On May 14, 2015, the securities regulators of British Columbia,
Saskatchewan, Manitoba, Québec, New Brunswick and Nova
Scotia (the Crowdfunding Jurisdictions) announced that they have
implemented, or expect to implement, exemptions that will allow
Canadian start-ups and early-stage companies to raise capital
through crowdfunding. The Ontario Securities Commission (OSC)
expects to announce its own crowdfunding rules in the Fall of
The New Crowdfunding Regime
Under the new rules, eligible securities can be sold without the
need for a prospectus on certain conditions. Notably, Canadian
issuers may only conduct two crowdfunding distributions per
calendar year and raise no more than $250,000 per distribution.
Although a prospectus is not required, issuers must use a
prescribed offering document to distribute the securities which
requires them to disclose basic information about their business,
its management and the distribution, including the use of proceeds
of the distribution. Each investor is limited to investing a
maximum of $1,500 per distribution. Investors would also have a
48-hour cooling off period to change their minds. The maximum
distribution period using the exemption is 90 days.
Unlike shares of a public company, the securities will not be
freely tradable when issued. They can only be resold under another
prospectus exemption, under a prospectus, or four months after the
issuer becomes a reporting issuer.
The securities must also be issued through a Canadian-based
online funding portal. The funding portals are exempt from the
registration requirements if the portals meet certain requirements,
including a requirement that they not provide advice to, or receive
fees from, investors. A portal's registration exemption can be
removed by a participating regulator if it determines that that
portal's principals or their past conduct demonstrate a lack of
integrity, financial responsibility or relevant knowledge or
The crowdfunding exemptions are being adopted by the
participating regulators by way of local blanket orders for a
period of five years, expiring on May 13, 2020. The local blanket
orders will be available on the website of the respective
participating securities regulator. Further details of the
crowdfunding regime are contained in Multilateral CSA Notice 45-316 –
Start-up Crowdfunding Registration and Prospectus
The Ontario Crowdfunding Regime
The OSC is not yet participating in the new crowdfunding regime.
It is expected to announce its own rules in the Fall of 2015.
In interviews with major media outlets reported in May
2015,1 the OSC said its decision to not join the other
provinces was based in part on the lack of a registration
requirement for funding portals and its desire to incorporate
higher capital raising limits. The OSC also said it expects its own
crowdfunding rules will follow the framework which it had proposed in March 2014 (see
our summary in our bulletin Crowdfunding and Other New Prospectus Exemptions
Proposed by the Ontario Securities Commission). Among other
things, the framework would allow companies to raise up to a total
of $1.5 million per year and would permit investors to invest up to
$2,500 in a single investment, to a maximum of $10,000 a year. The
rules would also require funding portals to register with the
Notably absent from the Crowdfunding Jurisdictions is Alberta,
which, unlike Ontario, has to date not proposed any similar
crowdfunding exemption, leaving it as a significant outlier amongst
Canada's more significant capital markets.
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.
While most are well aware that the sale of a business is generally a complex process, even sophisticated business owners are surprised by just how much cost and effort is required to complete the sale.
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