Minimum amount investment exemption

A company or fund putting money into a deal may rely on this exemption instead of qualifying under another one. The test turns on who the purchaser is and what it pays, not on who it knows. The Alberta Securities Commission lists it among the exemptions in Alberta most likely to be relied on by small businesses for capital raising. See bringing in an investor.

The conditions in section 2.10

• The purchaser is not an individual and purchases as principal.
• The acquisition cost is not less than the minimum in the section, paid in cash at the time of the distribution. Read the current text of section 2.10 for the amount.
• The distribution is of a security of a single issuer.
• Under section 2.10(2), the exemption does not apply to a person created, or used, solely to purchase or hold securities in reliance on it.

What to check or ask

Ask whether the investor is an individual or an entity, and why the entity was set up. Ask who files the report of exempt distribution, because section 6.1 lists section 2.10 among the exemptions that need one, subject to section 6.2. The Alberta commission notes that securities bought this way carry resale restrictions. This entry quotes the national instrument and Alberta’s regulator; check the rules where you are.