The Canadian Securities Administrators (CSA) have published Proposed National Instrument 45-110 Start-up Crowdfunding Registration and Prospectus Exemptions (the Proposed National Instrument), for a 90-day comment period ending May 27, 2020. The Proposed National Instrument would replace and further harmonize the crowdfunding requirements currently in effect in British Columbia, Alberta, Saskatchewan, Manitoba, Québec, New Brunswick, and Nova Scotia.
Securities crowdfunding (crowdfunding) has rapidly emerged as an alternative method for businesses, particularly start-ups and early-stage issuers, to raise capital. Through crowdfunding, a business raises capital through online portals by issuing securities (such as shares or debt instruments) to investors. Crowdfunding is intended to provide an alternative source of capital to non-reporting issuers at an earlier stage of development.
Prior to the introduction of the Proposed National Instrument, different regulatory regimes for the crowdfunding of securities had emerged in different Canadian jurisdictions. Blanket orders issued (the blanket orders) in May 2014 by the securities regulators of British Columbia, Saskatchewan, Manitoba, Québec, New Brunswick, and Nova Scotia, provided for substantially harmonized registration and prospectus exemptions that allowed start-ups and early-stage issuers to raise capital in these jurisdictions through securities crowdfunding. In October 2019, the Alberta Securities Commission (ASC) adopted a blanket order that substantially harmonized registration and prospectus exemption with those of British Columbia, Saskatchewan, Manitoba, Québec, New Brunswick, and Nova Scotia.
In January 2016, Multilateral Instrument 45-108 Crowdfunding (MI 45-108) came into force in Saskatchewan, Manitoba, Ontario, Québec, New Brunswick, and Nova Scotia, while Alberta adopted MI 45-108 in February 2017. Alberta also relies upon ASC Rule 45-517 Prospectus Exemption for Start-up Businesses (ASC Rule 45-517) which came into force in July 2016 and is similar to the blanket orders but does not provide an exemption from the registration requirement and does not require the use of a funding portal.
Proposed National Instrument 45-110 Start-up Crowdfunding Registration and Prospectus Exemptions are available for download from the websites of the Participating Jurisdictions.
For more information, please call Barbara Hendrickson at BAX Securities Law (416) 601 -1004.
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