Business combination and reorganization exemption

A seller who takes shares of the buyer as part of the price, or an owner in a merger of two companies, may be receiving securities. Section 2.11 of National Instrument 45-106 is one of its exemptions from the prospectus requirement. The amalgamation answer explains one route.

What section 2.11 covers

• An amalgamation, merger, reorganization or arrangement under a statutory procedure.
• One described in an information circular made under National Instrument 51-102, or in a similar disclosure record, that is delivered to each security holder whose approval is required and is approved by them.
• A dissolution or winding-up of the issuer.

What to check

The companion policy says regulators read “statutory procedure” broadly, as any statute under which the entities exist or the transaction takes place, and that the exemption covers distributions that are part of the procedure and necessary to complete the transaction. Ask whether your deal is done under such a procedure or is a plain share purchase, and whether another exemption such as the asset acquisition exemption is needed. A text box above section 2.11, which the instrument says does not form part of it, refers to National Instrument 45-102 Resale of Securities for first trades. This entry cites the instrument as the Ontario Securities Commission publishes it; check the rules where you are.