Support for equity crowdfunding as an alternative means of business finance is growing in Canada, with Ontario becoming the latest province to pass changes allowing the public to invest in small businesses through crowdfunding.
The Ontario Securities Commission’s new rules will allow businesses to offer equity stakes through registered crowdfunding platforms, including those operating online.
In total, six Canadian provinces now allow equity crowdfunding including British Columbia, Quebec and Nova Scotia. The new laws will come into force on January 28th, 2016.
Websites like Kickstarter, Indiegogo and Patreon already operate in Canada, but investors cannot receive an interest in the business.
The new rules will also make using crowdfunding less complicated for businesses, allowing them to issue an 11-point disclosure document about their business rather than a 38-point prospectus detailing every aspect of the company. This move should make crowdfunding more appealing and attainable for both businesses and investors. Like in the UK, crowdfunding platforms will still be required to run background checks and other due diligence on companies and investors.
OSC chairwoman Monica Kowal said in a statement:
“It’s specifically geared toward helping small- and medium-sized enterprises … leverage the Internet and social media to connect with investors who have an appetite to invest in startups and other companies that are hungry for capital.”
Last Friday, the U.S. Securities and Exchange Commission (SEC) changed their rules to allow companies to offer securities through crowdfunding, deregulating the sector to a model similar to that in the UK. UK-based crowdfunding platform Seedrs has already announced plans to expand into the US on this news.
Prior to this many individual states passed legislation regulating crowdfunding however the impact of this was limited as funding could not be found across state lines.
With the US and Canada getting on board with crowdfunding, there is no doubt that the sector continue to expand as a viable source of business finance.
Miranda Wadham on 06/11/2015
