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Are private companies subject to securities law?

Are private companies subject to securities law?

Are private companies subject to securities law? 150 150 Jiang Hong Wilkin Business Law

Most people think that securities law applies to the public companies only, and private companies do not need to worry about securities law. This is not correct. In Canada, private companies issuing shares must also comply with securities law. Private companies are exempt from prospectus requirement, if certain conditions are met. For example, there should be share transfer restrictions, shares can only be issued to certain permitted people, non-employee shareholders cannot be more than 50, etc. These exemption conditions have to be evidenced in the legal documents.

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