More to Offer: Recent Changes to the Offering Memorandum Exemption in Canada

National Instrument 45-106 Prospectus Exemptions ("NI 45-106") provides that certain distributions of securities completed pursuant to an offering memorandum ("OM") are exempt from the general requirement that all distributions of securities be done pursuant to a prospectus. An OM, like a prospectus, constitutes a disclosure document related to a particular distribution of securities. This article provides an overview of OM offerings and compares the requirements of the OM exemption throughout various Canadian jurisdictions in light of certain recent amendments.

History of the Offering Memorandum Exemption Throughout Canada

Historically, there has been a perceived funding gap for small- and medium-sized enterprises that could not afford the high fixed costs of preparing a prospectus, but needed more capital than that available under current prospectus exemptions. The OM exemption was thereby created to permit distributions to a wide variety of potential investors without the large fixed costs of preparing a prospectus.

In all provinces other than Ontario, prospectus-exempt distributions by way of an OM have been possible since as early as 2005.2 However, on October 29, 2015, the securities regulatory authorities in Alberta, New Brunswick, Nova Scotia, Ontario, Québec and Saskatchewan (collectively, the "Participating Jurisdictions") published amendments (the "Amendments") to NI 45-106, which will bring Ontario into the fold and will make certain other changes to the exemption in all Participating Jurisdictions. Subject to the requisite Ministerial approvals, the Amendments come into force in Ontario on January 13, 2016, and in the remaining Participating Jurisdictions on April 30, 2016. The availability of and requirements for an OM offering in jurisdictions other than the Participating Jurisdictions (the "Non-Participating Jurisdictions") will not change upon enactment of the Amendments.

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