Canadian M&A Perspectives Blog
Relief From New Disclosure Requirements
On August 10, 2011, the British Columbia Securities Commission (BCSC) gave advance notice of amendments (Amendments) to National Instrument 45-106 — Prospectus and Registration Exemption (NI 45-106), which will take effect on October 3, 2011. The Amendments will introduce a new form, Form 45-106F6 — British Columbia Report of Exempt Distribution (New B.C. Form), which will replace Form 45-106F1 (National Form) for the purposes of reporting exempt distributions in British Columbia, subject to the exemptions discussed below.
The New B.C. Form will require issuers — and particularly issuers that are not reporting issuers in Canada — to provide enhanced disclosure regarding insiders, promoters and registrants purchasing securities, which is not required by the National Form. Following the announcement of the Amendments, certain market participants expressed concerns that these disclosure requirements would be unduly onerous for investment funds and foreign issuers. In response, on September 23, 2011, the BCSC announced the adoption of BC Instrument 45-533 (Exemptions Instrument), which provides limited relief from the requirements of the Amendments.
The Exemptions Instrument exempts investment funds from the New B.C. Form and allows them to continue to use the National Form. The Exemptions Instrument also exempts issuers that are public reporting companies, in certain foreign jurisdictions1, from the requirement under the New B.C. Form to provide general information about their insiders and promoters. Such foreign public reporting companies must otherwise comply with the requirements of the New B.C. Form, including identifying securities purchasers who are insiders or registrants.
Under the New B.C. Form, non-reporting issuers, other than investment funds or foreign public reporting companies covered by the Exemptions Instrument, must disclose: (i) the names, municipalities and countries of residence of its insiders and promoters; (ii) the number and types of securities controlled or owned by such insiders and promoters, including securities purchased in the exempt distribution being reported; and (iii) the total price paid for all of the securities owned or controlled by such insiders and promoters, including securities purchased in the exempt distribution being reported. In addition, under the New B.C. Form, all issuers, other than investment funds (which are exempted by the Exemptions Instrument), must indicate whether the purchasers of securities in a private placement are registrants or insiders of the issuer.
The companion policy to NI 45-106 has been amended to make it clear that if a private placement is reportable in British Columbia, and in one or more other Canadian jurisdictions, the issuer must comply with both the B.C. requirements and the requirements of the other jurisdictions. This means that in any such multi-jurisdictional exempt distribution, the issuer must, unless it is an investment fund, file the New B.C. Form with the BCSC and file the National Form in the other jurisdictions2.
Press Access to Information Reported on New B.C. Forms
When the Amendments were proposed last year, the BCSC also made a proposal to begin publishing the full content of each filed New B.C. Form (including information regarding purchasers), on its website. However, in response to privacy concerns raised by several commenters, the BCSC adopted a modified version of its original proposal. In particular, the Amendments provide for the publication online of information regarding non-individual purchasers only. Nonetheless, the Amendments also provide for certain information regarding individual purchasers available to the public at the BCSC's offices. This information includes each individual purchaser's name, and whether or not he or she is an insider or registrant, but does not include his or her residential address.
To further address privacy concerns, in respect of the information concerning individual purchasers, the Amendments modified NI 45-106 to impose a prohibition on the use of information made available at the BCSC's offices other than for a person's own investment research concerning the relevant issuer. However, on September 23, 2011, the BCSC announced that it had adopted BC Instrument 45-532 (Media Instrument) to loosen the foregoing restriction in the interest of a free press. Under the Media Instrument, newspapers, magazines, radio and television stations, and other "bona fide" media of "mass communication," may use the information concerning individual purchasers made available at the BCSC's offices for "journalistic purposes."
Footnotes
1 These jurisdictions consist of Australia, France, Germany, Hong Kong, Italy, Japan, Mexico, the Netherlands, New Zealand, Singapore, South Africa, Spain, Sweden, Switzerland, the United Kingdom and the United States.
2 Distributions are reportable in British Columbia if: (i) the relevant securities are sold to purchasers resident in British Columbia; or (ii) the issuer has a significant connection to British Columbia. The existence of any of the following factors would generally indicate that an issuer has a "significant connection" to British Columbia and that a distribution by it would be deemed to be made from British Columbia: (i) the issuer's "mind and management" is primarily located within British Columbia (e.g., the issuer's head office or the residences of its key officers and directors are located in British Columbia); (ii) the business of the issuer is administrated from, and the operations of the issuer are conducted in, British Columbia; or (iii) acts, advertisements, solicitations, conduct or negotiations in furtherance of the distribution take place in British Columbia.
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