Asset acquisition exemption (NI 45-106)

A seller meets this exemption when the buyer of a business’s assets pays partly or wholly in the buyer’s own shares. Section 2.12 provides that the prospectus requirement does not apply to a distribution by an issuer of a security of its own issue to a person as consideration for the acquisition, directly or indirectly, of the assets of the person, if those assets have a fair value of not less than the amount stated in the section. Before accepting paper, read should I accept shares instead of cash.

What to check

• Whether the securities go to the person whose assets are being acquired, which is how the section is worded.
• Whether the assets reach the fair-value minimum in s. 2.12; read the current text for the amount.
• Who values the assets. The Companion Policy says that where securities are issued for non-cash consideration such as assets, the issuer and its board of directors must determine the fair market value and keep records showing how.
• What limits apply to the shares you receive; ask a securities lawyer, because this entry does not cover them.

Scope

This entry describes the national instrument as published by the Ontario Securities Commission; check the securities regulator where you are. A related exemption is the accredited investor exemption.