Our previous blogs discussed capital-raising for businesses in the agricultural sector. Generally speaking, to raise money by selling shares, a business must either prepare a prospectus or sell shares to a purchaser who qualifies for a prospectus exemption. Preparing a prospectus is an expensive process that is not generally economical unless the business is a public company.
Adding difficulty, only a few prospectus exemptions are available to permit a business to sell shares and even when there is a prospectus exemption, many impose resale restrictions that greatly limit the opportunity for a purchaser to sell the shares after they buy them. Although these laws are complex, they are designed to help protect participants in capital markets.
The Corporate Finance and Securities group at MLT Aikins believes that some agribusiness projects in Alberta could have project characteristics that makes them more suitable for a broader range of investors than current securities laws permit. Securities regulatory authorities grant relief from some securities laws if they determine it would be appropriate to do so and the process to seek exemptive relief is not difficult when an applicant has experienced legal support.
We believe that exemptive relief may be granted by the Alberta securities regulatory authority to permit the resale of shares to a broader set of potential purchasers than would typically be permitted. Our expectations is that having more opportunities to sell an investment in an agribusiness project would make it a more attractive investment opportunity and promote regional economic development.
In particular, we believe exemptive relief could be available allowing purchasers (who originally qualify to acquire shares pursuant to a prospectus exemption) to sell to:
- their own family members;
- other securityholders of the same business; and
- another customer of the business who was not previously a shareholder of the business.
We expect there to be additional criteria for the agribusiness itself to meet to satisfy regulatory authorities that the market for the shares would provide adequate investor protection but still allow greater resale potential than would ordinarily be available. We also believe that greater resale potential will promote demand and regional economic growth.
The nature of the agricultural sector creates unique issues for businesses wanting to raise money. The lawyers in our Agriculture & Food and Corporate Finance & Securities groups have the requisite knowledge of the agricultural sector and securities laws to assist businesses looking to raise money to explore all options and think outside the box to find new solutions.
Note: This article is of a general nature only and is not exhaustive of all possible legal rights or remedies. In addition, laws may change over time and should be interpreted only in the context of particular circumstances such that these materials are not intended to be relied upon or taken as legal advice or opinion. Readers should consult a legal professional for specific advice in any particular situation.