Crowdfunding has quickly become a popular method of raising
capital on the Internet, and can lift small and medium-sized
companies off the ground. After a long wait, Kickstarter opened to
projects from Canadian-based project creators in September 2013.
More than $3.2 million CAD was pledged for Canada-based creators in
the first month.
Crowdfunding in Canada remains limited to non-equity
funding. For example, in Ontario, currently, the sale of
equity requires the issuer to file a prospectus or rely on an
existing prospectus exemption category. Crowdfunding by issuing
securities is prohibited as a result.
The possibility of equity crowdfunding may be on the horizon in
Canada. In December 2012, the Ontario Securities Commission
(OSC) published a consultation paper outlining possible new capital
raising prospectus exemptions in Ontario, including addressing the
sale of equity through online crowdfunding platforms. The proposed
crowdfunding exemption would allow an organization to raise a total
of $1.5 million dollars in any twelve month period, and would limit
individuals to invest no more than $2500 in a single investment,
and no more than $10,000 in a calendar year. The exemption would
only be available to organizations incorporated in Canada with head
offices in Canada. Although equity funding has not yet been
instituted since the consultation, the OSC released an update in
August 2013 (Notice 45-712, Progress Report on Review of
Prospectus Exemptions to Facilitate Capital Raising
("Report")), stating it received feedback from
stakeholders on the crowdfunding exemption and will continue to
develop a crowdfunding regulatory framework.
The British Columbia Securities Commission (BCSC) also recently
issued a similar report for public comment. The report, currently
closed for comments and under review by the BCSC, proposes similar
investor protections but limits organizations to raising $500,000
and limits investors to $2000 in any 12 month period.
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