If you're a start-up, raising money can feel like a full time job.
Alberta recently brought in a few rule changes which may be of interest: ASC Rule 45-517 Prospectus Exemption for Start-up Businesses (Start-up Business Exemption – PDF) (effective July 19, 2016) is designed to "facilitate capital-raising for small- and medium-sized enterprises on terms tailored to deliver appropriate safeguards for investors." Second, Alberta is considering the adoption of Multilateral Instrument 45-108 Crowdfunding (MI 45-108) and opened it for a comment period in July.
Crowdfunding (MI 45-108)
If the crowdfunding rules are adopted for Alberta issuers, it would facilitate the distribution of securities through an online funding portal in Alberta as well as across any of the other jurisdictions which have adopted it. Alberta would join Saskatchewan, Manitoba, Ontario, Quebéc, New Brunswick and Nova Scotia who have already adopted MI 45-108.
Start-up Business Exemption (Rule 45-517)
As for the new Start-up Business Exemption, here are the essentials as pitched by the ASC:
- Designed for Alberta start-ups seeking to raise funds from Alberta investors
- Aimed at "very modest financing needs", see the caps below
- Designed to be a simpler and less costly process
- Can be used by issuers wishing to raise funds through their friends and family, or to crowdfund through an online funding portal provided the portal is a registered dealer, and funds are raised only from Alberta investors
- The issuer can issue common shares, non-convertible preference shares, securities convertible into common shares or non-convertible preference shares, among other securities
- Issuer must prepare an offering document
- There is a cap of $250,000 per distribution and a maximum of two start-up business distributions in a calendar year
- Aggregate lifetime cap $1 million
- Designed for a maximum investment amount of $1,500 per investor. However, through a registered dealer, the maximum subscription from that investor can be as high as $5,000.
- The offering must close within 90 days.
- There is a mandatory 48 hour period for investors to cancel their investment
- The issuer must provide each investor with a specified risk disclosure form and risk acknowledgment form.
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.