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CSA –Harmonized Rules for Securities Crowdfunding of Start-ups (National Instrument 45-110) [Completed]

Effective date:

Provided all necessary ministerial approvals are obtained, the new Start-up Crowdfunding Rule (and the consequential amendments to NI 13-101 and NI 45-102) will come into force on September 21, 2021.

Last up­dated:

June 2021

Overview

On February 27, 2020, the Canadian Securities Administrators (CSA) issued for comment Proposed National Instrument 45-110, Start-up Crowdfunding Registration and Prospectus Exemptions, which would replace and enhance the substantially harmonized requirements currently in effect in British Columbia, Alberta, Saskatchewan, Manitoba, Québec, New Brunswick and Nova Scotia.

The proposals represent harmonized rules for start-up securities crowdfunding that would become effective in each of these Provinces.

Enhancements from the current requirements include: 

  • Increasing to $1 million (from $500,000) the maximum total amount that could be raised by a business under the crowdfunding prospectus exemption per year;
  • Increasing to $2,500 (from $1,500) the maximum investment a purchaser can make in an offering, with a higher limit of $5,000 if the purchaser obtains advice from a registered dealer that the investment is suitable for the purchaser;
  • Requiring funding portals to annually certify that they have sufficient working capital to continue operations for the following year.

On June 23, 2021, the CSA adopted harmonized rules for securities crowdfunding. The new National Instrument 45-110, Start-up Crowdfunding Registration and Prospectus Exemptions,  introduces a single, uniform set of rules that replaces and enhances the requirements currently in effect in Alberta, British Columbia, Manitoba, New Brunswick, Nova Scotia, Ontario, Québec and Saskatchewan.

Following stakeholder consultation, the CSA made targeted amendments to improve the effectiveness of start-up crowdfunding as a capital-raising tool, including:

  • Increasing the maximum total amount that an issuer can raise under the crowdfunding prospectus exemption in a 12-month period to $1.5 million (from the current $500,000).
  • Increasing the maximum investment a purchaser can make in an offering to $2,500 (from the current $1,500), with a higher limit of $10,000 if a registered dealer advises that the investment is suitable for the purchaser.
  • Removing barriers preventing federal and provincial co-operatives or associations from using the start-up crowdfunding prospectus exemption.
  • Requiring funding portals relying on the registration exemption to certify on a semi-annual basis that they have sufficient financial resources to continue operations for the following six months.
  • Requiring issuers to have operations other than the acquisition of an unspecified business before using the start-up crowdfunding prospectus exemption.

Provided all necessary ministerial approvals are obtained, the Start-up Crowdfunding Rule (and the consequential amendments to NI 13-101 and NI 45-102) will come into force September 21, 2021.

For fur­ther de­tails re­fer to the press release on the CSA's web­site and the new National Instrument on the OSC's web­site.

 

Other developments

June 2021

On June 23, 2021, the CSA adopted harmonized rules for securities crowdfunding. The new National Instrument 45-110, Start-up Crowdfunding Registration and Prospectus Exemptions,  introduces a single, uniform set of rules that replaces and enhances the requirements currently in effect in Alberta, British Columbia, Manitoba, New Brunswick, Nova Scotia, Ontario, Québec and Saskatchewan.

July 2020

On July 30, 2020, the CSA announced that in light of COVID-19 and the challenges it presents to small businesses seeking to raise capital, the Ontario Securities Commission (OSC) made an interim local order that adopts the start-up crowdfunding regime currently in place in certain other Canadian jurisdictions (the Interim Order).

March 2020

On March 18, 2020, the CSA announced that all CSA proposals currently out for comment will have their comment periods extended by 45 days.

February 2020

On February 27, 2020, the Canadian Securities Administrators (CSA) issued for comment Proposed National Instrument 45-110, Start-up Crowdfunding Registration and Prospectus Exemptions, which would replace and enhance the various requirements currently in effect in British Columbia, Alberta, Saskatchewan, Manitoba, Québec, New Brunswick and Nova Scotia. Comments are requested by May 27, 2020.

 

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