Canada: B.C. Securities Commission Amends New Private Placement Report Form

Copyright 2011, Blake, Cassels & Graydon LLP

Originally published in Blakes Bulletin on Securities Regulation, September 2011

On September 23, 2011, the British Columbia Securities Commission (BCSC) published BC Instrument 45‑533 – Exemption from Form 45-106F6 requirements for investment funds and foreign public issuers (BCI 45‑533). The instrument was adopted in response to additional comments received by the BCSC in respect of its newly adopted Form 45-106F6 – British Columbia Report of Exempt Distribution (Form 45-106F6) which is scheduled to come into effect on October 3, 2011.

The new Form 45-106F6 only applies in respect of private placements made to purchasers located in, or made by issuers with a significant connection to, British Columbia. Except as contemplated in BCI 45-533, the current Form of Exempt Distribution (Form 45-106F1) will be repealed in British Columbia effective October 3, 2011, but will remain in effect in each of the other provinces and territories of Canada. Accordingly, if a private placement occurs in British Columbia and one or more other jurisdictions in Canada, the issuer is required to file a Form 45-106F6 in British Columbia and a Form 45-106F1 in the other applicable jurisdictions.

The new Form 45-106F6 places more onerous disclosure obligations on issuers and underwriters involved in British Columbia private placements than the current Form 45-106F1. In particular, Item 4 of Form 45-106F6 requires that an issuer that is not a "reporting issuer" in any jurisdiction in Canada disclose detailed information regarding its insiders and promoters, including the number of securities held by each insider and promoter and the amount paid for such securities. The effect of this requirement is to create a new insider reporting obligation for private companies that are located in British Columbia, or that sell securities to purchasers located in, British Columbia.

With the adoption of BCI 45-533, "foreign public issuers" will now be exempt from the insider disclosure obligations in Part 4 of Form 45-106F6 on the basis that such insider information should be publicly available in the foreign jurisdiction of the issuer. BCI 45-533 also exempts all investment funds from the requirement to file the new form, even if the investment fund manager is not registered in a jurisdiction in Canada, provided that the investment fund instead completes and files the current Form 45-106F1.

Under the current Form 45-106F1, issuers are required to disclose the identity, contact information and investment details of Canadian investors in a private placement, but this information is only made available to the securities regulatory authorities and is not made available to the public. Under the new Form 45-106F6, all of that same information will be made available to the public through the BCSC's website, unless the investor is an individual, in which case certain of the information will be made available in person at the BCSC's office. For British Columbia-based issuers this means that the identity and investment details of all investors in a private placement (whether or not those investors are based in British Columbia) will be made available to the pubic. For issuers based outside British Columbia, the identity and investment details of any investors located in British Columbia will be made available to the public.

While the amendments contained in BCI 45-533 have provided much needed relief to "foreign public issuers" and investment funds, it remains to be seen whether the private company insider reporting obligations in Item 4 of Form 45-106F6 and the requirement in Form 45-106F6 to publicly disclose the identity and investment details of investors will have a dampening effect on other inbound or outbound capital raising activity in British Columbia.

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