In Quebec, the concept of “closed issuer” was introduced through an amendment to the Quebec Securities Act and the adoption of Regulation 45-106. Henceforth, any person or entity, including a corporation, is subject to new standards when offering securities—including the issuance and transfer of shares—under Regulation 45-106.
Thus, a Quebec company is considered a “closed issuer” if it limits itself to 50 investors (excluding employees) and if its securities are subject to restrictions on raising capital, or if any holder wishing to transfer shares already acquired is, or was, subject to resale restrictions (the investor cannot resell them to just anyone).
If it fails to meet certain criteria established by these new rules, a provincial corporation that wishes to issue shares or other securities, or any holder wishing to transfer their shares, will be subject to the dual and costly obligation of preparing a prospectus and registering as a broker with the Autorité des marchés financiers. Currently, the exemption from registration as a broker has been eliminated with respect to the application of Regulation 45-106. Consequently, every transaction involving shares or other securities conducted by a corporation must now be validated in accordance with Regulation 45-106.