Raising Money From Investors in Alberta: Private Placements and Prospectus Exemptions

Selling shares to investors generally requires a prospectus, an expensive disclosure document, unless an exemption applies. For most private companies in Alberta, exemptions are the normal route to raising capital.

Common exemptions

The accredited investor exemption lets a company sell securities to investors who meet income or asset tests. There are also exemptions for close friends, family and business associates, and an offering memorandum exemption with its own disclosure and investment limits.

The rules are set nationally in a rule known as National Instrument 45-106 and enforced in Alberta by the Alberta Securities Commission.

Filings and follow-up

Many exempt distributions must be reported to the securities regulator within a short time after closing, often with a filing fee. Companies also need to keep records showing that each investor qualified.

Investors may be restricted from reselling their shares for a period, which should be explained in the documents.

Common mistakes

Advertising the offering to the public, relying on the wrong exemption or failing to file the required report can create liability, including a right for investors to cancel. Getting the paperwork right at the start is far cheaper than repairing it later.

Before you take an investor’s cheque

• Identify which exemption you are relying on and why the investor qualifies.
• Keep the evidence, such as signed accredited investor certificates.
• Diarize any report to the regulator and its filing fee.
• Avoid public advertising of the offering.