Securities Law

BCN 2001/02 - Adoption of BC Instrument 45-502 - Cooperative Associations [BCN - Rescinded]

Published Date: 2001-01-19
Related Document(s):

Concurrently Published:

The Commission has adopted BC Instrument (Rule) 45-5021  

1B.C. Reg. 9/2001.

(“BCI 45-502”) and Companion Policy 45-502CP relating to securities issued by cooperative associations to which the Cooperative Association Act, S.B.C. 1999, c. 282  

2The Cooperative Association Act is amended by the Cooperative Association Amendment  Act 2000, which comes into effect on January 31, 2001.

, as amended (the “new CAA”), applies. They will come into effect on January 31, 2001.

Background

The new CAA permits cooperative associations to issue both membership and investment shares. With the introduction of investment shares, which can be issued to non-members as well as members, it was necessary to limit the breadth of the exemption contained in sections 46(h) and 75(a) of the Securities Act. Section 46(h) of the Securities Act was amended to require that securities issued by cooperative associations under the exemption in that section comply with certain prescribed conditions.

BCI 45-502 sets out the prescribed conditions for exemptions for:

  • trades by a cooperative association in membership shares of its own issue, investment shares, securities issued as a dividend, as interest or as a patronage return, and
  • trades between members of a cooperative association.

Discussion of significant comments received

The proposed BC Instrument (Rule) was published for comment on June 2, 2000.3  

3NIN#2000/20. 

During the comment period, which expired on August 1, 2000, the Commission received one written submission. The submission was from the Canadian Co-operative Association BC Region ("CCA-BC"). The CCA-BC was pleased with the way the proposed rule addressed trades in membership shares but was very concerned with the way it addressed trades in investment shares. The CCA-BC thought the rule unduly restrictive in its requirement that cooperatives with more than 50 members would have to issue a prospectus or rely on a generally available exemption, which the CCA-BC believed would be a costly exercise. The CCA-BC proposed three alternatives, which all involved deleting the condition relating to the number of members. The Commission had originally proposed a limit of 50 members in order to parallel the private issuer exemption. However, due to the way in which cooperatives are required to operate under the new CAA, the Commission has decided to increase the number of 50 to 150. The increase would make the exemption available to a further 35 cooperatives in British Columbia, for a total of 190.

The CCA-BC's second alternative was that the Commission eliminate the condition restricting sales under the exemption to persons who have been members for 12 months or since inception. The Commission considers that a purchaser who has not been a member of the cooperative for 12 months or since inception is less likely to be fully informed about the affairs of the cooperative. The third alternative was that an offering memorandum be required. The Commission was concerned to achieve a balancing of the interests of the cooperative sector and the corporate sector and believes that the use of an offering memorandum would upset that balance.

The Commission had requested specific comment regarding the use by cooperatives of a prescribed form of the offering memorandum for generally available exemptions. The CCA-BC did not foresee any difficulties for cooperatives using the prescribed form of the offering memorandum.

Questions

The Commission will be preparing a brochure setting out the salient features of the amendment to section 46(h) and BCI 45-502. Questions relating to BCI 45-502 and Companion Policy 45-502CP may be referred to:

Veronica Armstrong
Senior Policy Advisor
British Columbia Securities Commission
(604) 899-6738
or (800) 373-6393 (in B.C.)
varmstrong@bcsc.bc.ca


DATED at Vancouver, British Columbia, on January 18, 2001.

 

 

       Douglas M. Hyndman
       Chair

Ref: NIN#2000/20
 Securities Act, sections 46(h) and 75(a)

 

This Notice may refer to other documents. These documents can be found at the B.C. Securities Commission public website at www.bcsc.bc.ca in the Commission Documents database or the Historical Documents database.