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• Assuming you’ve made all the changes, finally deliver prospectus to anyone who asked/anyone we want to sell it to, no section 61 problems, take out red herring, put in price/matters dependent on price, sign underwriting agreement, get receipt for final prospectus which finally gives you right to sell securities, now get ready to close
- Closing is really nothing more than collection of cheques. Want to issue share certificates in these denominations to these people, sign a bunch of doc, deliver cheques, certificates distributed, something occurs, then the company is a reporting issuer under laws of Ontario
- Final prospectus must be delivered to everyone (except to those whose 2 day cooling off period has expired)
o A dealer upon receiving an order or subscription for a security offered in a distribution must send the purchaser a copy of the prospectus before or within two business days of entering into a written confirmation of sale of the security o Further, the purchaser has a two-day cooling off period to change their mind
s.60: Statement of Purchaser rights: Every prospectus shall contain a statement of the rights given to a
purchaser by sections 71 (withdrawal rights) and 130 (right to sue for misrepresentation).
- Section 71 (1) Obligation to deliver prospectus: A dealer not acting as agent of the purchaser who receives an order or subscription for a security offered in a distribution to which subsection 53 (1) or section 62 is applicable shall, unless the dealer has previously done so, send by prepaid mail or deliver to the purchaser the latest prospectus and any amendment to the prospectus filed either before entering into an agreement of purchase and sale resulting from the order or subscription or not later than midnight on the second day, exclusive of Saturdays, Sundays and holidays, after entering into such agreement. R.S.O. 1990, c. S.5, s. 71 (1).
- (2) Withdrawal from purchase (2 day cooling off period): An agreement of purchase and sale referred to in subsection (1) is not binding upon the purchaser, if the dealer from whom the purchaser purchases the security receives written or telegraphic notice evidencing the intention of the purchaser not to be bound by the agreement of purchase and sale not later than midnight on the second day, exclusive of Saturdays, Sundays and holidays, after receipt by the purchaser of the latest prospectus and any amendment to the prospectus.
o NOTE:You want to deliver the prospectus as quickly as possible after entering into the agmt of purchase and sale b/c they have this two day period to change their minds o POLICY: The cooling off period gives purchasers an opportunity to have time with the final prospectus (for every offering, not just IPOs
When does the cooling off period?
- Scenario A: if you agreed to buy 6 days ago and received the prospectus today^Day 3
- Scenario B: if there was a fire 6 days ago, then you agreed to buy 4 days ago, received prospectus today and amendment delivered on 2nd day^Day 4 (b/c that’s when you received info)
- Scenario C: if you agreed to buy 4 days ago, you received prospectus today, but a fire occurs on day two and amendment delivered on day 12 ^Day 14 since buyer has not had 48 hour with all info until Day 12
- Scenario D: if you agree to buy 4 days ago, receive prospectus today, a fire occurs on day 2, amendment delivered on Day 6, a strike occurs on day 12 and amendment delivered on day 16^ Day 8 b/c it is 48 hours after the provision of the latest information – recall can’t give you more than 48 hours so strike is just tough luck
- Scenario E:
o Day 1: Prospectus Delivery; o Day 2: I say I’ll buy and do; o Day 6: fire occurs; o Day 8 : Amendment filed; o ANSWER: On Day 4:1 am bound.
- As long as you’ve had 48 hours with all the information, you are bound.
- Whereas if the fire occurred on day 3, and the amendment comes out on day 6, I’m not bound until Day 8 because I didn’t have all the information until Day 6. ^ it matters WHEN the CHANGE happened, and WHEN I became AWARE of the change
- NP 11-201: allows the prospectus to be delivered electronically if four components are met for satisfactory delivery:
o I) Notice: recipient of document should receive notice that the doc has been or will be sent electronically
o II) Easy Access: recipient should have easy access to the document o III) Evidence that doc has been delivered: deliverer has to have evidence that doc was delivered or otherwise made available to the recipient o IV) Must not be different: the doc received by the recipient must not be different than the doc delivered
- First 3 can be satisfied if informed consent of recipient is obtained, and fourth ^ deliverers are supposed to take proper steps to ensure that the docs arrive at their destination in an unaltered form
- See liability under s.130 (below) = second statutory right
- Closing: If you have to raise $200m, haven’t been able to enter into binding agreements of purchase and sale. Send prospectus, get printed, send copies, collect cheques, then go to company, sign papers, exchange cheques for certificates and close, but that takes a long time (let’s say 3 weeks)
- But company doesn’t stand still for those 3 weeks ^ sign contracts, strike, fire, etc. ^ things can change
If there is a material change in affairs of company b/w final receipt and closing, you have to deliver an amendment ^ positive OR Negative change …But during waiting b/w receipt for prelim and receipt for final, s. 57(1) says you only have to do an amendment for material adverse change (you can for any change, if you want)
- Where a material adverse change occurs after a receipt is obtained for a preliminary prospectus filed in accordance with subsection 53 (1) and before the receipt for the prospectus is obtained or, where a material change occurs after the receipt for the prospectus is obtained but prior to the completion of the distribution under such prospectus, an amendment to such preliminary prospectus or prospectus, as the case may be, shall be filed as soon as practicable and in any event within ten days after the change occurs.
POLICY BEHIND DIFFERENCE:Why would you have to do amendment for MAE during waiting, but positive or negative has to be disclosed?
- During waiting period
o If negative ^ We don’t know if people will read the whole thing again at the final stages, so if something negative happens, want to bring it to your attention
o But if it’s positive, don’t mind b/c it ’ll be picked up in the final prospectus o We’re more worried about negative things than positive things, b/c they can disclose positive if they wish (and probably would to induce sales)
- After receipt for final prospectus
o There is no document IN BETWEEN the final prospectus and the continuous disclosure regime that kicks in AFTER they become a reporting issuer (nothing to keep the file complete during closing) ^ need something to make sure information is always picked up
o B/w receipt and closing, only thing to make sure it’s entirely complete, demand there’s an amendment for positive or negative change Otherwise, there could be a gap.
Distribution can continue for 12 months from date of receipt for the preliminary prospectus. After this period, the prospectus is said to have lapsed (per s.62(1)) and no further distributions of the security can be made without a renewal of the prospectus (per s.62(1.1))
s.62(1) Refiling of prospectus: “lapse date” means, with reference to a security that is being distributed under subsection 53 (1) or this section, the date that is 12 months after the date of the most recent prospectus relating to the security.
(1.1) Same: No distribution of a security to which subsection 53 (1) applies shall continue after the lapse date, unless a new prospectus that complies with this Part is filed and a receipt for the new prospectus is obtained from the Director.
With national filings, there is a principal regulator (main rule for choice of PR is jurisdiction in which issuer’s head office is located). If head office is in a location that isn’t in any of the jurisdictions of potential principal regulators, then it’s the regulator in the jurisdiction with which the issuer has its most substantial connection
o Issuer files prelim prospectus and supporting material with regulator in each province where securities are to be distributed. Issues a decision document if satisfied (the PR), which serves as a receipt for the prelim.
o The non-principal regulators have to use best efforts to advise PR within 5 days if they have any material concerns that would cause them to opt out o If they have no material concerns, indicate on SEDAR filing status screen that they’re ready to receive final prospectus. When comments have been dealt with, principal jurisdiction can issue MRRS decision document that operates as a receipt for the final prospectus on behalf of PR and NPRs that have not opted out
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