Canada: New Crowdfunding Regime Adopted By Five Provinces

Last Updated: November 27 2015
Article by Andrea C. Johnson, Jason A. Saltzman, Michael M. Stephens and Sebastian Elawny

On November 5, 2015, securities regulators in five provinces published in final form Multilateral Instrument 45-108 Crowdfunding (MI 45-108) setting out rules that will provide a new way for businesses to raise capital over the internet. The rules are aimed at facilitating small investments made through online portals, a practice that has become known as "equity crowdfunding". The regulators anticipate that the regime will be of greatest use to small- and medium-sized businesses, including both reporting and non-reporting issuers.

The five provinces that are implementing the new rules are Manitoba, Ontario, Québec, New Brunswick and Nova Scotia, and are referred to herein as the "participating provinces". The planned effective date is January 25, 2016.


Any offering of securities must either be qualified by a prospectus or be exempt from the prospectus requirement. In addition, if the offering involves an intermediary—such as a broker or a dealer—that intermediary must either be registered in such capacity or be exempt from the requirement to register.

MI 45-108 introduces a prospectus exemption for equity crowdfunding in the participating provinces, subject to a number of conditions. There is no associated registration exemption, which means that any funding portal involved in an offering under the exemption must be registered. The MI 45-108 prospectus exemption will be available to both reporting and non-reporting issuers or, in non-technical parlance, to businesses both public and private.

The MI 45-108 prospectus exemption should be considered in light of the "Start-Up Crowdfunding Exemption" implemented by six provinces in May of this year, as described in a previous Insight. Those provinces—being British Columbia, Saskatchewan, Manitoba, Québec, New Brunswick and Nova Scotia—adopted exemptions from the prospectus and registration requirements for equity crowdfunding transactions to supplement other prospectus exemptions currently used by online platforms in Canada, such as the accredited investor exemption.1 In contrast to the crowdfunding prospectus exemption under MI 45-108, the Start-Up Crowdfunding Exemption is available only to non-reporting issuers. The interplay between the MI 45-108 prospectus exemption and the Start-Up Crowdfunding Exemption is discussed further below.

Details of the MI 45-108 prospectus exemption

The principal conditions of the MI 45-108 prospectus exemption are summarized below.

Investment limits

The limits on investment under the MI 45-108 prospectus exemption focus on both investors and issuers. Investors will be limited to $2,500 per investment and, in Ontario, $10,000 per calendar year (all figures CA$), unless they satisfy certain asset and income tests. Those that meet such tests and are therefore considered "accredited investors" may invest up to $25,000 per investment and, in Ontario, $50,000 per calendar year. In Ontario, investors who meet even higher thresholds—qualifying them as "permitted clients"—are not subject to an investment limit.

An issuer, together with any other person in the "issuer group," can raise a maximum of $1.5 million per 12-month period. "Issuer group" includes affiliates of the issuer.

Documentation requirements

Issuers using the MI 45-108 prospectus exemption must provide investors with an offering document containing prescribed information about the issuer and the offering including, among other things:

  1. Financial statements, which must be audited if the issuer has completed a financial year; and
  2. A statement that investors will be able to rescind their investment or sue for damages in the event of a misstatement in the offering document or other materials associated with the investment.

Investors will be required to sign a form acknowledging that the investment is risky.

Advertising and solicitation

An issuer using the MI 45-108 prospectus exemption must not advertise a distribution of securities, though it may inform prospective purchasers of its intention to distribute securities and refer the person to the applicable funding portal.

Continuous disclosure

After completing a distribution under the MI 45-108 prospectus exemption, issuers will have to continue to provide investors with certain information about the business. Reporting issuers must observe their existing disclosure obligations. Non-reporting issuers will have to make annual financial statements "reasonably available" to investors within 120 days of the issuer's year-end, together with a description of the use of proceeds.2 In Ontario, New Brunswick and Nova Scotia, a non-reporting issuer will also have to notify investors of certain issuer events, namely a discontinuation of its business, a change of its industry or a change of control.

Requirements for funding portals

A distribution under the MI 45-108 prospectus exemption must be made through a single funding portal, which must be registered as a dealer.3 The offering document and any other permitted materials must be posted only on that portal's online platform.

Funding portals are subject to a number of requirements, including those applicable to other registered dealers. Other rules include a prohibition on advertising or general solicitation of investors; a requirement to conduct certain background checks on the issuer and its key individuals; and an obligation to terminate a distribution if it appears that the business of the issuer is not being "conducted with integrity".

Other conditions

The MI 45-108 prospectus exemption is available only to issuers incorporated or organized in Canada, and having their head office and a majority of directors located in Canada. In addition, if the issuer has a principal operating subsidiary it must be incorporated or organized in Canada or the United States. The exemption is not available to investment funds, it cannot be used to offer complex securities, and proceeds of a distribution may not be expended to invest in, merge with or acquire an unspecified business. Issuers must maintain certain records for a period of eight years following the distribution.

Impact of the MI 45-108 prospectus exemption

The conditions to the MI 45-108 prospectus exemption, summarized above, are fairly onerous, particularly in light of the applicable investment limits. As such, there is uncertainty as to whether this exemption will be used with any frequency. In order to gauge its popularity, however, two other recent developments in securities law should be borne in mind.

The first is that, as noted above, the MI 45-108 prospectus exemption complements the Start-Up Crowdfunding Exemption in all participating provinces but Ontario. As such, non-reporting issuers may conduct a distribution under both exemptions in Manitoba, Québec, New Brunswick and Nova Scotia; a concurrent distribution in Saskatchewan and British Columbia under the Start-Up Crowdfunding Exemption; and another concurrent distribution in Ontario under the MI 45-108 prospectus exemption, assuming all conditions are satisfied. The investment limits under the Start-Up Crowdfunding Exemption are also low, at $1,500 per investor and $250,000 in aggregate, but the addition of those amounts may increase the viability of a distribution under the MI 45-108 prospectus exemption.

The other relevant development relates to the offering memorandum prospectus exemption, which has recently been adopted in Ontario and amended in several other provinces, as described in our recent Insight. The obligations of an issuer under that exemption are roughly similar to the obligations under the MI 45-108 prospectus exemption, while the investment limits are considerably higher. In addition, the offering memorandum exemption applies across Canada, if with some variation. Those facts may compel issuers interested in raising funds from the "crowd" to conduct offerings by way of the offering memorandum exemption, rather than the exemptions that are specifically designed for equity crowdfunding.


1 Alberta and Nunavut recently published for comment a separate proposed prospectus exemption for equity crowdfunding, as described in another recent Insight. Saskatchewan has published the MI 45-108 prospectus exemption for comment.

2 The notice of use of proceeds need not be provided in any year after the proceeds of a financing under the MI 45-108 prospectus exemption have been fully expended and investors have been notified of the use of proceeds.

3 The applicable categories of registration are investment dealer, exempt market dealer and restricted dealer, although a firm registered as a restricted dealer may not be registered in any other category and, in Ontario, may not be affiliated with another registered firm.

About Dentons

Dentons is a global firm driven to provide you with the competitive edge in an increasingly complex and interconnected marketplace. We were formed by the March 2013 combination of international law firm Salans LLP, Canadian law firm Fraser Milner Casgrain LLP (FMC) and international law firm SNR Denton.

Dentons is built on the solid foundations of three highly regarded law firms. Each built its outstanding reputation and valued clientele by responding to the local, regional and national needs of a broad spectrum of clients of all sizes – individuals; entrepreneurs; small businesses and start-ups; local, regional and national governments and government agencies; and mid-sized and larger private and public corporations, including international and global entities.

Now clients benefit from more than 2,500 lawyers and professionals in 79 locations in 52 countries across Africa, Asia Pacific, Canada, Central Asia, Europe, the Middle East, Russia and the CIS, the UK and the US who are committed to challenging the status quo to offer creative, actionable business and legal solutions.

Learn more at

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. Specific Questions relating to this article should be addressed directly to the author.

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

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

Events from this Firm
25 Nov 2016, Seminar, Toronto, Canada

On Thursday, September 22, 2016, Dentons hosted a panel discussion about the management of liabilities and risks associated with environmental crises, including potential liabilities for directors and officers and provided insight into risk and liability techniques associated with environmental crisis management.

In association with
Related Video
Up-coming Events Search
Font Size:
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
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). 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 & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd 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 or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.