Going forward in Canada there will be three forms of the offering memorandum prospectus exemption in place across Canada: the new “Ontario Model” (Alberta, New Brunswick, Nova Scotia, Ontario, Québec and Saskatchewan) which will be in effect in Ontario on January 13, 2016 and the other Ontario Model jurisdictions on April 30, 2016, the “BC Model” (BC and Newfoundland) and the “Manitoba Model” (Northwest Territories, the Yukon, Nunavut, Prince Edward Island and Manitoba) which is currently in effect. For a discussion of the Ontario Model please see Offering Memorandum Prospectus Exemption Available in Ontario January 13, 2015. For a discussion of the Manitoba Model please see Manitoba Model – Offering Memorandum Prospectus Exemption.
This article discusses the BC Model which has been in effect for over 10 years. Under all of the offering memorandum exemptions, issuers who produce a prescribed disclosure document are able to sell securities to investors as long as the disclosure document is up to date and the financial statements are not stale.
Under the BC Model (unlike the Ontario Model), there is no requirement that non-reporting issuers provide investors with audited annual financial statements; annual notices on how the proceeds raised under the exemption have been used; notices in the event of a discontinuation of the issuer’s business, a change in the issuer’s industry or a change of control of the issuer; requiring that marketing materials be incorporated by reference into the offering memorandum to provide investors with the same rights of action in respect of all disclosure made under the offering memorandum exemption in the event of a misrepresentation; and imposing additional investment limits in respect of both eligible (i.e., investors who meet certain income or asset thresholds) and non-eligible investors that are individuals to limit the risks associated with an investment in securities acquired under the offering memorandum exemption.
The following is a summary of the key features of the Manitoba Model:
Issuer qualifications – available to both reporting and non-reporting issuers.
Types of securities – available for any type of security including investment funds.
Offering parameters – there is no limit on the size or the number of offerings and there is no restriction on the length of time the offering can remain open (subject to the OM being up to date and the financial statements not stale).
Registrant Involvement – there is no prohibition on using registrants that are related to an issuer.
Investment limits – there will be no investment limits for “eligible investors”. Non eligible investors will only be able invest up to $10,000. Eligible investors are individuals with net assets alone or with a spouse in the case of an individual which exceeds $400,000 or whose net income before taxes exceeded $75,000 alone or $125,000 with a spouse in two of the most recent calendar years and reasonable expects to exceed that level in the current year.
Risk acknowledgement form – there are no risk acknowledgment forms.
Ongoing Disclosure of audited annual financial statements, notice of use of proceeds and notice of specified key events – there are no ongoing requirements.
Marketing and advertising – there is no restriction on advertising, marketing materials used by issuers in distributions; but any material in the marketing materials must also be included in the offering memorandum.
For more information on the BC Model as well as the Ontario and Manitoba Models please contact Barbara Hendrickson at 647.403.4606.