The Ontario Securities Commission has announced a number of new rules it hopes will make it easier for small and medium-sized businesses, along with new startups, to raise capital.
The OSC is proposing four new ways for businesses to sell securities without a prospectus – a detailed legal document intended to inform potential investors about a company and its finances.
The new rules are subject to a 90-day public consultation period and could be changed before they come into force.
The proposed rules include an exemption for crowdfunding that would allow businesses to raise up to $1.5 million through approved equity crowdfunding portals.
The system would work in a similar way to existing crowdfunding sites like Kickstater and Indiegogo but would give investors – who could invest up to $2,500 in an individual venture – equity in the company. The OSC would regulate equity crowdfunding portals.
Also proposed are new rules that would allow companies to issue securities through an offering memorandum, rather than a prospectus. That exemption already exists in every other province.
An offering memorandum requires less detail and can be obtained sooner after a company launches but still requires details like audited financial information.
Also on the table is “a family, friends and business associates exemption,” which would allow businesses to sell securities to people the owners know well. That would also bring Ontario rules in line with those in other provinces.
The other exemption would allow companies that are already traded on the Toronto Stock Exchange, the TSX Venture Exchange and the Canadian Securities Exchange to issue some new securities without requiring a new prospectus.
“Today we have proposed new tools, which will transform Ontario's exempt market by providing greater access to capital for businesses and expanding investment opportunities for investors,” said Howard Wetston, chair and CEO of the OSC, in a press release.
“We have done so in a balanced and responsible manner that is intended to facilitate capital raising while maintaining an appropriate level of investor protection. We look forward to receiving input on these proposals, which are tailored to address the needs of Ontario’s capital markets.”