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Get Your SEDAR Profile: Changes to Private Placement Filing Requirements Effective May 24 & June 30, 2016

Published:

June 6, 2016

On June 30, 2016, amendments to National Instrument 45-106 Prospectus Exemptions and related changes to Companion Policy 45-106 Prospectus Exemptions, including the requirement to use the new Form 45-106F1 Report of Exempt Distribution will come into force. But one important change was effective on May 24, 2016: no Canadian jurisdiction will accept paper filings of the new Form 45-106F1 Report of Exempt Distribution. All issuers, both reporting and non-reporting, must now file all Reports of Exempt Distribution electronically via SEDAR (with the exception of BC and Ontario issuers which must file the Reports via their respective jurisdiction’s electronic filing portals). While all public companies have a SEDAR profile, very few private ones do. If a private company doesn’t have a SEDAR profile, one must be created for it before it can complete a private placement for which it must file a Report of Exempt Distribution – and the Report must be filed no later than 10 days after the distribution date.

Here’s an overview of the Report of Exempt Distribution filing requirement and the new electronic filing requirements and Report of Exempt Distribution form.

Report of Exempt Distribution. An issuer must file a Report of Exempt Distribution whenever an entity completes a private placement and relies on certain prospectus exemptions under National Instrument 45-106, including (but not only) these popular ones: accredited investor exemption (section 2.3); family, friends and business associates exemption (section 2.5); offering memorandum exemption (section 2.9); and minimum amount investment exemption (section 2.10). The issuer must file the report no later than 10 days after the distribution date; if there are multiple distribution dates listed in the Report of Exempt Distribution, all such distributions must occur within a 10-day period and the Report of Exempt Distribution must be filed no later than 10 days after the first distribution date. A Report of Exempt Distribution must be filed in the jurisdiction in which the entity is formed or has its head office and in each jurisdiction where the investor resides. For example, ABC Inc., a private company, has its head office in Nova Scotia and issues securities pursuant to a private placement (relying on the accredited investor exemption) to investors resident in NB and Alberta; ABC Inc. must file a Report of Exempt Distribution via SEDAR with the Provinces of NS, NB and Alberta.

New Electronic Filing Requirement. Effective as of May 24, 2016, no Canadian province or territory will accept paper filings of a Form 45-106F1 Report of Exempt Distribution. All issuers, both reporting and non-reporting, must now file all Reports of Exemption Distribution via SEDAR and pay all applicable filing fees for the Report of Exempt Distribution filings at the time of SEDAR filing through a SEDAR user’s electronic bank account. In BC and Ontario, the Report of Exempt Distribution must be filed through the respective jurisdiction’s electronic filing portals. While all public companies have a SEDAR issuer profile, very few private ones do. If a private company (filing in Canada outside of BC or Ontario) doesn’t have a SEDAR issuer profile, one must be created for it – and to do that it will need to retain a party with SEDAR filing capabilities (which includes many law firms). The following information is required to create a SEDAR issuer profile:

  • Contact name.
  • Contact telephone number and email address.
  • Manner of formation of the issuer.
  • Date of formation of the issuer.
  • Jurisdiction of formation.
  • Industry classification.
  • Size of issuer’s assets (under $5M, $5M – $25M, $25M – $100M, $100M – $500M, etcetera).
  • Financial year end.

New Form of Report of Exempt Distributions. On June 30, 2016, amendments to National Instrument 45-106 Prospectus Exemptions and related changes to Companion Policy 45-106 Prospectus Exemptions, (published on April 7, 2016) will come into force. This includes the requirement to use the new Form 45-106F1 Report of Exempt Distribution. However, as of May 24, 2016, the old “paper” form of Report of Exempt Distribution can no longer be used. For private placements completed after May 24, 2016, a “transitional” form of report must be used; for private placements completed after June 30, 2016, the new form of report must be used; and during the “transition period” of the implementation of the Amendments, either the transitional or the new form can be used. Here’s a chart that outlines when each report should (or can) be used.

Distribution Dates under Private Placement Filing deadline Report Required
June 20, 2016 to June 29, 2016 June 30, 2016 Transitional form of report
June 21, 2016 to June 30, 2016 July 1, 2016 Either Transitional or New form of report
June 27, 2016 July 7, 2016 Transitional form of report
June 28, 2016 to July 1, 2016 July 8, 2016 Either Transitional or New form of report
June 30, 2016 to July 8, 2016 July 10, 2016 New form of report
July 4, 2016 July 14, 2016 New form of report
July 5, 2016 to July 14, 2016 July 15, 2016 New form of report

The new form of Report of Exempt Distribution also requires additional information that the old “paper” form (the one that was in place before May 24, 2016) didn’t, and the transitional form doesn’t, require, including:

  • Additional details about the issuer including its size, primary business activity, NAICS industry code and number of employees. Specific details about the prospectus exemptions relied on (both on an aggregate and per investor basis).
  • If a distribution has occurred in Saskatchewan, Ontario, Québec, New Brunswick or Nova Scotia, a listing of the offering materials that are required under the prospectus exemption relied on filed with or delivered to the relevant securities regulatory authority or regulator.
  • Details on compensation provided, including describing the relationship to the issuer.
  • Details on the directors, executive officers and promoters of the issuer.

Please contact your McInnes Cooper lawyer or any member of our McInnes Cooper Corporate Finance and Securities Team to discuss this topic or any other legal issue.

McInnes Cooper has prepared this document for information only; it is not intended to be legal advice.  You should consult McInnes Cooper about your unique circumstances before acting on this information. McInnes Cooper excludes all liability for anything contained in this document and any use you make of it.

© McInnes Cooper, 2016.  All rights reserved.  McInnes Cooper owns the copyright in this document. You may reproduce and distribute this document in its entirety as long as you do not alter the form or the content and you give McInnes Cooper credit for it. You must obtain McInnes Cooper’s consent for any other form of reproduction or distribution. Email us at [email protected] to request our consent.

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