On March 20, 2014, the securities commissions in several Canadian provinces published a proposed prospectus exemption modelled on the Saskatchewan Equity Crowdfunding exemption adopted on December 6, 2013 (the start-up crowdfunding exemption). All such provinces are requesting comment on whether a similar exemption should be adopted.

The start-up crowdfunding exemption would enable securities crowdfunding by early-stage businesses and start-ups. An issuer could distribute securities without a prospectus, provided:

• the issuer raises no more than $150,000 per offering and offers no more than twice per year;
• no investor invests more than $1,500 per offering;
• the offering is made on an on-line funding portal; and
• the issuer provides a streamlined offering document to investors through the portal.

The start-up crowdfunding exemption would allow a crowdfunding portal to operate without being registered under securities legislation, provided the portal:

• does not provide investment advice;
• ensures investors confirm online that they have read and understood the issuer’s offering document and the risk warnings required under the exemption; and
• ensures that all funds are held in trust for investors until the issuer raises the minimum amount required to close the offering.

British Columbia, Quebec, New Brunswick, Saskatchewan, Manitoba and Nova Scotia have published the same crowdfunding terms for comment. Ontario has also published a crowdfunding proposal for comment, which has slightly different terms.

The BCSC invites comments until June 18, 2014. A copy of the BC notice can be found here.

If you have any questions about the proposed crowdfunding prospectus exemption, contact any member of Clark Wilson’s Corporate Finance & Securities Group.