Startup and video game law, from a Canadian and U.S. perspective


Startup Equity Crowdfunding in Canada

New registration and prospectus exemptions adopted in British Columbia, Saskatchewan, Manitoba, Quebec, New Brunswick and Nova Scotia permit startups (and other companies) to crowdfund investment in exchange for equity.  Importantly, investors do not need to be accredited or have a previous relationship with the company.

What are the company requirements?

1.  Have a head office located in one of the above provinces;

2.  Conduct crowdfunding through an online funding portal that meets certain requirements (to be detailed in our next blog post); and

3.  Use, and post on the online funding portal, the required offering document form that details, for example, certain information about your company, the securities being offered, the minimum offering amount and how funds will be used.  The offering document is available at[F]_Form_1_05142015/.

How much can your company raise?

You can raise up to $250,000.00 per distribution in up to two crowd funding distributions a year.    As such, you can crowdfund a total of $500,00.00 a year (in two separate distributions).

What type of securities can you offer?

Common and preferred shares, convertible securities (that convert into common or preferred shares), non-convertible debt securities (fixed or floating interest rates) and limited partnership units.

Do the investors need to be accredited?

No.  However, each investor is limited to invest up to $1,500.00 per distribution.  As such, one person could invest a total of $3,000.00/year in your company where they invest the total permitted amount in two separate distributions.

You can receive concurrent investments under other securities exemptions, such as from accredited investors, and put these investments toward the minimum offering amount.

Do I need to raise the minimum offering amount?

Yes.  Like a Kickstarter campaign, the crowdfunding exemption requires that you raise the minimum offering amount.  Where you fail to raise the minimum amount, you cannot complete the offering.  Nonetheless, as noted above, concurrent investments under other securities law exemptions can assist with raising the minimum amount.

Are there other requirements?

Of course – this involves law, remember?  Other requirements include, but are not limited to:

1.  The crowdfunding campaign has a maximum duration of 90 days;

2.  Each investor has a right to withdraw their commitment within 48 hours of: (a) their subscription or (b) upon receiving notification that the offering document has been amended; and

3.  A report of exempt distribution and the offering document must be filed with the applicable securities commission no later than 30 days after closing.

The full text of the exemption is available at:

In upcoming blog posts, I will discuss funding portals as well as aspects to consider when structuring a crowdfunded investment round.


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