This document is intended to be a general summary of the law. The reader should not rely on this document to trade securities. Prior to selling securities the reader should obtain and review the full text of the law and obtain professional advice.
In some cases there will be restrictions on a purchaser's ability to resell the security.
A security can be a share, stock, bond, partnership unit and includes most products where the purchaser invests money with an expectation of a return on investment.
The Securities Act requires securities to be traded using the services of a person who is registered with the Commission and a prospectus. However, the Act, regulations and rules set out ways a business can raise money through the sale of securities without the need for a prospectus and a registered dealer. These ways of selling securities are referred to as exemptions from the registration and prospectus requirements.
In order to qualify for an exemption it is important that you follow each and every requirement. For this reason we strongly urge anyone who plans on selling securities using an exemption to obtain professional advice before approaching any potential investors. It may be an offence under The Securities Act to trade in securities without complying with an exemption, unless the trade is made by a registered dealer using a prospectus.
Do not begin contacting people to invest until you are sure you have complied with the requirements of an exemption. In some cases the Commission must receive notice before you can start approaching potential purchasers.
There are exemptions available in most of Canada ("A" below), as well as exemptions that are only available in Manitoba ("B" below):
A. The following are some commonly used exemptions available in all Canadian jurisdictions under Multilateral Instrument 45-106:
Part 2 of National Instrument 45-106 (MI 45-106) permits securities to be sold:
- to an Accredited Investor (section 2.3)
- by a Private Issuer (section 2.4)
- to family, friends and business associates (section 2.5)
- by using an Offering Memorandum
Part 6 of National Instrument 45-106 sets out when there are requirements to file forms with the Commission.
There is a filing fee of $25 paid to the Commission to file a report of an exempt trade (Form 45-106 F1). There is a filing fee of $650 to be paid to the Commission to file an Offering Memorandum (Form 45-106 F2 or 45-106 F3).
National Instrument 45-106 also provides for other exemptions in specific circumstances. Each of these exempt offerings have specific requirements and specific limits about who can purchase the securities using each exemption.
A copy of Multilateral Instrument 45-106 (MI 45-106) and the policy describing it can be obtained at the following link:
http://www.msc.gov.mb.ca/securities/policies_legislation/rules/index.php
B. The following four exemptions are available in Manitoba only:
1. Section 91(a) Regulation
A sale of securities is permitted to a specific group of purchasers. These purchasers either have knowledge of the business they are investing in or have received professional advice about the investment. This exemption is suited for a new or developing business and can only be used once.
This exemption is generally used by a new business or a private company that changes its articles of incorporation to be able to offer securities to the public.
What document is to be used to offer the securities for sale?
No specific type of offering document is required. Information provided to a purchaser cannot be misleading.
Who can purchase?
Related purchasers and/or no more than 15 informed purchasers
How long can I sell securities
using this exemption?
Securities can be sold for a maximum of 180 days following the date a Notice (Form 23) is filed with the Commission. The exemption can only be used once.
At the start of the offering:
A Notice of Intention to Trade in Securities (Form 23 of regulations) is filed with the Commission to start the offering of securities.
At the end of the offering (no later than 15 days after the end of the 180 day offering):
(a) a report describing what was sold (Form 27 of the regulations) and
(b) a declaration from each purchaser (Form 24 of the regulations).
What fees are paid?
There is a $650 fee to file the Form 23 Notice of Intention to Trade.
Link to law: http://web2.gov.mb.ca/laws/regs/pdf/s050-491.88r.pdf
2. Section 91(b) Regulation
A sale of securities is permitted to a specified type of purchaser using an offering memorandum. An offering memorandum provides the potential investor with information required to make an investment decision. An offering memorandum is not reviewed by the Commission.
This exemption is generally used by businesses that are not in a position to issue a prospectus, but have been in operation and have developed a business history.
What document is to be used to offer the securities for sale?
An offering memorandum is required. The contents of the offering memorandum are set out in Form 26 of the Regulations. Any information provided to a purchaser cannot be misleading.
Who can purchase?
Related purchasers
Up to 50 Sophisticated purchasers
How long can I sell securities using this exemption?
Securities can be sold for a maximum of 180 days following the date a Notice (Form 23) is filed with the Commission. The exemption can be used more than once, but there must be at least 180 days between each offering of securities.
What documents need to be filed with the Commission?
At the start of the offering:
A Notice of Intention to Trade in Securities (Form 23 of regulations)
is filed with the Commission to start the offering of securities.
At the end of the offering (no later than 15 days after the end of the offering):
a report describing what was sold (Form 27 of the regulations) and
a declaration from each purchaser (Form 25 of the regulations).
The offering memorandum must also be filed with the Commission.
What fees are paid?
There is a $650 fee to file the Notice (Form 23).
Link to law: http://web2.gov.mb.ca/laws/regs/pdf/s050-491.88r.pdf
