Common Capital Raising Exemptions

Your business may wish to raise money by selling shares, debt or other securities to investors. Securities law provides that in order to do this the business, the “issuer” of the securities, must use a prospectus, i.e., a prescribed comprehensive disclosure document. This is called the prospectus requirement. Filing a prospectus and obtaining a receipt for it will result in your business becoming a “reporting issuer.”

Filing a prospectus and fulfilling the ongoing disclosure obligations of a reporting issuer involve significant time and cost. If your business only needs a relatively small amount of money, you may not want to incur these costs. And, in some cases, the investors your business is targeting may not require the protections of a prospectus. In these situations, both public and private businesses of all sizes will often rely on exemptions from the prospectus requirement to sell their securities.

There are a number of different prospectus exemptions that may be available for your business. Most of them are set out in NI 45-106 Prospectus Exemptions.

It is necessary to comply with the securities laws in each jurisdiction in which a distribution of securities occurs. All Canadian jurisdictions have adopted NI 45-106.

If your business is not a reporting issuer and investors do not have access to ongoing information about the business, the resale of securities acquired under a prospectus exemption is typically restricted. Unless the business becomes a reporting issuer, these restrictions continue indefinitely.

In most cases if you rely on a prospectus exemption there is a requirement to file a report, typically a Form 45-106F1, with the ASC reporting use of the exemption. The report is filed electronically through SEDAR and also requires payment of a fee.

Whether or not you rely on a prospectus exemption, the prohibitions against fraud and misleading statements apply to any information provided to investors.

Please note: the information available on this website provides only a high-level general summary. It is not legal advice. We encourage all businesses to seek their own legal guidance.

Private issuer exemption
Family, friends and business associates exemption
Employee exemption
Accredited investor exemption
Distribution to investors outside Canada
Minimum amount investment exemption
Offering memorandum exemption
Start-up prospectus exemption
Start-up crowdfunding prospectus and registration exemption
Additional Prospectus Exemptions for Cooperatives and Community Economic Development Corporations
Rights offering exemption for reporting issuers
Existing security holder and investment dealer exemption for listed reporting issuers