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Proposed New Multilateral Instrument 45-109, Prospectus Exemption for Start-up Businesses [ED]

Com­ment pe­riod ends: December 18, 2015

Proposed effective date:

To be determined

Last updated:

October 2015

Overview

On October 19, 2015, the Alberta Securities Commission and the Nunavut Securities Office published for comment Proposed Multilateral Instrument 45-109, Prospectus Exemption for Start-up Businesses, which sets out a proposed prospectus exemption to facilitate capital raising by start-up and early stage companies. Subject to certain conditions, the proposed exemption would allow a start-up or early stage business to raise up to $1,000,000 using a streamlined offering document together with a bluntly worded risk warning. Investors would be permitted to invest up to $1,500 in a business or $5,000 with the advice of a registered dealer.

Although not limited to crowdfunding, the proposed exemption could be used to raise funds through an online portal. If implemented, the new rule would only create a new prospectus exemption; if a financing occurs through a portal, the portal would still need to comply with the registration requirement e.g., be registered as an exempt market dealer or investment dealer.

The proposed exemption is designed to coordinate with the Start-up Crowdfunding exemption adopted by local order on May 5, 2015 by the securities regulators of British Columbia, Saskatchewan, Manitoba, Québec, New Brunswick and Nova Scotia.  See Completed Project. The Start-up Crowdfunding exemption is comprised of two exemptions: a prospectus exemption for start-ups seeking to raise capital and a dealer registration exemption for persons wishing to operate a funding portal. Under the Start-up Crowdfunding exemption: (i) the issuer may not be a reporting issuer or an investment fund in any jurisdiction of Canada or foreign jurisdiction; (ii) the head office of the issuer must be located in a participating jurisdiction; (iii) the aggregate funds raised in any start-up crowdfunding distribution may not exceed $250,000;  (iv) the issuer is restricted to no more than two start-up crowdfunding distributions in a calendar year; and (v) no person may invest more than $1,500.

Recent activities

October 2015

On October 19, 2015, the Alberta Securities Commission and the Nunavut Securities Office published for comment Proposed Multilateral Instrument 45-109, Prospectus Exemption for Start-up Businesses, which sets out a proposed prospectus exemption to facilitate capital raising by start-up and early stage companies.

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