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Five Canadian Provinces Adopt Equity Crowdfunding Exemptions

May 28, 2015

The Canadian Securities Administrators (CSA) announced that securities regulators in five Canadian Provinces have agreed to CSA Notice 45-316 – a common set of rules that will allow startups to raise up to $500,000 CD (approximately $401,600 USD) per year from unaccredited investors via authorized Canadian-based funding portals. With the passage of the new rules, the provinces of British Columbia, Manitoba, Québec, New Brunswick and Nova Scotia join Saskatchewan as provinces that allow non-accredited investors to make equity investments in startups and other small businesses, according to techvibes.com.

Under CSA Notice 45-316, each investor is limited to investing a maximum of $1,500 CD (approximately $1,200 USD) per investment. The rules include a unique feature that allows investors to rethink their investment and withdraw within the first 48 hours if any changes are made to the offering document. However, unlike shares in public companies, these crowdfunded securities will not be freely tradable when issued. They can only be resold during another round of crowdfunding offering or four months after the issuer becomes a reporting issuer.

Startups can only raise $250,000 CD (approximately $201,000 USD) in one campaign, but are permitted just two campaigns a year for a total offering of $500,000 CD (approximately $401,600 USD). To protect investors, startups must disclose basic information about their business, its management and the size of the offering. Startups also must disclose to investors how they will use the funds.

The funding portals that will host these offerings are exempt from the registration requirements if the portals meet certain requirements. Among the requirements, funding portals are not allowed to provide advice or receive fees from potential investors. However, the portal can be denied or lose its registration if it is determined that the portal's principals or their past conduct demonstrate a lack of integrity, financial responsibility, or relevant knowledge or expertise.

Although, Ontario did not adopt CSA Notice 45-316, the province’s securities regulators are currently drafting its own regulations, according to CBC News. Those proposed rules will allow startups to raise up to $1.5 million CD (approximately $1.2 million USD) per year. Individual investors would permit investors to invest up to $2,500 (approximately 2,000 USD) in a single investment, with a maximum of $10,000 CD (approximately $8,000 USD) invested per year. The remaining three provinces including Alberta have not announced plans to pass any similar crowdfunding exemptions. Read the press release…

 

 

Internationalcapital, crowdfunding