Crowdfunding has officially been launched in Ontario as of
January 28, 2016, enabling Canadian businesses to raise capital at
a low cost by reaching out to a large number of investors over the
Internet. The new regime, available in Ontario, Québec,
Manitoba, New Brunswick and Nova Scotia, is particularly attractive
to start-ups and small and medium-sized enterprises in their early
stages of development seeking access to sources of capital not
otherwise available in the prospectus exempt market. Up to $ 1.5
million in annual total proceeds can be raised under the new
Although crowdfunding has been available in British Columbia,
Saskatchewan, Québec, Manitoba, New Brunswick and Nova
Scotia since May 2015 by way of local blanket orders, the new
regime differs in that it is available to non-reporting issuers and
it provides for higher investment and capital raising limits. The
new crowdfunding exemption is available to all Canadian companies,
both private and public, issuing non-complex securities with the
exception of blind pools and investment funds. Any investor can buy
securities under the exemption.
Retail investors are limited to $2,500 per investment and are
permitted to invest up to $10,000 in any given calendar year.
Accredited investors are limited to $25,000 per investment and are
permitted to invest up to $50,000 in a calendar year. There are no
investment limits for "permitted clients", as defined in
National Instrument 31-103 Registration Requirements,
Exemptions and Ongoing Registrant Obligations and including
banks, registered dealers, pension funds and governmental
Securities must be distributed via a single registered funding
portal, which acts as a gatekeeper by reviewing the issuer's
disclosure and conducting background checks on the issuer and its
directors, officers and promoters. Access to the portal may be
denied in certain circumstances.
Businesses wishing to avail themselves of the exemption are
required to provide a crowdfunding offering document to investors,
setting out certain information about the distribution including a
brief overview of the issuer, its management and its business. As
with any offering document, issuers may be held liable for
misrepresentations or untrue statements. Issuers must also provide
their annual financial statements to investors as well as a notice
of use of proceeds. Investors are required to complete and sign a
risk acknowledgment form. The securities of a public company are
subject to a 4-month holding period and, as is always the case in
the exempt market, securities of non-public companies can only be
resold under another prospectus exemption or under a
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