A Practical Guide for Issuers and Their Advisors
What Every CEO, CFO, Director, and Professional Advisor Needs to Know About Offering Memorandum Compliance

Understanding the Offering Memorandum Exemption

The offering memorandum exemption under section 2.9 of National Instrument 45-106 is one of the most powerful capital-raising tools available to Canadian issuers. Unlike other prospectus exemptions, it allows you to offer securities to virtually any investor, regardless of their wealth, sophistication, or relationship to your company. The trade-off is straightforward: you must provide investors with a comprehensive disclosure document that meets specific regulatory requirements.

Over the years, securities regulators have identified recurring compliance failures that result in cease trade orders,^[i] enforcement actions, and civil liability. The good news is that most of these problems are entirely preventable. This guide draws on regulatory guidance and enforcement experience to help you understand what can go wrong and, more importantly, how to get it right.

This is not a theoretical exercise. Securities regulators actively review offering memoranda and do not hesitate to cease trade issuers who fail to comply with the requirements. Understanding and following these rules is essential to protecting your capital raise, your company, and your directors.

Who Should Read This Guide

This guide is designed for:

• Chief Executive Officers and Chief Financial Officers overseeing capital raises.
• Directors who will be signing the offering memorandum certificate.
• In-house legal counsel and finance teams.
• Securities lawyers preparing or reviewing offering memoranda.
• Accountants and auditors preparing financial statements for offering memoranda.
• Anyone involved in the preparation, review, or approval of an offering memorandum.

Understanding the Consequences of Non-Compliance

Before examining the technical requirements, it’s important to understand what’s at stake. The consequences of preparing a non-compliant offering memorandum extend well beyond regulatory scrutiny.

Regulatory Remedies

Securities regulators have several enforcement tools at their disposal when they identify a deficient offering memorandum:

• Cease trade orders: Your capital raise stops immediately. You cannot accept additional subscriptions until the deficiency is corrected.^[ii]
• Mandatory amendments: You may be required to prepare and file an amended offering memorandum and deliver it to all existing investors.^[iii]
• Rescission rights: Regulators may require you to grant rescission rights to investors, allowing them to demand their money back.^{[iv], [v]}
• Enforcement proceedings: Serious violations can result in administrative penalties, disgorgement of proceeds, and personal sanctions against directors and officers.^{[vi], [vii]}

Civil Liability and Reputational Risk

Regulatory consequences are only part of the picture. Investors have statutory and contractual rights of action for misrepresentation in an offering memorandum. These rights can be exercised years after the investment was made. Even successfully defending such claims is costly and time-consuming.^{[viii], [ix]}

Beyond the legal and financial costs, consider the reputational damage. Public cease trade orders and enforcement actions become part of the regulatory record. Future investors, lenders, and business partners will discover these issues during their due diligence. The impact on your ability to raise capital in the future can be significant and long-lasting.

The bottom line: compliance is not simply about avoiding regulatory trouble. It’s about protecting your company, your directors, your reputation, and your ability to access capital markets in the future.

The Three Core Requirements

Every compliant offering memorandum must satisfy three fundamental requirements:

1. Correct Form: The offering memorandum must be prepared in accordance with Form 45-106F2 (for non-qualifying issuers) or Form 45-106F3 (for qualifying issuers – issuers listed on a stock exchange like the CSE, TSX or TSX-V).
2. No Misrepresentations: The document must not contain any untrue statements of material fact or omit any material fact necessary to make the statements not misleading.^[x]
3. Sufficient Information: The offering memorandum must provide enough information for a reasonable investor to make an informed investment decision.

These requirements apply continuously. Your offering memorandum must remain compliant from the moment you deliver it to the first prospective investor until you complete your distribution. An offering memorandum that was compliant when first prepared can become non-compliant if circumstances change and you fail to amend it.

Critical Point: Issuer Responsibility

Responsibility for compliance rests solely with the issuer. While your legal counsel and accountants can assist you, when a regulator identifies deficiencies, it is your company that faces the consequences. Directors who sign the certificate are personally certifying compliance. This is why understanding the requirements is essential, not optional.

Common Compliance Failures

Based on extensive regulatory reviews, certain deficiencies appear repeatedly in offering memoranda. The following sections address the most common problems and explain how to avoid them.

Failure to File or Late Filing

The Requirement: Issuers must file a copy of the offering memorandum with securities regulators no later than 10 days after the first distribution under that offering memorandum.

The Problem: Many issuers complete their first closing, focus on managing the incoming capital, and fail to file the offering memorandum within the required timeframe. Some issuers fail to file at all.

Action Step: Establish a Filing System

The moment you accept your first subscription agreement, calendar the filing deadline. Assign responsibility for the filing to a specific individual. File within a few days of the first closing rather than waiting until the deadline approaches. If you prepare an amended offering memorandum, it must be filed when you use it for subsequent distributions.

Failing to Amend When Required

This is one of the most serious and common compliance failures. If your offering memorandum is out of date or contains a misrepresentation or a material change has occured, you cannot legally accept additional subscription agreements until you correct the problem.

When Material Changes Occur

If a material change occurs in your business after you deliver an offering memorandum to a prospective investor, you must provide that investor with an amended offering memorandum before accepting their subscription agreement. Material changes include significant events such as loss of key customers, departure of key management, changes in business strategy, or any other development that a reasonable investor would consider important.

What constitutes “material”? Generally, a change is material if there is a substantial likelihood that a reasonable investor would consider it important in making an investment decision. When in doubt, err on the side of disclosure and amend your offering memorandum. The cost of preparing an amendment is far less than the consequences of failing to do so.

Financial Statement Update Requirements

For ongoing distributions, financial statement requirements create amendment obligations:

• Annual financial statements: No later than 120 days after your financial year-end, you must amend the offering memorandum to include audited annual financial statements for your most recently completed year.
• Interim financial statements: If you are distributing to Ontario residents, you must amend the offering memorandum to include interim financial statements no later than 60 days after the end of your interim period (subject to certain exceptions).

Action Step: Implement Monitoring Procedures

Designate someone to monitor compliance during ongoing distributions. Establish procedures for:

• Identifying potential material changes.
• Tracking financial statement preparation and amendment deadlines.
• Ensuring all persons involved in your distribution understand they must not distribute outdated offering memoranda.
• Halting distributions immediately when amendment is required.

Inadequate Business Description

Generic business descriptions are a recurring problem. An offering memorandum that simply states “The Company operates in the technology sector” or “The Company acquires real estate properties” does not provide sufficient information for an investor to make an informed decision.

Required Disclosure:

• Business operations: Provide specific detail about your products or services, target markets, revenue model, and current stage of operations.
• Competitive landscape: Describe both current competitors and prospective competition. Address competing technologies or alternative approaches. Generic statements that you have no competition are rarely accurate.
• Development status: Explain where you are in your business development. For early-stage companies, describe milestones achieved and next steps. For research and development issuers, detail the resources required to complete product development.
• External factors: Discuss political, regulatory, technological, and economic factors that could significantly affect your business.

Complex Business Structures

If your business involves subsidiaries, joint ventures, or partnerships, you may need to include an organizational chart. If the structure is sufficiently complex that a reasonable investor would have difficulty understanding how the business operates, a visual representation is advisable.

Deficient Use of Funds Disclosure

The Available Funds and Use of Available Funds tables are mandatory disclosure requirements. Securities regulators scrutinize these tables carefully because they directly inform investor decision-making.

Common Errors in Available Funds Table

Error 1: Mischaracterizing “additional sources of funding required.”

This line item is for funding you have already arranged (such as a confirmed credit facility), not anticipated future financings. You cannot include speculative future capital raises in this calculation.

Error 2: Incorrectly stating offering costs as zero.

If you are paying commissions or incurring offering costs, they must be disclosed in the table. You cannot state these costs are zero and then explain in a footnote that they will be paid from general corporate funds. All offering costs must be disclosed in the table as required.

Error 3: Failing to account for working capital deficiency.

If your company has a working capital deficiency, it reduces the funds available for your stated purposes. This must be properly reflected in your calculation.

Common Errors in Use of Funds Table

Error 1: Omitting interest payments or distributions.

A real estate investment fund issues preferred shares with an 8% annual distribution. The fund’s business plan involves acquiring and developing properties, with stabilized cash flow projected in three years. Unless the fund has another source of funding for distributions, you must disclose that 24% of the offering proceeds will be reserved for distribution payments over that three-year period. Failing to disclose this use of funds is a material omission.

Error 2: Using generic descriptions.

Vague statements such as “for purposes of investment in eligible properties” provide no meaningful information to investors. You must provide a detailed breakdown showing specific allocations for capital expenditures, general and administrative expenses, working capital, and other material uses.

Error 3: Not identifying related party payments.

Any payments to related parties, including payments to management companies controlled by insiders, must be specifically identified in the use of funds table. Investors are entitled to know if their investment is being used to compensate related parties.

Action Step: Provide Detailed Breakdown

When completing these tables, consider whether an investor reading your disclosure would understand exactly how their money will be used. If the answer is no, add more specificity.

Insufficient Material Agreement Disclosure

Every material agreement to which your company is a party must be summarized in your offering memorandum. Simply mentioning that an agreement exists, or attaching the full agreement as a schedule, does not satisfy this requirement. You must provide a summary of the key terms.

Key terms include:

• Identity of the parties.
• Subject matter and purpose of the agreement.
• Material obligations of each party.
• Term and termination provisions.
• Financial terms, including pricing and payment obligations.

Related Party Agreements

When disclosing agreements with related parties, you must clearly explain:

• The form and amount of all compensation being paid.
• The services, goods, or other value the company receives in return.
• Whether the arrangement is on market terms.

Stating that an agreement is “available upon request” or “attached hereto” does not replace the requirement to summarize key terms in the body of the offering memorandum.

Incomplete Compensation Disclosure

The compensation table in Item 3.1 of Form 45-106F2 must include all forms of compensation paid to directors, officers, promoters, and related parties:

• Direct salary, fees, and bonuses.
• Compensation paid to professional corporations or holding companies (regardless of whether the individual has received personal distribution).
• Deferred compensation.
• Equity-based compensation (stock options, restricted shares, etc.).
• Benefits and perquisites.
• Anticipated future compensation.

Critical Point: Disclose in the Table

Compensation amounts must be disclosed directly in the table, not merely referenced in footnotes. If you are paying $150,000 to a management company controlled by your CEO, that amount belongs in the compensation table, not just in a footnote directing readers to related party transaction disclosure elsewhere in the offering memorandum.

Generic Management Experience Descriptions

Statements such as “John has over 15 years of experience in the real estate industry” are insufficient. This could describe a property developer, a realtor, a property manager, or many other roles. Investors need specific information to evaluate management’s qualifications.

Required information:

• Specific position titles for the past five years.
• Names of employers or organizations.
• Meaningful descriptions of responsibilities and accomplishments.
• Explanation of how prior experience qualifies them for their current role.

Investors are assessing not only your business but also the team executing your strategy. They deserve clear information about who is managing their investment.

Financial Statement Requirements

Approximately one-third of all offering memorandum deficiencies relate to financial statements. The technical requirements in this area are strict and merit careful attention.

Applicable Accounting Standards

All financial statements included in an offering memorandum must comply with National Instrument 52-107, which generally requires Canadian GAAP applicable to publicly accountable enterprises. In most cases, this means International Financial Reporting Standards (IFRS). You may not use Canadian GAAP for private enterprises for your company’s financial statements, even though you are a private company.

Limited exception: Private enterprise GAAP may be used for certain acquisition statements, but this is a narrow carve-out that does not apply to your company’s own financial statements.

Complete Financial Statements

Each set of financial statements must include all of the following components:

• Statement of financial position.
• Statement of comprehensive income.
• Statement of changes in equity.
• Statement of cash flows.
• All required comparative periods.
• Complete notes to the financial statements.

Omitting any of these components results in incomplete financial statements that do not satisfy the requirements. It does not matter that your company was only incorporated a month ago.

Audit Requirements

Pre-revenue issuers: If you have not completed your first financial year, or if your first year-end is less than 120 days before the offering memorandum date, you must include audited financial statements from inception to a date not more than 90 days before the offering memorandum date.

Established issuers: If you have completed one or more financial years, you must include audited annual financial statements for your most recently completed financial year.

Audit opinion: The auditor’s report must express an unmodified (“clean”) opinion and comply with Canadian auditing standards. Qualified opinions are generally not acceptable, except for very limited circumstances involving inventory.

Notice to Reader Language

Interim financial statements, while not required to be audited, must still comply with applicable Canadian GAAP. A Notice to Reader containing language such as “these financial statements may not be appropriate for their purposes” is prohibited.

It is the issuer’s responsibility to ensure that financial statements included in the offering memorandum are appropriate for the document’s purposes and comply with all requirements. If you lack in-house expertise to prepare IFRS-compliant financial statements, you must engage qualified external professionals.

Action Step: Engage Your Auditor Early

Before commencing preparation of your offering memorandum, discuss with your auditor:

• Timing requirements for audit completion.
• Any issues that might result in a qualified opinion.
• Confirmation that your financial statement preparation process meets IFRS requirements.
• Requirements for interim financial statements if you will be conducting an ongoing distribution.

The Certificate: Personal Accountability

The certificate page is not a formality. When you (or your directors) sign the certificate, you are personally certifying that the offering memorandum “does not contain a misrepresentation.” This certification carries significant legal implications.

Common Certificate Deficiencies

1. Missing signatures: All required signatories must sign the certificate.
2. No date: The certificate must be dated.
3. Incorrect date: The certificate date must match the actual signing date and the offering memorandum cover page date.
4. Pre-dating the audit: The certificate cannot be dated before the audit report. You cannot certify financial statements that have not yet been audited.
5. Back-dating: Never back-date the certificate. This is a serious compliance violation.
6. Incorrect placement: The certificate must appear at the very end of the offering memorandum, after all other content including financial statements.

Action Step: Proper Certificate Process

Before signing the certificate:

• Ensure all signatories have received and reviewed the complete offering memorandum, including all schedules and financial statements.
• Confirm the audit is complete and the audit report is dated.
• Verify that all signatories understand what they are certifying.
• Have all signatories sign on the same date and date the certificate accordingly.

Maintaining Ongoing Compliance

Preparing a compliant offering memorandum is only the beginning. Maintaining compliance throughout your distribution requires active management and ongoing vigilance.

Assign Ownership

Designate a specific individual (typically your Chief Financial Officer or General Counsel) to be responsible for offering memorandum compliance. This person’s responsibilities should include:

• Monitoring for material changes that trigger amendment obligations.
• Tracking financial statement and amendment deadlines.
• Ensuring no outdated offering memoranda are distributed.
• Coordinating with legal counsel and accountants.
• Ensuring all regulatory filing deadlines are met.

Train All Distribution Participants

Everyone involved in distributing your offering memorandum must understand:

• They may only distribute the current version of the offering memorandum.
• They cannot make representations to investors that are not contained in the offering memorandum.
• They must immediately report any information that might constitute a material change.
• All marketing materials must be consistent with offering memorandum disclosure.

Working With Professional Advisors

While professional fees represent a cost, consider them an investment in protecting your capital raise and your company. The cost of regulatory proceedings, cease trade orders, and potential civil liability far exceeds the cost of proper legal and accounting advice.

Minimum Professional Review

Even if you prepare your offering memorandum in-house, at minimum have it reviewed by:

• Securities counsel: To verify compliance with form requirements and identify any legal issues.
• Qualified accountant: To confirm financial statements meet IFRS requirements and use of funds disclosure is appropriate.

Pre-Filing Review Programs

Saskatchewan and New Brunswick offer pre-filing review programs (SK Staff Notice 45-706 and NB Local Staff Notice 45-701). Saskatchewan charges $500 for this service; and New Brunswick $350 (pricing for both is subject to change). Securities commission staff will review your draft offering memorandum and provide comments on how to address any deficiencies before you begin your distribution.

This represents an opportunity to correct problems before they become regulatory issues. If you are resident in either jurisdiction, this service merits serious consideration.

Final Observations

The offering memorandum exemption provides significant flexibility for capital raising. It allows you to access a broad investor base without the time and cost associated with a prospectus offering. However, this flexibility comes with responsibilities.

Compliance is achievable. You need to:

• Understand the requirements thoroughly.
• Take them seriously from the outset.
• Implement systems to maintain compliance throughout your distribution.
• Engage qualified advisors when needed.

The goal is not simply regulatory compliance. The goal is to provide your investors with the disclosure they deserve, protect your company and directors from liability, and establish a foundation for successful future capital raises.

Invest the time to do it properly. The consequences of getting it wrong are too significant to risk shortcuts.

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Resources and References

Key Regulatory Documents

• National Instrument 45-106 Prospectus Exemptions
• Form 45-106F2 Offering Memorandum for Non-Qualifying Issuers (including all instructions)
• Form 45-106F3 Offering Memorandum for Qualifying Issuers
• Companion Policy 45-106CP Prospectus Exemptions (particularly section 3.8)
• CSA Staff Notice 45-309 (Revised) Guidance for Preparing and Filing an Offering Memorandum
• National Instrument 52-107 Accounting Principles and Auditing Standards
• National Instrument 51-102 Continuous Disclosure Obligations (sections 4A.2 and 4A.3 for forward-looking information)
• National Instrument 43-101 Standards of Disclosure for Mineral Projects (mining issuers)
• National Instrument 51-101 Standards of Disclosure for Oil and Gas Activities (oil and gas issuers)

Pre-Filing Review Programs

Saskatchewan: Corporate Finance Branch, Saskatchewan Financial Services Commission (fee: $500)

New Brunswick: Securities Division, Financial and Consumer Services Commission (fee: $350) – New Brunswick Securities Commission  Local Staff Notice 45-701 Voluntary Pre-Filing of Draft Offering Memoranda Under National Instrument 45-106 Prospectus and Registration Exemptions

Starter Checklists

Offering Memorandum Compliance Checklist: This is a starter checklist prepared by Venture Law Corporation. You should prepare your own checklist which reflects your business and current legal requirement applicable to you and your business. Go to HTML Version. Download PDF version.

This guide reflects the law as of November 8, 2025. The date of the revised CSA Staff Notice 45-309. Securities regulation is dated March 8, 2023, and changes over time. Always verify you are using current forms and following current requirements. When in doubt, consult with qualified legal counsel and accountants experienced in securities matters.

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Endnotes:

[i]  Re EnerMerge Inc., 2022 ABASC 133. The Alberta Securities Commission issued a cease trade order prohibiting the purchase or sale of any security of the issuer until the order was revoked or varied on October 13, 2022. The cease trade order was issued as a result of the issuer’s offering memorandum not conforming to the requirements of the offering memorandum exemption in section 2.9 of National Instrument 45-106 and Form 45-106F2.

[ii] ReSol Securities Inc., Re, 2011 ABASC 572. The Alberta Securities Commission issued a cease trade order prohibiting the purchase or sale of any security of the issuer until the order was revoked or varied on November 15, 2011. The order was issued because the issuer failed to update its audited financial statements in its offering memorandum within 120 days of year-end, as required for ongoing distributions.

[iii]  Re Crossroads – DMD Mortgage Investment Corporation, 2015 ABASC 659. The Alberta Securities Commission issued a cease trade order prohibiting the purchase or sale of any security of the issuer until the order was revoked or varied on September 13, 2013. The cease trade order was lifted on April 28, 2015, after the issuer filed a revised offering memorandum correcting the deficiencies and delivered a notice to all security holders identifying the main issues raised by Commission staff during the compliance review, along with a copy of the revised offering memorandum. The issuer was also required to provide an undertaking not to distribute securities under the revised offering memorandum.

[iv] Moore, Wayne. “Kelowna Mtn under commission scrutiny”, Castanet (Nov 25, 2013). The article discusses how, in August 2012, the British Columbia Securities Commission issued a cease trade order against Kelowna Mountain Limited Partnership for failing to prepare and file an offering memorandum in the required form. On October 28, 2013, the issuer provided security holders with a revised offering memorandum that included previously omitted or unclear information and offered to repurchase their investments.

[v] Re McBean, 2024 ABASC 158. The Alberta Securities Commission found that William Jordan McBean breached Alberta securities laws by distributing securities under the offering memorandum exemption while providing offering documents that contained material misrepresentations. These misrepresentations included false statements about his credentials, the structure of the investment fund, and the intended use of investor funds. Instead of establishing legitimate investments, McBean diverted funds for personal use and to repay earlier investors. The Commission concluded that McBean failed to provide the full, true, and plain disclosure required under the offering memorandum exemption, resulting in findings of fraud and fundamental non-compliance. Sanctions included permanent prohibitions from trading in securities or derivatives, acting as a director or officer of any issuer or registrant, engaging in investor relations activities, and acting in any management or consultative capacity in the securities market. McBean was also required to immediately resign from all director and officer positions held.

[vi] Paramount Equity Financial Corporation (Re), 2023 ONCMT 20. The Ontario Capital Markets Tribunal found that the respondents distributed securities to over 500 investors under the offering memorandum exemption, but the offering memoranda contained material misrepresentations regarding the use of proceeds, risk factors, and related-party transactions. Most investor funds were diverted from their stated purposes into higher-risk, undisclosed real estate projects. The Tribunal concluded that the disclosure documents failed to provide full, true, and plain disclosure as required, resulting in findings of fraud, illegal distribution, and fundamental non-compliance with the OM exemption regime. Sanctions included disgorgement of $43.61 million, significant administrative penalties, immediate resignation from all director and officer positions, and permanent prohibitions against acting as a director, officer, registrant, or promoter.

[vii] Re Donald Bergman and others, 2021 BCSECCOM 302. The British Columbia Securities Commission found that All Canadian Investment Corporation and its principal, Donald Bergman, contravened section 50(1)(d) of the Securities Act by providing false and misleading statements in offering memoranda used to raise capital under the offering memorandum exemption. Between January 2016 and October 2018, over $8.2 million was raised from investors through several offering memoranda that represented all mortgage loans held by the corporation were secured and in first or second priority. The Commission determined this representation was inaccurate for a number of mortgages, some of which were unregistered or not in the stated priority, materially misrepresenting the security of the underlying investments to investors. Bergman, as the company’s directing mind, was held personally responsible for authorizing or permitting these breaches. Both parties were permanently banned from participating in British Columbia’s capital markets as registrants or directors, were ordered to disgorge investor funds obtained through the non-compliant offering memoranda, and required to pay administrative penalties totaling $425,000.

[viii] Mattina v. Virtus Capital (2025 ONSC 4082). This class action involved investors in a failed Ontario real estate project, alleging breach of contract, negligence, breach of trust, breach of fiduciary duty, misrepresentation in an offering memorandum, and related statutory and common law violations. The Superior Court approved a settlement under which investors—whose interests had been rendered valueless following an asset sale—will receive 35% equity in the redeveloped and significantly enhanced property, thereby restoring their proportionate ownership interest. The Court found the settlement fair, reasonable, and in the best interests of the class. Deficiencies and disclosure failures in the offering memorandum were central to the pleaded liabilities, including statutory claims under s. 130.1 of the Ontario Securities Act. The action continues among defendants in respect of unresolved crossclaims.

[ix] Moman v Bradley, 2024 ABKB 351.The Alberta Court of King’s Bench dismissed the defendants’ application to strike an investor class action for long delay under Rule 4.33 of the Alberta Rules of Court. The class seeks recovery of approximately $14 million invested with Bridgegate Financial Corporation (“BFC”) and related companies pursuant to an offering memorandum. The funds were to be used exclusively for the development of a resort community; however, of the $33 million raised, only about half was used for the purpose stated in the offering memorandum.

[x] Ghani, 2024 ABASC 48. The Alberta Securities Commission found that the respondents breached section 93 of the Securities Act (Alberta) by perpetrating fraud on investors who subscribed for trust units under the offering memorandum exemption. Between August 2013 and May 2014, over $4.25 million was raised from more than 200 investors through an offering memorandum filed with the ASC. Investor funds were to be used solely for acquiring and developing the Summerside Plaza project; instead, the ASC found that approximately $1.8 million of sale proceeds were misappropriated for the benefit of the respondents, including payments unrelated to the project. Investors did not receive their principal or promised returns. The respondents were permanently banned from participating in Alberta’s capital markets, including trading, advising, promoting, and holding positions as directors, officers, or registrants. They were ordered to jointly and severally disgorge more than $3.43 million obtained from investors in breach of securities laws, to pay an administrative penalty of $325,000, and to cover investigation and hearing costs totaling $173,983.