Under the crowdfunding exemption, both reporting and
non-reporting issuers and their affiliates would be able to raise
up to $1.5 million per year. Investors would also be limited to
investing no more than $2,500 in a single investment, and no more
than $10,000 in a year under the exemption.
While the proposed exemption would certainly make it easier for
smaller companies to raise capital, as we stated in our comments to the
OSC, the following are some proposed restrictions
the OSC may want to reconsider to ensure that access to the
exemption is not unduly restricted.
For example, issuers relying on the exemption would be
required to be be incorporated or organized in Canada. While a
requirement that a business have its principal place of business in
Canada would serve the objective of assisting Canadian
start-ups and SMEs with raising capital, a requirement for
incorporation or organization in Canada arguably fails to
provide a sufficient or relevant nexus.
There are many reasons why a business may be organized outside
of Canada while still being a "Canadian" business. For
example, many "B Corps" (corporations certified to meet
certain standards of social and environmental performance,
accountability, and transparency) incorporate or organize in other
jurisdictions, predominantly Delaware, where legislation currently
exists where it is possible to incorporate a B Corp or that is more
favourable to B Corps than the Canada Business Corporations
Act or other Canadian corporate statutes. These
are the types of entities that would benefit the most from, and
make the most use of, the crowdfunding exemption.
The crowdfunding exemption also prohibits the completion of an
offering unless the issuer has "financial resources sufficient
to achieve the next milestone in [its] written business plan, or if
no milestones, to carry out the activities set out in the business
plan". It remains to be seen whether this requirement
would achieve any significant investor protection given than the
milestones may not be significant or represent any minimum level of
achievement by the issuer.
While the proposed investment limits provided in the
crowdfunding exemption would serve to protect investors, it
may make sense to exclude accredited investors from such
limits. Investment limits should also not extend to anyone who
would be able to purchase securities through another prospectus
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.
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Under the Income Tax Act, the Employment Insurance Act, and the Excise Tax Act, a director of a corporation is jointly and severally liable for a corporation's failure to deduct and remit source deductions or GST.
Under the Income Tax Act, the Employment Insurance Act, the Canada Pension Plan Act and the Excise Tax Act, a director of a corporation is jointly and severally liable for a corporation's failure to deduct and remit source deductions.
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