Notice of Use of Proceeds 45-106F16 and the Offering Memorandum Exemption
What is Form 45‑106F16 & Why It’s Required
Form 45‑106F16 is the Notice of Use of Proceeds that non‑reporting issuers relying on the Offering Memorandum (OM) exemption under NI 45‑106 section 2.9 must file annually along with their audited financial statements (per subsection 2.9(17.19))(OSC).
It provides investors and regulators with a clear, structured breakdown of how capital raised under the OM exemption during the financial year was used, including selling commissions, offering costs, principal uses identified in the OM, and what remains unused(FCNB).
How to Complete Form 45‑106F16
Header & Dates
- Insert issuer name.
- State “For the financial year ended [YYYY‑MM‑DD]”.
- Use a notice date no earlier than the date of the auditor’s report for that year(Financial and Consumer Affairs Authority).
Table, Section 1: Opening Proceeds
(A) Closing unused proceeds from your prior year’s Notice (Line E from last year), or $0 if none.
(B) Total gross proceeds raised in Canada under OM exemption (or all exemptions, if mixed) in the year.
(C) Sum of A + B.
Section 2: Proceeds Used During Year
Provide a detailed breakdown:
- Commissions/fees paid to dealers or brokers
- Offering costs
- Uses identified in the OM
- Any other principal uses
Sum to obtain (D) total used proceeds (must equal actual proceeds used)(FCNB).
Section 3: Closing Unused Proceeds
(E) = (C) − (D).
Related‑Party Payments Disclosure
At the end of the table, if any proceeds (directly or indirectly) were paid to a related party (as defined in Instruction A.6 of Form 45‑106F2), you must:
- Name the related party
- State their relationship to the issuer
- Provide the amount paid to them(Financial and Consumer Affairs Authority).
Instructions Guidance
- Explain any indirect payments (e.g. debt repayments used to settle related‑party obligations)(FCNB).
- If Line C is nil, no filing is needed for the year(Financial and Consumer Affairs Authority).
Why Form 45‑106F16 Is Required: Relevant NI Provisions
- NI 45‑106 subsection 2.9(17.19) mandates that audited financial statements “must be accompanied by a notice … disclosing in reasonable detail the use of the aggregate gross proceeds … in accordance with Form 45‑106F16”(OSC).
- Together with subsection 2.9(17.5) (audited statements within 120 days) and 2.9(17.21) (annual obligations until the issuer becomes a reporting issuer or ceases operations) the rules form the core of ongoing OM‑exemption disclosure(OSC).
Transparency on use of funds and any payments to insiders or related parties is critical to investor protection, control of conflicts, and regulatory oversight.
Example Application: Related Party Disclosure Requirement
Illustrative Example:
| Related Party Name | Relationship to Issuer | Amount Paid |
|---|---|---|
| XYZ Funding Corp. | Common‑control entity (same directors) | $250,000 |
| Jane Doe | CFO of the issuer | $30,000 |
In this scenario:
- XYZ Funding Corp. received proceeds to repay a loan it extended earlier (indirect payment).
- Jane Doe, as CFO, received a consulting/staffing fee directly from offering proceeds.
Under Form F16 instructions, both must be identified with their relationship and amounts paid. Even indirect payments (e.g. debt repayment) count, per instructions(FCNB, Financial and Consumer Affairs Authority, ASC).
Summary Guidance
- Form 45‑106F16 is a mandatory disclosure tool for OM‑exemption issuers in Ontario (and specified provinces), tied to the audited annual financial statement filing.
- It breaks out capital raised, funds used, and closing balances.
- Critical to include related‑party payments with full identification.
- The requirement traces to NI 45‑106 subsections 2.9(17.5), 2.9(17.19), and 2.9(17.21).
Filing Form 45‑106F16 accurately and on time helps maintain compliance, supports investor confidence, and avoids regulatory default status.
