(1) Introduction

On September 1, 2021, the Alberta Securities Commission and the Financial and Consumer Affairs Authority in Saskatchewan announced a three-year pilot of a new small business financing exemption, through MI 45-539, which enables issuers, excluding publicly traded companies or investment funds, in Saskatchewan or Alberta to raise an aggregate lifetime maximum of $5 million by way of a public offering using a streamlined offering document process.

The exemption is only available for distribution of securities in Saskatchewan and Alberta.

(2) Rationale

Securities Regulators continue to be aware of bottlenecks standing in the way of start-ups and small businesses raising capital to continue their growth. The small business financing prospectus exemption promotes a streamlined process for businesses that still provides appropriate investor protection. The end goal of the exemption is to improve the opportunity for companies attempting to raise capital that may not have the profile or growth prospects to drive venture capital investment or facilitate public placement. The small business exemption has also been drafted to address the concerns of issuers hesitant to access the equity crowdfunding prospectus exemption that was announced earlier this summer by the Canadian Securities Administrators (see our post here for more details).

(3) Key Summary Points

For Issuers

The 5 million dollar exemption limit is an aggregate lifetime limit that applies to the issuer, its affiliates, other issuers engaged in a common enterprise, and issuers who share the same founder(s) as the founder(s) of the issuer.

To access the exemption, the issuer must provide an offering document via Form 45-539F1 that includes information identifying the company and the person in charge of the offering. The offering document must also set out the minimum and maximum offering amounts and how those funds will be used. The remainder of the offering document sets out business structure and activities, material investments and contracts, directors and management, capital structure, and further details of the offering.

The exemption restricts the types of securities available under the offering to one or more of the following:

  • Common shares
  • Preferred shares
  • Debt securities
  • Units of a limited partnership
  • Membership or investment shares (where the issuer is a co-operative)
  • Convertible or exchangeable securities where the conversion or exchange results in any of the securities listed above

Issuers should also be aware that any offering or aggregate of offerings that results in more than $1,500,000 raised in a 12-month period will require that the offering be accompanied by financial statements following GAAP principles.

The issuer has a period of 120 days from the delivery of the Offering Document to raise the minimum offering amount. Should the offering fail to reach the minimum offering amount by that time, the issuer must return all funds to the purchaser.

Once an offering has closed, the issuer has 30 days to file a completed offering document, a completed Form 45-106F1 Report of Exempt Distribution along with the applicable fee. Depending on whether the company is a Tier 11 or Tier 22 company, the issuer (in the instance of a Tier 2 company) will be required to file an undertaking to deliver its annual financial statements and to make those statements reasonably available to each purchaser of the exemption.

For Investors

Prior to investing in a company under the small business financing exemption, an investor must complete an enhanced risk acknowledgement via Form 45-539F2.

Investors should be aware that whether an issuer is a Tier 1 or Tier 2 company will impact the offering and the raise round. Where the issuer is a Tier 1 company, an investor is limited to an investment of $2,500 in a 12-month period with the maximum investment increased to $10,000 where an investor's personal net income for the last two year's is in excess of $75,000 or $125,000 with their spouse ("Minimum Income Investor").

Where the issuer is a Tier 2 company the investment limit is $5,000 with a potential increase to $20,000 investment where the investor is a Minimum Income Investor or the purchaser has obtained advice from a Registered Dealer that the investment is suitable for the purchaser.

(4) Final Comments

The small business financing exemption is a tool for more than just high-growth and tech start-ups. The Alberta Securities Commission has actively described the purpose of the exemption is to create opportunities for co-operatives, small-town corporations, and rural communities to help finance local initiatives.

For issuers, the preparation and filing burdens are significantly reduced, enabling the issuer to focus their time and energy on development and creating value for investors instead of creating complex prospectus documents. For investors, investment limits and disclosure obligations in offering documents still promote a level of transparency that enable an investor to assess the level of risk of any investment and make an informed decision regarding their investment choice.

We at McKercher interact daily with start-up founders, angel investors, venture capital investors, and government funding agents. We are proud to offer a start-up package of legal resources to start-ups at fixed fee pricing and we regularly advise clients on all manner of financing transactions. Please contact us if you are a start-up looking to raise capital.


1. Tier 1 companies are issuers with greater financial resources. A Tier 1 listing comes with more arduous minimum listing and maintenance requirements than for Tier 2 companies. These requirements vary depending on industry sector. McKercher LLP can provide further guidance on these listing and maintenance requirements based on your specific industry sector.

2. Tier 2 companies are generally early-stage or junior companies across all industry sectors. Tier 2 issuers may obtain Tier 1 status if they later meet Tier 1 listing requirements. Listing requirements for both Tier 1 and Tier 2 companies vary depending on industry sectors. McKercher LLP can provide further guidance on these listing and maintenance requirements based on your specific industry sector.

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.