Verifying accredited investor status for private placements and exempt-market financings under National Instrument 45-106 — for Canadian issuers raising capital and investors confirming their eligibility.
When a company raises capital privately in Canada without a prospectus, it usually relies on a prospectus exemption — most commonly the accredited investor exemption under National Instrument 45-106. To rely on it safely, the issuer has to take reasonable steps to confirm that each investor actually qualifies. Getting that verification right is what keeps a financing onside; getting it wrong can put the whole raise at risk.
The categories are set out in NI 45-106. For individuals, the most common tests are financial assets (cash and securities, net of related liabilities) of more than $1 million; net income before taxes over $200,000 (or $300,000 combined with a spouse) in each of the last two years, with a reasonable expectation of the same; or net assets of at least $5 million. Various corporations, trusts, and other entities also qualify. The precise category matters, because it drives what paperwork is required.
Individuals qualifying under certain categories must sign the prescribed risk acknowledgement form (Form 45-106F9). Missing or incorrect forms are one of the most common exempt-market compliance gaps — we make sure the right form is used and completed for each investor.
Beyond the exemption, a clean financing needs a proper subscription agreement, an investor questionnaire that actually establishes the exemption relied on, and the representations and closing deliverables that support it. We prepare and review the full package.
After closing, most exempt distributions require a report of exempt distribution (Form 45-106F1) filed in each jurisdiction where investors reside, within the required deadline. We handle the filing and the multi-province variations.
Where US investors take part in a Canadian financing — or the reverse — the Canadian-side exemption analysis has to line up with the US position. We handle the Canadian side and coordinate with US counsel on Regulation D or Regulation S where needed.
The accredited investor exemption is simple in theory and unforgiving in practice. The value is in verifying eligibility properly, using the right forms, and filing on time — so the exemption actually holds if it is ever questioned.
An accredited investor is a person or entity that meets one of the categories in National Instrument 45-106 — for individuals, typically financial assets over $1 million, net income over $200,000 (or $300,000 with a spouse) in each of the last two years, or net assets of at least $5 million. Various corporations, trusts, and institutions also qualify.
The issuer relying on the exemption is responsible for taking reasonable steps to confirm each investor qualifies. In practice that is done through an investor questionnaire and supporting representations. The investor certifies their status, but the issuer needs to be able to show it verified eligibility.
Individuals qualifying under certain accredited investor categories must sign the prescribed risk acknowledgement form (Form 45-106F9). Whether it is required depends on the specific category relied on, which is one of the things we confirm for each investor.
Yes, with the right structure. The Canadian-side exemption still has to be satisfied, and the US-side position (for example Regulation D or Regulation S) has to line up. We handle the Canadian compliance and coordinate with US counsel where needed.
Get the exemption and the verification right the first time. Initial consultations are short and no-cost.
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