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The national registration search contains the names of all individuals and firms who are registered to sell securities in Canada, with the exception of those registered solely with the Ontario Securities Commision (OSC).

Common Capital Raising Exemptions

The following is a brief description of some of the most common capital raising exemptions that would likely be used to raise money.

What is the “accredited investor exemption”?

Under the accredited investor exemption companies can raise money from wealthy individuals and certain qualified institutions. An accredited investor is an individual or institution that is financially sophisticated, can withstand loss or both.

An individual is an accredited investor if:

  • he/she is or was ever registered as an investment adviser (broker or mutual fund salesperson);
  • he/she has net financial assets in excess of $1,000,000; or
  • his/her net income before taxes exceeds $200,000 per year in each of the most two recent calendar years or $300,000 combined with a spouse in each of the two most recent calendar years.

When a company relies on this exemption it must file a report of the trade with the ASC within 10 days. For more information, please refer to National Instrument (NI) 45-106, section 2.3.

What is the “minimum amount investment exemption”?

The minimum amount exemption allows a company to sell shares to anyone who invests a minimum of $150,000 paid in cash at the time of the trade. However, each purchaser who invests the minimum required value of $150,000 must purchase only on their own account; the share(s) purchased cannot be held for any other person or persons. In addition, the entire share purchase must be made from only one company.

If there happens to be an accompanying document prepared in the form of or similar to an offering memorandum, then the purchaser will have 2 days in which to change their mind and ask for their funds to be returned.

When a company uses this exemption to issue shares they must file a report of the trade with the ASC within 10 days. For more information, please refer to NI 45-106, section 2.10.

What is the “offering memorandum exemption”?

The offering memorandum exemption allows a company to raise money from investors by providing those investors with a certain level of information in the form of a prescribed document called an offering memorandum (OM). An offering memorandum is a disclosure document that describes the company and the securities being offered, and has audited financial statements of the company attached to it.

An investor can sue the company and its directors if the offering memorandum contains a misrepresentation.

The offering memorandum must be filed with the ASC and a report of trades under the OM must also be filed. If you are investing with a company that is relying on the offering memorandum exemption, you should receive a completed Risk Acknowledgement form (NI 45-106F4) to sign outlining the risk of the investment. It should be explained that under “rights of rescission” you have 2 business days to cancel your purchase. In Alberta, there are some additional requirements associated with the offering memorandum exemption if you are investing more than $10,000.00. For more information on the offering memorandum exemption, refer to NI 45-106, section 2.9.

If you have further questions on common capital raising exemptions, Check First by contacting ASC public inquiries at inquiries@asc.ca or toll free at 1-877-355-4488.