The Canadian Securities Administrators (CSA) has announced it is amending (the Amendments) National Instrument 45-106 Prospectus Exemptions (NI 45-106). Provided all necessary ministerial approvals are obtained, the Amendments will come into force on March 8, 2023.
The Amendments set out new disclosure requirements for issuers that are engaged in “real estate activities” (Real Estate Issuers) and issuers that are “collective investment vehicles” (CIVs) when those issuers are preparing an offering memorandum (OM). An offering memorandum is a disclosure document that describes a company’s business, includes financial statements, discusses relevant risks, and explains how the company will use the money it raises. The offering memorandum prospectus exemption allows an issuer to sell its securities to a wider range of people than typically allowed for private placements.
The regulator intends that the new requirements will set out a clear disclosure framework for these issuers, giving them greater certainty as to what they must disclose, and giving better information to investors.
Additionally, the Amendments include general amendments (the General Amendments), which clarify parts of NI 45-106 and improve disclosure for investors.
Generally, the Amendments include but are not limited to:
- Removal of the requirement, in all jurisdictions except Ontario (see below) for ongoing distributions to amend the OM to include an interim financial report for the issuer’s most recently completed six-month period
- The Ontario Securities Commission (OSC), while viewing the six-month requirement as appropriate, has added an exemption to the requirement that would allow issuers meeting certain conditions to not amend their OM to include an interim financial report for the issuer’s most recently completed six-month period.
- Revision of the Appraisal Requirements, including the removal of the requirement for an appraisal if a Real Estate Issuer were using a material amount of the proceeds of the offering to acquire an interest in real property.
- Revisions to definitions, including those of a CIV and deletion of the definition of “net asset value” as the latter confirms the generally accepted meaning.
- Revisions to Form 45-106F2 Offering Memorandum for Non-Qualifying Issuers.
National Instrument 45-106 Prospectus Exemptions (NI 45-106) is available for download from the websites of participating CSA members.
For more information, please call Barbara Hendrickson at BAX Securities Law (647) 403-4606.
This publication is not intended to constitute legal advice. No one should act on it or refrain from acting on it without consulting with a lawyer. BAX does not warrant or guarantee the accuracy or currency or completeness of the publication. No part of this publication may be reproduced without the prior written permission of BAX Securities Law.
