The securities commissions in British Columbia, Saskatchewan, Manitoba, Québec, New Brunswick and Nova Scotia (“participating jurisdictions”) have adopted a new registration and prospectus exemption (“start-up crowdfunding exemption”) that allows start-up and early stage companies to raise capital in these jurisdictions, subject to certain conditions. The start-up crowdfunding exemption was effective May 14, 2015 and is scheduled to expire on May 13, 2020. Ontario is not one of the participating jurisdictions and has indicated that it will bring forward its own version of the crowdfunding exemption.

The Exemption

Private Companies: The start-up crowdfunding exemption allows private companies (non reporting issuers) which are located in a participating jurisdiction to sell their own securities through an online funding portal (“portal”). 
Disclosure Document: Companies must make available an offering document in the prescribed form to investors, (Form 1) which includes basic information about the issuer, its management and the offering, including how the issuer intends to use the funds raised and the minimum offering amount. Companies must also make available to investors a risk acknowledgement form (Form 2). 
Limits on Offerings: Companies will not be able to raise more than $250,000 per offering and will only be allowed two offerings in a calendar year. Individual investors will not be able to invest more than $1500 per offering.  All offerings must have a minimum offering amount and must stay open for a maximum of 90 days. 
Contractual Rescission Rights: Investors will have a contractual right to withdraw their offer to purchase securities within 48 hours of the investor’s subscription or notification to the investor that the offering document has been amended. 


The issuer’s securities must be sold through a portal that is either relying on the start-up crowdfunding exemption or is operated by a registered dealer. Registered dealers that operate portals must meet their existing registration obligations under securities legislation and confirm to issuers that they meet or will meet certain conditions provided in the start-up crowdfunding exemption. In order for a portal that is not a registered dealer to operate a portal they must meet a number of conditions. The key conditions are: 
Filings with Securities Commissions:  Portals must deliver a portal information form (Form 3) and individual information forms (Form 4) for each of its principals to the securities commission in the participating jurisdiction at least 30 days prior to its offering. The commission has the option of notifying the portal that the portal cannot rely on the start-up crowdfunding exemption because its principals or their past conduct demonstrate a lack of integrity, financial responsibility or relevant knowledge or expertise. 
Corporate: The head office of the portal must be in Canada and the majority of the portal’s directors must be Canadian residents.
Conflicts: An issuer cannot sell through a portal if the promoters, directors, officers and control persons (“principals”) of the portal are a principal of the issuer. 
Website: The portal must make the offering document of the issuer and the risk acknowledgement form available online to investors and cannot allow a subscription until the investors have confirmed that they have read and understood these documents and that the investor is resident in the jurisdiction. The portal must also disclose the name, residence and contact information for each of the principals of the portal. 
Payment for Securities: The portal must receive payment for the securities sold through the portal’s website.  The funding portal must either release funds to the issuer after the minimum offering amount has been reached if the 48-hour right of withdrawal has elapsed, or return the funds to investors if the minimum offering amount is not reached or if the offering is withdrawn by the issuer. If the investor exercises his or her right to cancel the purchase, the portal must refund all of the investor’s funds within five days of the exercise.
No Commissions from Investors: The portal cannot receive a commission, fee or any other amount from an investor and it can only be compensated by issuers.
No Advice: The portal cannot provide advice to a purchaser or otherwise recommend or represent that an eligible security is suitable, or about the merits of the investment. 
Handling Assets: The portal must hold the investors’ assets separate and apart from its own property, in trust for the investor and, in the case of cash, at a Canadian financial institution. 
Books & Records: The portal must maintain books and records at its head office to accurately record its financial affairs and client transactions, and to demonstrate the extent of the portal’s compliance with the start-up crowdfunding exemption orders for a period of eight years from the date a record is created.