The Alberta Securities Commission Advances New Capital-Raising Initiatives for Start-up Businesses

4 août 2016 | Rhea Solis

( Disponible en anglais seulement )

On Friday, July 29, 2016, the Alberta Securities Commission (the “ASC”) announced that it is moving forward with two initiatives designed to facilitate capital-raising for small and medium-sized enterprises.

First, the ASC has adopted ASC Rule 45-517 Prospectus Exemption for Start-up Businesses (“45-517”). The new prospectus exemption allows Alberta-based small or start-up issuers to immediately raise start-up capital from Alberta investors. In addition to providing a prospectus exemption, 45-517 allows that the exemption can be used with or without a funding portal or other registered dealer.

The requirements to rely upon 45-517 are as follows:

  1. Each security distributed by the issuer must be an eligible security. “Eligible Security” is defined as a common share; a non-convertible preference share; a security convertible into a common share or preference share; a non-convertible debt security linked to a fixed or floating interest rate; a unit of a limited partnership; or an investment share that is a non-convertible preference share issued by a cooperative organized under the Cooperatives Act (Alberta);
  2. The issuer must be an eligible issuer.  An “Eligible Issuer” is an issuer that is not an investment fund or reporting issuer in a jurisdiction of Canada and is not subject to reporting obligations similar to those of a reporting issuer in a foreign jurisdiction;
  3. The head office of the issuer is located in Alberta or a corresponding jurisdiction;
  4. The aggregate funds raised in the start-up business distribution together with all funds raised by members of the issuer group in prior start-up business distributions cannot exceed $1,000,000. “Issuer Group” means an issuer together with each affiliate of the issuer and each other issuer that is either engaged in a common enterprise with the issuer or with an affiliate of the issuer or that has a founder that is a founder of the issuer;
  5. At the same time or before the investor signs the agreement to purchase the security, the issuer or, if the issuer has retained a registered dealer in respect of the distribution, the dealer (i) delivers to the investor an offering document in the prescribed form, and (ii) obtains a risk acknowledgment in the prescribed form from the investor which evidences that the investor has read and understood the contents of that form;
  6. The issuer provides to the investor a contractual right to withdraw the investor’s offer to purchase the security which right can be exercised by the investor delivering a notice to the issuer or, if the issuer has retained a registered dealer in respect of the distribution, the dealer within 48 hours of the later of (i) the investor’s subscription, and (ii) an amended offering document being delivered to the investor;
  7. The acquisition cost of the securities acquired by the investor cannot exceed $1,500 unless a registered dealer provides the investor with positive suitability advice in respect of the acquisition, in which case the maximum acquisition cost of the securities acquired by an investor in a start-up business distribution is $5,000;
  8. The aggregate funds raised in any start-up business distribution by the issuer group cannot exceed $250,000;
  9. Not more than one other start-up business distribution in aggregate has been conducted by any members of the issuer group in the current calendar year;
  10. No commission, fee or other amounts are paid to the issuer group or any of their principals, employees or agents with respect to the distribution; and
  11. Any person or company acting or proposing to act as an intermediary in connection with the start-up business distribution of securities through an online platform to an Alberta investor is a registered dealer.

Second, the ASC published for a 30-day comment period ending on August 25, 2016, Multilateral Instrument 45-108 Crowdfunding (“45-108”). If adopted, 45-108 would allow Alberta issuers to raise somewhat larger amounts through crowdfunding offerings across multiple jurisdictions in Canada. The framework of 45-108 consists of the following two parts:

  1. A prospectus exemption; and
  2. A requirement that the distribution be conducted through a funding portal that is registered as either a “registered dealer funding portal” or a “restricted dealer funding portal”.

Both the offering parameters and investment limits are higher under 45-108.  The total proceeds raised by the issuer group in reliance on 45-108 cannot exceed $1,500,000 within a 12-month period.  Further, if an investor is not an accredited investor, the issuer cannot accept a subscription of more than $2,500 per distribution from that investor (and in Alberta and Ontario, not more than $10,000 in all distributions under 45-108 in a calendar year) and, if an investor is an accredited investor (but not a permitted client), the issuer cannot accept a subscription of more than $25,000 per distribution from that investor (and in Alberta and Ontario, not more than $50,000 in all distributions under 45-108 in a calendar year).

The key elements of the two regimes are summarized briefly below:

ASC Rule 45-517
(available for use immediately)

MI 45-108
(currently out for comment)

Investment Limits
(per investor)
  • $1,500/distribution
  • $5,000 with positive suitability advice from a registered dealer
  • $2,500/distribution
  • $25,000 for accredited investors
Offering Limits
  • $250,000 per offering
  • Maximum 2 offerings/year
  • Lifetime limit $1,000,000
  • $1,500,000/12 months
Online Funding Portals
  • Use of funding portal not required
  • Use of funding portal required

Details on ASC Rule 45-517 and MI 45-108 can be found on the ASC website at  For further information on using 45-517, please contact a Partner in our Capital Markets and Securities group in Alberta.

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