Overview 

On November 5, 2015, the securities regulatory authorities in Manitoba, Ontario, Québec, New Brunswick and Nova Scotia (collectively, the participating jurisdictions) published in final form Multilateral Instrument 45-108, Crowdfunding, which introduces a crowdfunding prospectus exemption for issuers as well as a registration framework for funding portals. The MI 45-108 crowdfunding regime will enable businesses to benefit from greater access to capital from a large number of investors online.

Among the measures adopted to protect investors, issuers will be required to distribute their securities through a registered funding portal. These funding portals will fulfill certain gatekeeper functions that include reviewing the issuer’s disclosure and obtaining background checks on the issuer and its directors, executive officers and promoters. In addition, investment limits based on the investor’s income and financial resources have been adopted as a means of reducing their exposure to a risky investment.

Provided all necessary Ministerial approvals are obtained, MI 45-108 will come into force in the participating jurisdictions on January 25, 2016.

The crowdfunding regime set out in MI 45-108 is in addition to the Start-up Crowdfunding exemption approved by local order on May 14, 2015 by the securities regulators of British Columbia, Saskatchewan, Manitoba, Québec, New Brunswick and Nova Scotia, which does not require issuers to distribute their securities through a registered funding portal and which has lower funding limits. The MI 45-108 crowdfunding regime will coexist and is viewed to be complementary with the Start-up Crowdfunding exemption by those jurisdictions that adopted it on May 14, 2015.

On October 31, 2016, the Alberta Securities Commission (ASC) announced that it has also adopted Multilateral Instrument 45-108. The new rule is available immediately. The implementation of MI 45-108 by the ASC follows its adoption on July 26, 2016 of ASC Rule 45-517 Prospectus Exemption for Start-up Businesses, which was introduced to help facilitate Alberta-based small or start-up issuers seeking to raise modest amounts of capital from Alberta investors.

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.

Recent developments

Amendments under consideration

• None