Crowdfunding Alert: OSC Extends Comment Period For New Prospectus Exemptions

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The Ontario Securities Commission (“OSC”) is actively taking steps to make capital raising easier for start-ups. In late 2012, the OSC published Staff Consultation Paper 45-710, seeking feedback on proposed new prospectus exemptions in Ontario. In a recent announcement, the OSC has extended the deadline for submitting comments to March 8, 2013.

The Consultation Paper seeks feedback from stakeholders on four concept ideas:

- Crowdfunding

- Offering Memorandum prospectus exemption in Ontario

- Exemption based on investment knowledge

- Exemption based on registrant advice

If adopted, start-ups will particularly benefit from the equity crowdfunding concept.  Equity crowdfunding allows early stage companies to raise funds from investors in return for an equity stake in the company. Think "Kickstarter" with shares instead of rewards. Subject to certain investor protection measures, issuers would be able to make prospectus exempt securities offerings over the Internet. This will increase capital raising efficiency and reduce both financing and ongoing disclosure costs. Click here for a more complete review of crowdfunding in Canada.

This is a great opportunity for various stakeholders to contribute comments on the proposed exemptions. Please contact Andrea Johnson or any other member of our technology team if you would like to make a submission or have any questions regarding the consultation.

Andrea Johnson is a partner in FMC's Ottawa office. Her practice focuses on corporate and securities law, with an emphasis on technology and emerging growth companies.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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