The Securities Commission has granted an issuer, which is not a reporting issuer in Canada, relief from the prospectus requirement for the first trade of its securities to Canadian residents. The issuer’s securities are listed on an exchange outside of Canada, and there is no market for the issuer’s securities in Canada. Despite being organized under British Columbia corporate law and having a nominal head office in BC, the issuer has minimal connection to Canada, with no operations conducted in Canada, few Canadian directors or officers, and the majority of its employees and operations located outside of Canada.
The relief is conditional on the issuer providing Canadian securityholders with the same continuous disclosure materials as foreign shareholders. The relief also extends to first trades within a limited group of permitted transferees, such as family members, holding companies, and family trusts, or for specific purposes like corporate restructuring or compensation, provided there is no market for the securities in Canada and none is expected to develop.
The decision is based on the issuer meeting all conditions of section 2.14 of National Instrument 45-102 Resale of Securities except for the ownership cap, which stipulates that residents of Canada must not own more than 10% of the securities of the class. The issuer’s securities are expected to be listed on NASDAQ, and the issuer will not be a reporting issuer in Canada at the time of the trade.
The outcome allows the issuer to trade its securities without a prospectus in Canada, provided the trades occur outside of Canada or to a person or company outside of Canada, and are not control distributions. The issuer must also ensure that no unusual efforts are made to prepare the market or create a demand for the securities, no extraordinary commission or consideration is paid for the trade, and if the seller is an insider or officer of the issuer, they must have no reasonable grounds to believe that the issuer is in default of securities legislation.