Do you need to do a SEDAR filing every month when issuing shares under a DRIP or other Reinvestment Plan?

Do you need to do a SEDAR filing every month when issuing shares under a DRIP or other Reinvestment Plan?

Short Answer: NO so long as you meet the requirements below.

National Instrument Policy 45-106 says:  (note a Mortgage Investment Corporation, a MIC, is not an ‘Investment Fund’)

Reinvestment Plans

2.2 (1) Subject to subsections (3), (4) and (5), the prospectus requirement does not apply to the following distributions by an issuer, or by a trustee, custodian or administrator acting for or on behalf of the issuer, to a security holder of the issuer if the distributions are permitted by a plan of the issuer:

(a) a distribution of a security of the issuer’s own issue if a dividend or distribution out of earnings, surplus, capital or other sources payable in respect of the issuer’s securities is applied to the purchase of the security, and

(b) subject to subsection (2), a distribution of a security of the issuer’s own issue if the security holder makes an optional cash payment to purchase the security of the issuer that trades on a marketplace.

(2) Subsection (1) does not apply unless the aggregate number of securities issued under the optional cash payment referred to in subsection (1)(b) does not exceed, in the financial year of the issuer during which the distribution takes place, 2% of the issued and outstanding securities of the class to which the plan relates as at the beginning of the financial year.

(3) A plan that permits a distribution described in subsection (1)(a) or (b) must be available to every security holder in Canada to which the dividend or distribution out of earnings, surplus, capital or other sources is available.

(4) Subsection (1) does not apply to a distribution of a security of an investment fund.

(5) If the security distributed under a plan described in subsection (1) is of a different class or series than the class or series of the security to which the dividend or distribution is attributable, the issuer or the trustee, custodian or administrator must have provided to each participant that is eligible to receive a security under the plan either a description of the material attributes and characteristics of the security distributed under the plan or notice of a source from which the participant can obtain the information without charge.

Dividends and Distributions

2.31 (1) The prospectus requirement does not apply to a distribution by an issuer of a security of its own issue to a security holder of the issuer as a dividend or distribution out of earnings, surplus, capital or other sources.

(2) The prospectus requirement does not apply to a distribution by an issuer to a security holder of the issuer of a security of a reporting issuer as an in specie dividend or distribution out of earnings or surplus.

Reporting Requirements

Report of exempt distribution 6.1 (1) Subject to subsection (2) and section 6.2 [When report not required], issuers that distribute their own securities and underwriters that distribute securities they acquired under section 2.33 must file a completed report if they make the distribution under one or more of the following exemptions:

(a) section 2.3 [Accredited investor] or, in Ontario, section 73.3 of the Securities Act (Ontario) [Accredited investor];

(b) section 2.5 [Family, friends and business associates];

(c) subsection 2.9 (1), (2) or (2.1) [Offering memorandum];

(d) section 2.10 [Minimum amount investment];

(e) section 2.12 [Asset acquisition];

(f) section 2.13 [Petroleum, natural gas and mining properties];

(g) section 2.14 [Securities for debt];

(h) section 2.19 [Additional investment in investment funds];

(i) section 2.30 [Isolated distribution by issuer];

(j) section 5.2 [TSX Venture Exchange offering];

(k) section 5A.2 [Listed issuer financing exemption].

(2) The issuer or underwriter must file the report in the jurisdiction where the distribution takes place no later than 10 days after the distribution.

When report not required

6.2 (1) An issuer is not required to file a report under section 6.1(1)(a) [Report of exempt distribution] for a distribution of a debt security of its own issue or, concurrently with the distribution of the debt security, an equity security of its own issue, to a Canadian financial institution or a Schedule III bank.

(2) An investment fund is not required to file a report under section 6.1 [Report of exempt distribution] for a distribution under section 2.3 [Accredited investor], section 2.10 [Minimum amount investment] or section 2.19 [Additional investment in investment funds], or section 73.3 of the Securities Act (Ontario) [Accredited investor], if the investment fund files the report not later than 30 days after the end of the calendar year.

(3) An issuer or underwriter is not required to file a report under section 6.1 for a distribution of a security if a report has been filed by another issuer or underwriter for the distribution of the same security.

Required form of report of exempt distribution

6.3 (1) The required form of report under section 6.1 [Report of exempt distribution] is Form 45-106FI.

(2) Except in Manitoba, an issuer that makes a distribution under an exemption from a prospectus requirement not provided for in this Instrument is exempt from the requirements in securities legislation to file a report of exempt trade or exempt distribution in the required form if the issuer files a report of exempt distribution in accordance with Form 45-106F1.

Required form of offering memorandum

6.4 (1) The required form of offering memorandum under section 2.9 [Offering memorandum] is Form 45-106F2.

(2) Despite subsection (1), a qualifying issuer may prepare an offering memorandum in accordance with Form 45-106F3.

(3) Despite subsections (1) and (2), an offering memorandum for the distribution of a syndicated mortgage under section 2.9 [Offering memorandum] must be prepared in accordance with Form 45-106F2 and Form 45-106F18.

(4) An issuer that is engaged in real estate activities must supplement its offering memorandum with Schedule 1 of Form 45-106F2 Offering Memorandum for Non-Qualifying Issuers, unless the offering memorandum is prepared under subsection (2).

(5) An issuer that is a collective investment vehicle must supplement its offering memorandum with Schedule 2 of Form 45-106F2 Offering Memorandum for Non-Qualifying Issuers, unless the offering memorandum is prepared under subsection (2).

Required form of risk acknowledgement

6.5 (0.1) The required form of risk acknowledgement under subsection 2.3(6) [Accredited investor] is Form 45-106F9.

(1) The required form of risk acknowledgement under subsection 2.9(15) [Offering memorandum] is Form 45-106F4.

(1.1) In Alberta, New Brunswick, Nova Scotia, Ontario, Québec and Saskatchewan, the required form of risk acknowledgement for individual investors includes Schedule 1 Classification of Investors Under the Offering Memorandum Exemption and Schedule 2 Investment Limits for Investors Under the Offering Memorandum Exemption to Form 45-106F4.

(2) In Saskatchewan, the required form of risk acknowledgement under section 2.6 [Family, friends and business associates – Saskatchewan] is Form 45-106F5.

(3) In Ontario, the required form of risk acknowledgement under section 2.6.1 [Family, friends and business associates] is Form 45-106F12.

Under the National Instrument 45-106 Companion Policy:

Reinvestment Plans

3.4.1 (1)When is a plan administrator acting “for or on behalf of the issuer”?

Section 2.2 of NI 45-106 contains a prospectus exemption for distributions of securities by a trustee, custodian or administrator acting for or on behalf of the issuer. If the trustee, custodian or administrator is engaged by the issuer, the plan administrator acts “for or on behalf of the issuer” and therefore falls within the language contained in section 2.2(1). The fact that the plan administrator may act on or in accordance with instructions of a plan participant, under the plan, does not preclude the administrator from relying on the exemption contained in section 2.2 of NI 45-106.

(2) Providing a description of material attributes and characteristics of securities

The reinvestment plan exemption in section 2.2(5) of NI 45-106 includes a requirement, effective September 28, 2009, that if the securities distributed under a reinvestment plan are of a different class or series than the securities to which the dividend or distribution is attributable, the issuer or plan agent must have provided the plan participants with a description of the material attributes and characteristics of the securities being distributed. An issuer or plan agent with an existing reinvestment plan can satisfy this requirement in a number of ways. If plan participants have previously signed a plan agreement or received a copy of a reinvestment plan that included this information, the issuer or plan agent does not need to take any further action for current plan participants. (Future participants should receive the same type of information before their first trade of a security under the plan.)

If plan participants have not received this information in the past, the issuer or plan agent can provide the required information or a reference to a website where the information is available with other materials sent to holders of that class of securities, for example with proxy materials.

(3) Interest payments The exemption in section 2.2 of NI 45-106 may be available where a person invests interest payable on debentures or other similar securities into other securities of the issuer. The words “distributions out of earnings…or other sources” cover interest payable on debentures.

Does the exemption referred to in paragraph (b) trigger a reporting requirement? (Reports of exempt distribution are required for distributions made in reliance on the prospectus exemptions listed in section 6.1 of NI 45- 106, Multilateral Instrument 45-108 Crowdfunding and certain local rules and orders.)

Read More: Do MICs need to file an exempt distribution report for shares issued under a DRIP?