Canpro Decorating Products Cooperative



Multilateral Instrument 11-102 Passport System and National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions – relief from prospectus requirements in connection with the issuance, from time to time, of membership shares of a federally incorporated cooperative. The cooperative could not rely on the prospectus exemption in the Securities Act (Ontario).

Applicable Legislative Provisions

Securities Act, R.S.O. 1990, c. S.5, as am., ss. 53, s. 74.


Re Canpro Decorating Products Cooperative, 2019 ABASC 120

July 26, 2019

(the Jurisdictions)




(the Filer)



The securities regulatory authority or regulator in each of the Jurisdictions (the Decision Maker) has received an application from the Filer for a decision under the securities legislation of the Jurisdictions (the Legislation) that the prospectus requirement contained in the Legislation (the Prospectus Requirement) shall not apply to the issuance, from time to time, of membership shares of the Filer (Membership Shares) to Prospective Members (as defined below) or to the first trade of such shares by a Member (as defined below) to the Filer (the Exemption Sought).

Under the Process for Exemptive Relief Applications in Multiple Jurisdictions (for a dual application):

(a)           the Alberta Securities Commission is the principal regulator for this application;

(b)           the Filer has provided notice that subsection 4.7(1) of Multilateral Instrument 11‑102 Passport System (MI 11-102) is intended to be relied upon in British Columbia, Saskatchewan, Manitoba, New Brunswick, Prince Edward Island, Nova Scotia, Newfoundland and Labrador, Yukon, Northwest Territories, and Nunavut; and

(c)           this decision is the decision of the principal regulator and evidences the decision of the securities regulatory authority or regulator in Ontario.


Terms defined in NI 14-101 Definitions, MI 11-102 or the Canada Cooperatives Act (G.C.1998, c.1) (the CCA) have the same meanings if used in this decision, unless otherwise defined.


This decision is based on the following facts represented by the Filer:

1.             The Filer is incorporated under the CCA.

2.             The Filer was created to provide independent paint and decorating suppliers in all provinces and territories of Canada, who meet the Filer’s Eligibility Criteria (defined below) (the Members), with the opportunity to participate with other Members in the coordinated bulk purchase of paint, decorations, and supplies to leverage a collective buying power for commercially favourable and competitive prices.

3.             The authorized capital of the Filer consists of an unlimited number of Membership Shares. The Membership Shares will have voting rights and will entitle the holders of such shares to a right to share in the distribution of assets of the Filer upon its dissolution.

4.             Each Membership Share will be issued, purchased, redeemed or otherwise acquired at a fixed price of $1000. There is a limit of one Membership Share per Member.

5.             As set out in the by-laws of the Filer, the transfer of Membership Shares is restricted except for the transfer by a Member to the Filer upon termination of the Membership Subscription Agreement (defined below).

6.             The Filer will not issue investment shares.

7.             In accordance with the requirements of the CCA, the Filer will have a fixed place of business in more than one province and will thus establish offices in two jurisdictions, namely, in Edmonton, Alberta and in Sudbury, Ontario. The registered and head office of the Filer is located in Edmonton.

8.             In compliance with the applicable provisions of the CCA, the Filer will hold annual meetings of Members.

9.             The Filer is not, and has no present intention of becoming, a reporting issuer in any of the provinces or territories of Canada.

10.          There is no market for the Membership Shares and the Membership Shares are not traded on any marketplace as defined in National Instrument 21-101 Marketplace Operation.

11.          The Filer has no present intention of listing the Membership Shares on any stock exchange or market.

12.          The business of the Filer is restricted in its articles of continuance to the wholesale trade of decorating products and all ancillary matters related to same on behalf of its Members.

13.          Each Member shall be entitled to order decorating, paint and related products through the Filer at the prices the Filer can negotiate for such supplies and the Filer will pass along cost savings to its Members. Membership in the Filer does not impose restrictions or requirements on how Members operate their paint and decoration retail stores.

14.          There is no minimum or maximum amount of products that a Member may order through the Filer, either in a single order or over any time period. The purpose of the Filer is to negotiate reduced prices of products on behalf of Members and to pass this reduced price on to the Members. Therefore, the Filer is not re-selling the products to the Members, it is simply allowing the cost savings to flow directly to the Members.

15.          The Filer’s operating expenses are funded by: (i) a onetime initiation fee, as set from time to time by the board of directors; (ii) monthly membership fees, as set from time to time by the board of directors; and (iii) interest earned on the proceeds from the sale of Membership Shares, the initiation fee and any deposits being held by the Filer.

16.          To be eligible for membership in the Filer, each person or company shall: (i) be actively engaged in the retail business of selling decorating products in Canada; (ii) have submitted a fully executed Membership Subscription Agreement (as defined below) to the Filer; and (iii) meet the financial and credit criteria as determined by the board of directors of the Filer (collectively, the Eligibility Criteria, and any person or company meeting the Eligibility Criteria, other than a Member, is a Prospective Member).

17.          In conjunction with meeting the Eligibility Criteria, each Prospective Member will be required to execute a subscription agreement (Membership Subscription Agreement) with the Filer in order to subscribe for a Membership Share. The Prospective Member must then provide payment to the Filer in the amount of $1,000 for the Membership Share as well as an initiation fee (the Initiation Fee) at a price determined from time to time by the board of directors of the Filer. Upon the Filer receiving an executed Membership Subscription Agreement and the requisite funds, the Prospective Member will become a Member.

18.          Each Prospective Member will receive a document disclosing the following:

(a)           the business operations of the Filer;

(b)           the objectives and operations of the Filer;

(c)           the working capital requirements;

(d)           the basis for determination of the purchase price of the Membership Shares and the Initiation Fee;

(e)           the membership solicitation to be undertaken;

(f)            the description of officers and directors of the Filer;

(g)           the compensation of officers and directors of the Filer;

(h)           conflicts of interest between the Filer and any of its officers and directors;

(i)            restrictions on the transfer of Shares;

(j)            description of the Contractual Right of Action and Right of Withdrawal (each as defined below);

(k)           a description of any exemptive relief granted in respect of the securities of the Filer; and

(l)            risks associated with membership, including risk factors indicating there can be no assurance of the ability of the Filer to receive preferred pricing on products.

(the Disclosure Document).

19.          The Disclosure Document will also have attached the articles of continuance and by-laws of the Filer, a copy of the Membership Subscription Agreement and a copy of the Filer’s most recent audited annual financial statements.

20.          In addition to the Disclosure Document and its attachments, each Prospective Member will receive a certificate signed by the Chief Executive Officer and Chief Financial Officer of the Filer (or, alternatively, the President and Treasurer of the Filer) stating that the Disclosure Document contains no untrue statement of a material fact and does not omit to state a material fact that is required to be stated or omit to state a material fact that is necessary to make a statement not misleading in light of the circumstances in which it was made (the Certificate).

21.          Each Prospective Member will also receive, and must sign, a risk acknowledgment form substantially similar to Form 45-106F4 Risk Acknowledgement (the Risk Acknowledgement Form).

22.          Each Prospective Member will be provided with a contractual right of action against the Filer with respect to any misrepresentation contained in the Disclosure Document (the Contractual Right of Action) provided to the Member upon entering into the Membership Subscription Agreement. The Disclosure Document will contain a description of the Contractual Right of Action and a statement that the Contractual Right of Action is in addition to any other right or remedy available at law to the Member.

23.          Each Member or Prospective Member will be provided with the right to withdraw from their subscription commitment within two business days of signing the Membership Subscription Agreement (the Right of Withdrawal).

24.          Each Member will receive a certificate representing a Membership Share. The certificate will state that the Membership Share is subject to restrictions as contained in the Filer’s by-laws and the relevant Membership Subscription Agreement, including restrictions on transfers.

25.          The Filer will provide Members with reports of any material change in the business of the Filer in a timely manner and will send Members updated versions of the Disclosure Document on an annual basis.

26.          The Filer will send each Member a copy of its audited annual financial statements in accordance with section 247 of the CCA, and a proxy circular and form of proxy in respect of the annual meeting of Members in accordance with section 166 of the CCA.

27.          At each annual meeting of Members, the Filer will provide Members with a review of the operating results of the Filer and the opportunity to ask questions of management of the Filer.

28.          No Prospective Member of the Filer is expected at the time it acquires a Membership Share to be an "accredited investor", as defined in Section 1.1 of National Instrument 45‑106 Prospectus Exemptions.


Each of the Decision Makers is satisfied that the decision meets the test set out in the Legislation for the Decision Maker to make the decision.

The decision of the Decision Makers under the Legislation is that the Exemption Sought is granted provided that:

(a)           the Filer is in compliance with the provisions of the CCA.

(b)           the only shares to be issued by the Filer are Membership Shares.

(c)           the Filer is not a reporting issuer in any province or jurisdiction of Canada.

(d)           no securities of the Filer are listed on a securities exchange or other marketplace.

(e)           the Filer does not make any written or oral representations to Prospective Members regarding potential future profits from membership in the Filer.

(f)            solicitations for membership in the Filer are conducted solely by the Filer and there are no finder’s fees or commissions paid in connection with the issuance of Membership Shares.

(g)           the Filer restricts the issuance of Membership Shares to Prospective Members that meet the Eligibility Criteria.

(h)           prior to the initial trade of a Membership Share to a Prospective Member meeting the Eligibility Criteria, the Filer delivers to such Prospective Member a copy of:

(i)            this Decision;

(ii)           the Disclosure Document containing all of the disclosure specified in paragraphs 18 and 19;

(iii)           the Certificate; and

(iv)          the Risk Acknowledgment Form.

(i)            all share certificates representing the Membership Shares bear a legend stating that the right to transfer the Membership Shares is subject to restrictions contained in the by-laws of the Filer and the Membership Subscription Agreement.

(j)            the exemptions contained in this Decision cease to be effective if any one of the provisions of the articles of continuance or by-laws of the Filer or of the Membership Subscription Agreement relevant to the exemptions granted herein are amended in any material respect without written notice to, and consent by, the Decision Makers.

(k)           the first trade in any Membership Share by a Member to a person or company other than the Filer is deemed to be a distribution subject to section 2.6 of National Instrument 45-102 Resale of Securities.

For the Commission:

“Tom Cotter”
Vice Chair

“Kari Horn”
Vice Chair