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On July 26, 2016, the Alberta Securities Commission (ASC) adopted ASC Rule 45-517 Prospectus Exemption for Start-Up Businesses. This Rule permits Alberta issuers to raise funds from Alberta investors through an online funding portal that is a registered dealer, a registered dealer, or the network of contacts of the issuer’s principals.

The main conditions of ASC Rule 45-517 are as follows:

  • the issuer can only distribute “eligible securities”[1];
  • the issuer is an “eligible issuer”, which is an issuer that is not an investment fund or a reporting issuer in a Canadian or foreign jurisdiction;
  • the issuer’s head office is located in Alberta or a corresponding jurisdiction;
  • the issuer, including other members of its “issuer group”[2], are subject to a $1,000,000 lifetime limit on the amount they can raise under ASC Rule 45-517 and a corresponding start-up exemption;
  • the issuer group cannot raise in aggregate more than $250,000 per distribution and is limited to two start-up distributions in a calendar year;
  • the issuer must prepare an offering document in the required form, Form 45-517F1 Start-Up Business Offering Document, which includes information about the business, the management, the offering, and the intended use of funds;
  • the issuer must provide investors with 48 hours to cancel their agreement to purchase securities;
  • the issuer must obtain a signed risk acknowledgement from investors in the required form, Form 45-517F2 Start-Up Business Risk Acknowledgment;
  • the maximum amount that an issuer can accept from an investor in a single investment is $1500, unless a registered dealer provides the investor with suitability advice, then the maximum amount increases to $5000 for that investor; and
  • the offering must close within 90 days.

[1]  Eligible securities are common shares, non-convertible preference shares, securities convertible into the foregoing, non-convertible debt securities linked to a fixed or floating interest rate, limited partnership units or investment shares that are non-convertible preference shares issued by a cooperative under the Cooperatives Act (Alberta).

[2] An “issuer group” means the issuer together with its affiliate(s), each other issuer that is engaged in a common enterprise with the issuer or its affiliate(s), or each other issuer that has a founder that is the issuer’s founder.

This article contains general information only and is not intended to provide a legal opinion or advice. Please consult a lawyer for matters related to your situation before relying on any of the statements made in this article.