Restricted Period | Practical Law

Restricted Period | Practical Law

Restricted Period

Restricted Period

Practical Law Canada Glossary 7-575-5269 (Approx. 3 pages)

Glossary

Restricted Period

The period under section 2.5 of National Instrument 45-102 — Resale of Securities (NI 45-102) during which a trade of securities purchased under specified exemptions from the prospectus requirement of Applicable Securities Laws in Canada, will be a distribution unless these conditions are met:
  • The issuer is and has been a reporting issuer in a jurisdiction of Canada for the four months immediately preceding the trade.
  • At least four months have elapsed from the distribution date.
  • If the distribution date is on or after March 30, 2004, or, in Québec, on or after September 14, 2005, and either of the following apply:
    • if the issuer was a reporting issuer on the distribution date, the certificate representing the security, if any, carries a legend stating:
      “Unless permitted under securities legislation, the holder of this security must not trade the security before [insert the date that is 4 months and a day after the distribution date]"; or
    • if the issuer was not a reporting issuer on the distribution date, the certificate representing the security, if any, carries a legend stating:
      “Unless permitted under securities legislation, the holder of this security must not trade the security before the date that is 4 months and a day after the later of (i) [insert the distribution date], and (ii) the date the issuer became a reporting issuer in any province or territory.”
  • If the security is entered into a direct registration or other electronic book-entry system, or if the purchaser did not directly receive a certificate representing the security, the purchaser received written notice containing the legend restriction notation set out in the applicable preceding sub-bullet.
  • The conditions in the preceding two bullets do not apply to an underlying security if the underlying security is issued at least four months after the later of
    • the distribution date; and
    • the date the issuer became a reporting issuer in any jurisdiction of Canada.
  • The trade is not a control distribution.
  • No unusual effort is made to prepare the market or to create a demand for the security that is the subject of the trade.
  • No extraordinary commission or consideration is paid to a person or company in respect of the trade.
  • If the selling security holder is an insider or officer of the issuer, the selling security holder has no reasonable grounds to believe that the issuer is in default of securities legislation.
If these conditions are not met, it could still be possible to trade the securities under another exemption from the prospectus requirements of Applicable Securities Laws.