In British Columbia, the Securities Act and the rules adopted by the British Columbia Securities Commission (“BCSC”) impose a number of obligations on corporations. One of the main objectives of the Securities Act and the BCSC is to protect investors when they invest in “securities”, such as shares of a corporation.
Many private corporations are surprised to learn that the Securities Act and the BCSC’s rules apply to them when they issue shares and other securities to investors. The rules apply to small private corporations, not just publicly listed companies. When issuing shares, a corporation has to provide an investor with a “prospectus” unless the corporation can rely on an exemption from this requirement. A prospectus is a disclosure document that describes the business, securities and management of the issuer in detail such that an investor has “full, true and plain disclosure of all material facts relating to the securities offered”.
The process of preparing and filing a prospectus is costly and time consuming and results in continuous disclosure obligations on the corporation. Therefore, most small corporations rely on exemptions from the prospectus requirement when issuing shares. Please see the article entitled “Selling Shares to Investors: Exemptions from the Prospectus Requirement” for more information on selling shares to private investors. Issuers that issue securities pursuant to a prospectus exemption comprise what is referred to as the “exempt market”.
In addition to the prospectus requirement, securities regulations include the following (amongst other things):
- the registration provisions, which require those in the investment industry, including participants in the exempt market, to abide by certain standards;
- the continuous disclosure provisions, which require issuers that have offered securities to the public to disclose information that will assist investors in making investment decisions; and
- the take-over bid provisions, which require fair treatment of shareholders in take-over bids.
For more information on how the registration rules may apply to you, see the article entitled “Expanded Registration Rules Apply to Many Private Corporations”.
How Pushor Mitchell Can Help
Andrew Brunton is a business and securities lawyer at Pushor Mitchell LLP. You can reach Andrew at 250-869-1135. Our office offers a wide range of legal services to start-up and growth companies. For more information, please visit pushormitchell.com.
