Further Changes to Ontario’s Prospectus Exemptions

December 19, 2014

On November 27, 2014, the Ontario Securities Commission (“OSC”) published its Notice of Amendments to OSC Rule 45-501 Ontario Prospectus and Registration Exemptions approving a new prospectus exemption (the “Exemption”) expected to come into force, provided Ministerial approval is obtained, on February 11, 2015. The Exemption will allow issuers listed on the Toronto Stock Exchange, the TSX Venture Exchange, the Canadian Stock Exchange and the Aequitas Neo Exchange to raise capital from existing security holders without a prospectus, subject to certain conditions being met. The Exemption will bring Ontario in line with other Canadian jurisdictions (other than Newfoundland and Labrador) who adopted a similar exemption in March 2014. For more information on the existing exemption, please refer to our Spring 2014 Securities Practice Notes.

Pursuant to the Exemption, an issuer may offer a class of listed securities (or units which include a listed security and warrant to acquire the listed security) to all existing security holders of the class of security being offered. The OSC has imposed a limit on issuers from making a distribution under the Exemption that will result in more than 100% dilution of the issuer’s already outstanding securities of the same class of security being offered. This limit is unique to Ontario and has not been imposed by the other CSA jurisdictions. Another unique feature of the Exemption (which differs from the other CSA jurisdictions) is that it is not available to investment funds.

In order to rely on the Exemption, an issuer must announce the distribution by news release and provide relevant details about the distribution including the minimum and maximum number of securities being offered, expected proceeds and use of the proceeds. All materials related to a distribution must be filed by the issuer on SEDAR on the same day the issuer provides materials to investors. Like many other exempt market distributions, the securities will be subject to statutory 4-month hold period imposed by National Instrument 45-102 Resale of Securities.

Under the Exemption, investors will be limited to investments in the aggregate of $15,000 (when added to the acquisition cost to the investor of all other securities of the issuer acquired in reliance on the Exemption) for every 12 month period unless they seek suitability advice regarding the investment from a registered dealer.

The Exemption is part of the OSC’s larger exempt market review which includes proposals for additional capital raising exemptions in Ontario. Stay tuned for future updates in future editions of the Securities Practice Notes newsletter.

For more information, please refer to Notice of Amendments to OSC Rule 45-501 Ontario Prospectus and Registration Exemptions.


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