Canada: Saskatchewan Getting Ready To Legalize Equity Crowdfunding

Last Updated: October 17 2013
Article by Brian P. Koscak

On October 7, 2013, the Saskatchewan Financial and Consumer Affairs Authority (the FCAA) published a framework for a proposed Saskatchewan-only equity Crowdfunding exemption1 (the Proposed Exemption) and requested public feedback with a comment period ending on November 6, 2013. Although the FCAA originally published a concept equity Crowdfunding proposal in July 13, 2013, it has now been fine-tuned with the publication of the Proposed Exemption. The purpose of the Proposed Exemption is to help bridge the funding gap for start-ups and entrepreneurs while adequately protecting investors. If implemented, the FCAA stated the Proposed Exemption would have a three-year sunset clause when it expires. 

The key features of the Proposed Exemption are set out below.

Investors

  • Saskatchewan investors only - Only available to investors who have an address in Saskatchewan.
  • Investment limit per offering - Maximum purchase of $1,500 per offering.
  • Annual investment limit - None.
  • Risk warning - Investors must confirm online that they have read and understood a prescribed form of document called Important Risk Warnings.
  • Right to sue for a misrepresentation - Subject to certain limitation periods, investors have a right to sue for a misrepresentation in the issuer's advertising or sales materials or if a verbal statement was made in connection with the investment that contained a misrepresentation. Investors also have a right to cancel the subscription agreement and recover the purchase price if the investment is sold in breach of a decision of the FCAA or the Saskatchewan Securities Act.

Issuers

  • Saskatchewan issuers only - Only available to issuers who have an address in Saskatchewan.
  • Type of issuer - Any type of issuer can use the Proposed Exemption except a reporting issuer or an investment fund.
  • Type of securities - Any type of security can be issued except derivatives. The trade can only involve a trade by the issuer in its own securities facilitated by the portal.
  • Form filing - An issuer must file Form GO45-925F1 Issuer Information 10 days prior to beginning to trade.
  • Maximizing offering size - $150,000.
  • Minimum offering size - The minimum offering size must be set out in the offering document which must equal the amount needed to carry out the purpose for which the funds are sought. The minimum offering size may be reduced by any other amount available for the purpose set out in the offering document, as long as the offering document states that these other funds are unconditionally available to the issuer.
  • Annual limit - The issuer and its promoters, directors, officers and control persons cannot use the Proposed Exemption more than two times per calendar year.
  • Offering period - No longer than six months.
  • Offering Document - The issuer must use an offering document following Form GO45-925F3 Offering Document to be made available to investors through the portal and file the offering document 10 business days prior to beginning to trade.
  • No other concurrent offering - There can be no other concurrent offering by the issuer or other issuer for the same project.
  • Background checks - The FCAA will be doing background checks on individuals involved with the offering who must submit Form GO45-925F2 Individual Information Form.
  • No commissions - There can be no commissions or other amounts paid to the issuer or its promoters, directors, officers, control persons, employees or agents in respect to the trade.
  • Report of trade - The issuer must file a report of trade in Form GO45-925F4 Report of Trades within 30 days after the offering closes.
  • Filing fees - None.
  • Resale restriction - Securities can only be resold under a prospectus exemption unless the issuer becomes a reporting issuer and if so, then subject to certain conditions.
  • Ongoing disclosure requirement - None.
  • Portal requirement - In order to rely on the exemption, all trades must be carried out through the portal and payment for the securities must be made through the portal.

Portal

  • Registration - The portal is not required to be registered with the FCAA as a dealer provided if complies with certain filings, conditions and that it provides no advice to investors.
  • Compensation - The portal can be paid a commission or earn a fee.
  • Filings 
    • Portal– the portal must file Form GO45-925F5 Portal Information within 30 days of facilitating Crowdfunded trades. 
    • Key people – each promoter, director, officer and control person of the portal must file a Form GO45-925F6 Portal Individual Information Form within 30 days of facilitating Crowdfunded trades. The FCAA will be doing background checks on individuals involved with the portal.
  • Conditions: - In order to rely on the Proposed Exemption, the portal must ensure that:
  1. It makes the Important Risk Warnings document and the offering document separately available to investors electronically online.
  2. It does not allow the investment until the investor confirms online that they have read and understood the offering document and the Important Risk Warnings.
  3. It does not release any funds until the minimum offering amount has been raised and, until that time, all funds received for the offering are held in trust for investors.
  4. When the offering is closed, the portal provides the issuer with the details of the investor (e.g., name, address, e-mail etc.) within 15 days of the closing of the offering.
  5. Issuers and investors have an address in Saskatchewan.

Analysis

The Proposed Exemption is a 'regulatory-lite' approach for equity Crowdfunding since portals are not required to be registered as a dealer or adviser with the FCAA, there are no financial statement requirements and small dollar amounts are at risk which limits the extent of any potential for fraud and loss.

However, some market participants may be concerned that the Proposed Exemption does not impose any liability on the portal since it is unregistered. This would be particularly concerning if a fraud occurs on its platform. Moreover, the public may incorrectly believe the FCCA has passed on the merits of the offering and the people involved since the FCCA: (a) will perform background checks on key individuals involved with the issuer; and (b) reviews the issuer's offering document prior to posting it on the portal's website. 

Regardless of one's view, if the Proposed Exemption is adopted, Saskatchewan will be the first jurisdiction in Canada to have a specific equity Crowdfunding exemption. Saskatchewan would then join the ranks of certain states, such as Kansas and Georgia, who have similarly adopted an equity Crowdfunding exemption, albeit an intra-state equity Crowdfunding exemption.

A copy of the Proposed Exemption is available here.

Footnotes

1 General Order 42-925 Saskatchewan Equity Crowdfunding Exemption.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Similar Articles
Relevancy Powered by MondaqAI
Thompson Dorfman Sweatman LLP
Stikeman Elliott LLP
 
In association with
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Thompson Dorfman Sweatman LLP
Stikeman Elliott LLP
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions