, 2015, certain private placements of
non-Canadian securities made to Canadian institutional investors
that qualify as "permitted clients" will no longer
require a "Canadian wrapper".
Key conditions to new rules
The new rules require that certain conditions be satisfied:
the offering must be conducted primarily in a non-Canadian
a concurrent distribution of the securities must be made by the
issuer to investors in the U.S.;
the securities must either be
issued by a non-Canadian issuer that is not a reporting issuer
in Canada and has its head office outside Canada and a majority of
its executive officers and directors ordinarily resident outside
issued or guaranteed by the government of a non-Canadian
the Canadian clients must be "permitted clients" as
defined in NI 31-103;
the offering document delivered to Canadian clients must comply
with applicable U.S. disclosure requirements and federal securities
certain prescribed notices must be provided to Canadian clients
either in the offering document, accompanying the offering
document, or, in advance of an offering, on a one-time basis.
We expect a practice already followed by some will gain momentum
which will see the replacement in the offering document of the
Canadian wrapper with a notice for Canadian residents. The notice
would be identical across all offerings and would require no
acknowledgment from the client or prospective client.
Certain issues are not addressed by new rules
After the new rules come into effect, the following
representative Canada-specific issues will need to be
Considerations: As a result of Multilateral Instrument
51-105 – Issuers Quoted in the U.S. Over-the-Counter
Markets, issuers not listed or quoted on certain specified
exchanges (such as the NYSE or NASDAQ), that undertake promotional
activities in Canada (e.g. having a dealer call accounts and then
sell securities to those accounts in Canadian provinces other than
Ontario) may become reporting issuers in Canada with obligations to
meet Canadian continuous disclosure requirements if the
issuer's equity securities trades over the counter. Since
Ontario did not adopt the instrument and securities regulators in
Quebec, Alberta and British Columbia have granted blanket exemptive
relief orders excluding dealings with "permitted clients"
from the burdens of the reporting requirements, a practice has
developed to market these types of deal in Canada only in Ontario,
Quebec, Alberta and British Columbia. These limitations were often
described in the Canadian wrapper and will continue to be relevant
Offerings Not Extended
in the U.S.: A Canadian wrapper will normally be required if
an offering document is used and the offering does not also
concurrently extend to the U.S.
Reports: Post-trade reporting obligations for sales into
Canada remain unchanged and filings generally have to be done
within 10 days of closing. For sales in Ontario and Alberta, there
is a late filing fee of $100 per business day (per calendar day in
Alberta) that the filing is late up to a total of $5,000 in each
calendar year in each province.
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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