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Accredited Investor ExemptionEach of the Atlantic provinces has anexemption that allows a person or companyto purchase the security of an issuer if thepurchaser purchases the security asprincipal (i.e. not on behalf of someoneelse) and is an “accredited investor”. Toqualify as an accredited investor, the personor company must meet one of severalsophistication or financial tests, includingamong others:An individual who, either alone orwith a spouse, beneficially owns,directly or indirectly, financial assetshaving an aggregate realizable valuethat before taxes, but net of anyrelated liabilities, exceeds $1 million;An individual whose net incomebefore taxes exceeded $200,000 ineach of the two most recent years orwhose net income before taxescombined with that of a spouseexceeded $300,000 in each of thetwo most recent years and who, ineither case, reasonably expects toexceed that net income level in thecurrent year;An individual who, either alone orwith a spouse, has net assets of atleast $5 million; andAn entity, other than an individual orinvestment fund, that has net assetsof at least $5 million, as shown on itsmost recently prepared financialstatements.There are no limits on the number ofaccredited investor purchasers or theaggregate proceeds raised. Regulatoryfilings may be required post-transaction.Private Issuer ExemptionClearing a prospectus involves costs thatrarely can be justified or borne by a small,private company. Accordingly, exemptionsare provided for private issuers to sellsecurities to a specified category ofpurchasers. To qualify for this exemption, acompany must:Have a restriction on the transfer ofits securities in the company’sconstating documents or in ashareholders’ agreement;Not be a reporting issuer or aninvestment fund;Not have more than 50 shareholders(not counting current or formeremployees); andOnly sell (and have only ever sold)its securities to persons who eitherare within listed categories (includingaccredited investors, employees,directors, officers and certainrelatives, close friends or businessassociates of directors and officers)or are not the “public”.Whether a person falls into the “public”category can be a difficult question toanswer, and involves a mixture of fact andlaw. Generally speaking, the approachtaken is based on the view that the publiccomprises those members of a communitywho need the protection of securitieslegislation and require the informationcontained in a prospectus to make aninformed investment decision. A number offactors are relevant in determining whethera person is part of the “public” in respect ofthe trading of a particular security, includingthe number of offerees and purchasers in atransaction, the relationship of theSecurities Law 73