Canada 45-106 Reporting Obligations

by | Wednesday January 24, 2024
Canada 45-106 Reporting Obligations

Raising capital as a company can be an exciting step, but understanding some particularities of the area is not always so easy. One crucial aspect is understanding prospectus requirements, detailed legal documents outlining a security offering.

Regulation 45-106, a game-changer for Canadian companies by offering “exemptions” from this requirement, but it’s not a free pass, it has specific conditions.

Curious? Keep reading and check practical aspects about Canada 45-106 Reporting Obligations.

Introduction

Regulation 45-106, also known as National Instrument 45-106, is a key piece of Canadian securities law that governs exemptions from issuing a prospectus (a detailed legal document) for companies raising capital.

It outlines specific scenarios where companies can offer and sell securities without a prospectus, often referred to as “exemptions.” This streamlines the process for both companies and investors by reducing documentation and administrative burdens.

However, using these exemptions doesn’t mean companies get a free pass. Regulation 45-106 also imposes reporting requirements on companies that utilize these exemptions, typically those raising capital through private placements (selling shares to a limited group of accredited investors). These reports serve two main purposes:

 

  • Transparency: Provide investors and regulators with detailed information about the company and its securities offering, enabling informed investment decisions and ensuring everyone has access to essential facts.

 

  • Investor protection: Uphold a high standard of market integrity by deterring fraud and ensuring investors are treated fairly.

 

Therefore, Regulation 45-106 balances streamlined capital raising with essential investor protection by allowing exemptions under specific conditions but requiring reporting to maintain transparency and safeguard investor interests.

Filing Form 45-106: don’t forget this!

As we talked in the previous section, the National Instrument 45-106 is a securities regulation in Canada that governs prospectus and registration exemptions for issuers and investors. 

In this context, it sets out various exemptions from the prospectus requirement for the issuance and trading of securities, along with specific reporting obligations for companies that rely on these exemptions.

The reporting requirements for companies under Regulation 45-106 primarily apply to issuers who issue securities under specific exemptions, such as the private placement exemptions. The reporting obligations aim to provide investors and regulators with information about the issuers and their securities offerings, ensuring transparency and investor protection.

What is 45-106 filing?  

Summing up, the 45-106 filing is a mandatory reporting process in Canadian securities regulations. It involves submitting a form with detailed information about the issuer, security, exemptions, offering amount, and investors. 

Let’s take a closer look.

  • Form 45-106F1 – Report of Exempt Distribution:
    • Issuers who rely on certain prospectus exemptions (e.g., private placements) to issue securities in Canada must file a Form 45-106F1 – Report of Exempt Distribution.
    • This report must be filed with the applicable securities regulatory authority in each Canadian jurisdiction where the distribution occurred.
    • The Form 45-106F1 contains details about the issuer, the type of security issued, exemptions relied upon, the offering amount, and information about the investors.

Regulation 45-106 Compliance: best practices

Seeking professional assistance to fill out the forms and solve questions about your business and 45-106 is a key aspect and might be considered since the beginning of the process.

It’s crucial for companies and issuers to understand the specific reporting requirements associated with the exemptions used and to ensure timely and accurate filings to meet their regulatory obligations. Compliance with reporting requirements under Regulation 45-106 contributes to maintaining transparency in the Canadian capital markets and supports investor confidence. Companies should seek guidance from legal and financial professionals familiar with Canadian securities regulations to navigate these obligations effectively.

 

Join the All-In-One Platform empowering private capital markets.

Free forever, KoreConX makes it easy for participants in private capital markets to manage their investment portfolios, raise capital, and meet global compliance standards along every step of the way.

left line right line bottom line