Offering memorandum exemption

A buyer may raise money for an acquisition from outside investors by issuing securities, such as shares. Section 2.9 of National Instrument 45-106 states when the prospectus requirement does not apply to that distribution. The Alberta Securities Commission describes it as allowing a business to sell its securities to the general public without filing a prospectus and becoming a reporting issuer.

What the instrument requires

• The purchaser buys as principal.
• At the same time or before the purchaser signs the agreement, the issuer delivers an offering memorandum in the required form, with a certificate that states it does not contain a misrepresentation, and obtains a signed risk acknowledgement.
• Subsection (2.1) applies in Alberta, New Brunswick, Nova Scotia, Ontario, Québec and Saskatchewan, and adds investment limits for individual purchasers, which subsection (2.3) lifts for accredited investors and persons described in subsection 2.5(1); subsection (2.2) restricts its use by investment funds.
• The issuer files a copy of the offering memorandum with the securities regulatory authority.

What to ask

Subsections (1) and (2) name other jurisdictions and different conditions. This entry covers the instrument as the Ontario Securities Commission and the Alberta Securities Commission publish it, so check the securities regulator where the investors are. For an issuer that is not a reporting issuer, the ASC says the offering memorandum requires audited annual financial statements. See loan covenants to expect when financing an acquisition and the accredited investor exemption.