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), the “BC Model” (BC and Newfoundland) and the “Manitoba Model” (Northwest Territories, the Yukon, Nunavut, Prince Edward Island and Manitoba). For a discussion of the Ontario Model which will come into effect in Ontario on January 13th 2016 and the other Ontario Model jurisdictions on April 30th 2016 please see Offering Memorandum Prospectus Exemption Available in Ontario January 13, 2016. For a discussion of the BC Model (which is currently in effect) please see BC Model – Offering Memorandum Prospectus Exemption.
This article discusses the Manitoba Model which has been in effect for over 10 years. Under all of the offering memorandum exemptions in effect in Canada, 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.
The Manitoba Model (unlike the Ontario Model) does not require that non-reporting issuers provide investors with audited annual financial statements; annual notices on how the proceeds raised under the offering memorandum 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, and does not require 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.
The following is a summary of the new key features of the Manitoba Model:
Issuer qualifications – available to both reporting and non-reporting issuers.
Types of securities – available for all types of securities 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 offering memorandum 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 those 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 – investors must sign a risk acknowledgement form 45-106 F4.
Disclosure of audited annual financial statements, notice of use of proceeds and notice of specified key events – none required.
Marketing and advertising – there is no restriction on advertising. Marketing materials used by issuers in distributions under the offering memorandum exemption must only contain material that is found in the offering memorandum.
For more information on the Manitoba Model as well as the BC and Ontario Models please contact Barbara Hendrickson at 647.403.4606.