The Canadian Securities Administrators (CSA) have announced that they are developing a national instrument (the National Crowdfunding Rule) intended to replace the registration and prospectus exemptions related to start-up crowdfunding currently existing in certain provinces.
The securities regulators in British Columbia, Saskatchewan, Manitoba, Quebec, New Brunswick and Nova Scotia (the Participating Jurisdictions) previously adopted registration and prospectus exemptions to allow Canadian start-ups and early stage companies to raise capital through crowdfunding. The existing exemptions were implemented in the Participating Jurisdictions through local orders which are set to expire on May 13, 2020.
Under the existing prospectus exemption, certain non-reporting issuers in the Participating Jurisdictions may issue eligible securities through online funding portals. The existing registration exemption allows certain funding portals to facilitate distributions under the prospectus exemption without being formally registered. Both the existing prospectus exemption and the existing registration exemption are subject to a number of conditions.
According to the CSA, the National Crowdfunding Rule would include the same key features as the existing exemptions, along with amendments to improve harmonization and the effectiveness of crowdfunding as a capital-raising tool for early stage businesses. The CSA expect the existing exemptions to be extended in the Participating Jurisdictions until such time the National Crowdfunding Rule is finalized.
You can read the CSA notice here.
DISCLAIMER: This post is intended to convey general information about legal issues and developments as of the date above. It does not constitute legal advice and must not be treated or relied on as such.