“eligible investor” means:
- (a) a person whose
- (i) net assets, alone or with a spouse, in the case of an individual, exceed $400 000,
- (ii) net income before taxes exceeded $75 000 in each of the 2 most recent calendar years and who reasonably expects to exceed that income level in the current calendar year, or
- (iii) net income before taxes, alone or with a spouse, in the case of an individual, exceeded $125 000 in each of the 2 most recent calendar years and who reasonably expects to exceed that income level in the current calendar year,
- (b) a person of which a majority of the voting securities are beneficially owned by eligible investors or a majority of the directors are eligible investors,
- (c) a general partnership of which all of the partners are eligible investors,
- (d) a limited partnership of which the majority of the general partners are eligible investors,
- (e) a trust or estate in which all of the beneficiaries or a majority of the trustees or executors are eligible investors,
- (f) an accredited investor,
- (g) a person described in section 2.5 of National Instrument 45-106 [Family, friends and business associates], or
- (h) in Manitoba, Northwest Territories, Nunavut, Prince Edward Island and Yukon, a person that has obtained advice regarding the suitability of the investment and, if the person is resident in a jurisdiction of Canada, that advice has been obtained from an eligibility adviser.
(2.1) In Alberta, New Brunswick, Nova Scotia, Ontario, Québec and Saskatchewan the prospectus requirement does not apply to a distribution by an issuer of a security of its own issue to a purchaser if
- (a) the purchaser purchases the security as principal,
- (b) the acquisition cost of all securities acquired by a purchaser who is an individual under this section in the preceding 12 months does not exceed the following amounts:
- (i) in the case of a purchaser that is not an eligible investor, $10 000;
- (ii) in the case of a purchaser that is an eligible investor, $30 000;
- (iii) in the case of a purchaser that is an eligible investor and that received advice from a portfolio manager, investment dealer or exempt market dealer that the investment is suitable, $100 000,
- (c) at the same time or before the purchaser signs the agreement to purchase the security, the issuer
- (i) delivers an offering memorandum to the purchaser in compliance with subsections (5) to (13), and
- (ii) obtains a signed risk acknowledgement from the purchaser in compliance with subsection (15), and
- (d) the security distributed by the issuer is not either of the following:
- (i) a specified derivative;
- (ii) a structured finance product.
A few notes on the cap:
The $30,000 cap only applies to purchasers resident in Alberta, New Brunswick, Nova Scotia, Ontario, Québec and Saskatchewan; the cap only applies to an “individual” person.
The cap does not apply in the following instances:
- 1. The investor is a person other than an individual (whether “eligible” or not) where the entity was not set up for the purpose of making the investment;
- 2. The individual investor is resident in British Columbia, Manitoba, Prince Edward Island, Newfoundland & Labrador (there are restrictions on ineligible);
- 3. An accredited investor;
- 4. A person purchasing under the FFBA exemption; and
- 5. A “minimum amount” subscription.