In response to feedback and to spur investment and provide enhanced flexibility for investors and businesses in Alberta and Saskatchewan, the self-certified investor prospectus exemption has been expanded by the Alberta Securities Commission (ASC) and the Financial and Consumer Affairs Authority of Saskatchewan (FCAA).
The self-certified prospectus exemption allows investors to invest in businesses similarly to accredited investors. To qualify, a self-certified investor must certify that they have specific financial and investment knowledge and they must acknowledge that they understand certain investment considerations and risks. To reduce investment risk, businesses are limited to accepting investments from self-certified investors up to CA$10,000 in any one business and CA$30,000 across multiple businesses in a calendar year.
The ASC and FCAA announced amendments to the self-certified prospectus exemption on July 28, 2022. These amendments permit the sale of securities by a business to self-certified investors and will allow for the resale of securities by a current security holder to a self-certified investor in the same manner as for accredited investors. In addition, the amendments allow businesses to sell their securities to certain qualifying special purpose vehicles (SPVs), in which both accredited investors and self-certified investors participate without being subject to the investment limits that apply when selling securities to other self-certified investors.
The self-certified investor prospectus exemption was initially introduced as a three-year pilot project set to expire on March 31, 2024 (see Dentons’ previously published insight for more details). Introducing the amendments will provide additional opportunities for investors and businesses to raise capital.
A key expansion of the program removes the limits for SPVs, which were initially the same as for an individual investor. In the early stages of a business expansion, SPVs are often considered essential for growth opportunities. Now, the revised exemption provides for greater flexibility and investment opportunities as qualifying SPVs are not subject to the same investment limits as individuals, provided three conditions are met, which are:
- The SPV distributes its securities to self-certified investors in compliance with the exemption;
- Self-certified investors must not have contributed more than 25% of the total funds invested in the SPV in aggregate; and
- Accredited investors and self-certified investors must own all of the interests (direct, indirect, or beneficial) of the SPV, except for the voting securities that are legally required to be owned by directors.
Details of the amended exemption are set out in Multilateral CSA Notice of Amendments to Alberta and Saskatchewan Orders 45-538 Self-Certified Investor Prospectus Exemption available on the websites of the ASC and the FCAA.