Karsten Wenzlaff, Advisor
August 26th, 2025
Karsten Wenzlaff is a Crowdfunding and Fintech Expert from Germany. He is Secretary-General of Digit[...]
Category Archives: Equity Crowdfunding, Alternative Funding
Toronto Event (April 3, 2014): Inspire the Crowd: The Rise of Crowdfunding
Toronto Lawyers Association | Chris Hope | March 28, 2014
Thursday, April 3, 2014
5:30 p.m. – 7:00 p.m.
(Registration at 5:15 p.m.)
TLA Lawyers Lounge, 2nd Floor, 361 University Avenue Court House
Crowdfunding allows groups of people to pool their resources as donors or micro angel investors for the purpose of financing specialized goods or materials. Thanks to the reach of the Internet and the popularity of sites such as indieGoGo and Kickstarter, the past year has seen an explosion of global crowdfunding initiatives. As simple as the basic concept of crowdfunding seems, in practice it is fraught with legal, ethical and regulatory pitfalls. As this trend rapidly becomes a widely employed tool in the development of the small business sector, it is critical that all business lawyers familiarize themselves with the forms and pitfalls of crowdfunding. In this Nutshell, you will learn about:
- Types of crowdfunding and the benefits/pitfalls of each
- The current regulatory position of the OSC
- Vulnerability of crowdfunding to fraud
- Risks to IP rights that crowdfunding poses
Speakers:
Chris Hope, Cassels Brock & Blackwell LLP
Jason Leung, TLA Trustee
Rick Whiler, Ontario Securities Commission
Moderator: Jason Leung, TLA Trustee
Online registration is available until: 4/2/2014
Register for this Event --> here
TMX to launch private markets business for startups, entrepreneurs
570 News via Canadian Press | March 25, 2014
TORONTO – The operator of the country’s largest stock exchange is expanding into the private sector with a new business aimed at helping Canadian startups raise money, and eventually go public.
The idea of connecting these small- to medium-sized firms with capital investments is not entirely foreign to TMX Group (TSX:X), says Kevan Cowan, president of TSX Markets and group head of equities at the company.
“For decades, we’ve been engaged in facilitating the growth and financing of young companies… These elements are not new to us,” he said in an interview Tuesday.
“We are looking to capitalize on that experience and that expertise and expand it into this area.”
TMX said the launch of TSX Private Markets will give registered dealers “access to unique investing opportunities” that will assist private firms secure key capital in the early-to-mid stage of their development.
The company, which operates the Toronto Stock Exchange, said it anticipates the service to be launched in the third quarter of this year, pending approval by the Ontario Securities Commission. The service will be overseen by TMX subsidiary, Shorcan Brokers Ltd., along with a registered exempt market dealer.
Related: Two equity crowdfunding specific exemptions taking hold in Canada
The exempt market is a cheaper alternative for companies who are not publicly listed, but has been criticized for being an easier place for fraud to take place because listed firms do not need to provide detailed documents to investors.
The move by TMX Group comes as it prepares to compete against a new proposed exchange, Aequitas Innovations Inc., which is backed by Royal Bank (TSX:RY), BCE Inc. (TSX:BCE), Canadian pension fund PSP Investments, and a number of Canadian and international brokerages.
Aequitas could be up and running later this year if it receives regulatory approval.
Cowan said the new TMX service will help address what has long been a problem for Canadian startups that find it difficult to secure the money they need to develop.
“A lot of people are looking for ways to enhance the financing opportunities for small to medium enterprises,” he said.
“We all realize that small to medium enterprises play a crucial role in our economy: they grow, they employ people and they provide investment return.”
Last week, the OSC proposed new rules to allow startups and early-stage businesses to raise up to $1.5 million a year from individuals through registered crowdfunding web portals.
Under the proposed OSC rules, investors would be limited to a maximum of $2,500 in a single investment and $10,000 per year.
Other jurisdictions including Saskatchewan, Manitoba, Quebec, New Brunswick and Nova Scotia are also considering the new rules, which are subject to a 90-day public comment period closing June 18.
Cowan said if these OSC changes go ahead, TMX can look at expanding its TSX Private Markets offering to retail investors.
Websites like Kickstarter have raised the popularity of crowdfunding, which allows entrepreneurs to pitch their ideas directly to large numbers of consumers, who then invest typically small amounts.
Canada’s Venture Capital and Private Equity Association said being able to easily secure capital funds is vital to keeping startups in Canada.
Continue to the full article --> here
Equity crowdfunding is moving forward in Canada
Canada Media Fund | Antoine van Eetvelde | March 25, 2014
Disclaimer: The following content is intended to provide general information and does not constitute legal or tax advice of any kind. Refer to your local tax credit administrator for more specific guidelines on reporting crowdfunding income for tax credit purposes.
The end of 2013 and the beginning of 2014 saw a number of significant regulatory developments regarding crowdfunding, both here in Canada and in the US. In particular, the US and certain Canadian provinces made significant progress toward making investment crowdfunding a reality. In addition, the Canada Revenue Agency came forward with official comments on how crowdfunding fits into the current income tax framework.
What follows is a summary of the latest significant regulatory developments in North America.
The CRA takes position on crowdfunding
The Canada Revenue Agency (CRA) has broken its silence and come forward with official comments regarding how crowdfunding income should be reported from a taxation perspective.
In October 2013, the CRA released comments and technical interpretations in a series of published responses to specific questions on the issue. The technical interpretations state that while some crowdfunding situations require a case-based interpretation, the CRA’s general interpretation is that most donation- or rewards-based crowdfunding campaigns would be considered as “voluntary payments (or other transfers of benefits) received by virtue of a profession or by virtue of carrying on a business”, which are considered to be taxable receipts.
This ruling has important implications for creative projects that may want to access other forms of support such as production tax credits. While the CRA has not published an official position or guidelines with respect the interplay between crowdfunding and labour-based refundable tax credits (e.g., the Canadian Film or Video Tax Credit), this broader statement on crowdfunding monies may mean that project owners seeking tax credit support for their projects should report any crowdfunding income as they would report other forms of business income.
Further reading
- Treatment of funds obtained through “crowdfunding” received by a taxpayer (CRA Document # 2013-048494 )
- What is the tax treatment of amounts received through crowdfunding? (CRA Document #2013-050897)
- What is the tax treatment of amounts received through crowdfunding? (CRA Document #2013-050910)
Equity crowdfunding is moving forward
Saskatchewan became the first Canadian province to officially make special provisions that legalize investment crowdfunding.
Following pressure from local entrepreneurs and in accordance with the province’s new growth plan, the Financial and Consumer Affairs Authority (FCAA) released a proposed equity crowdfunding prospectus exemption in October 2013, which led to a month-long public consultation process.
In December 2013, the FCAA approved and released the final Saskatchewan Equity Crowdfunding Exemption. The new exemption allows local start-ups and small businesses to sell securities to the general public (i.e., local, non-accredited investors) via crowdfunding as an alternative way to finance their business. The catch is that the exemption only applies to businesses and investors located in Saskatchewan, serving as a reminder of the core challenge of giving Canadian entrepreneurs and investors access to investment crowdfunding in a decentralized securities regulation system.
Related: Two equity crowdfunding specific exemptions taking hold in Canada
Key features of the Saskatchewan Equity Crowdfunding Exemption:
- Both the business and the investor must be located in Saskatchewan.
- Businesses can make two offerings of $150,000 each over the course of a year and each offering period cannot exceed 6 months.
- No person may invest more than $1,500 in an offering.
- Businesses must give the FCAA notice of their intention to issue an offering 10 business days before posting online.
- Businesses must report sales from the offering to the FCAA within 30 days of the offering’s close.
- Crowdfunding platforms (referred to as portals in the document) are not required to register as dealers or advisers with the securities regulator. However, they are obligated to submit an information and identification form with the FCAA 30 days prior to offering equity crowdfunding services.
- Platforms are obliged to verify that both the issuers and investors are located in Saskatchewan.
- Platforms must require that investors read and acknowledge the standard Important Risk Warnings statement before allowing them to complete their transaction.
- Platforms cannot release funds to the issuer until the minimum amount required to close the offering has been attained. (In other words, they have to follow the all-or-nothing model.)
For more information, see the full General Order document
Continue to the full source page --> here
The National Crowdfunding Association of Canada (NCFA Canada) is a cross-Canada crowdfunding hub providing education, advocacy and networking opportunities in the rapidly evolving crowdfunding industry. NCFA Canada is a community-based, membership-driven entity that was formed at the grass roots level to fill a national need in the market place. Join our growing network of industry stakeholders, fundraisers and investors. Increase your organization’s profile and gain access to a dynamic group of industry front runners. Learn more About Us | Prezi or contact us at casano@ncfacanada.org.
Crowdfunding Alert: Ontario Securities Commission Releases Equity Crowdfunding Exemption Proposal
Dentons | Andrea C. Johnson and Andre Garber | March 25, 2014
Following a lengthy consultation period and broad review, the Ontario Securities Commission ("OSC") has unveiled a series of proposed prospectus exemptions aimed at growing small and medium-sized enterprises ("SMEs"). Among the exemptions that will facilitate new fundraising and innovation avenues for start-ups is a set of guidelines that would open the door to equity crowdfunding (the "Crowdfunding Exemption").
While a number of platforms have gained significant popularity in the crowdfunding realm, websites like Kickstarter and Indiegogo have limited fundraising to donation and rewards-based campaigns. This means that a SME could solicit contributions as donations or in exchange for a tangible good (for example, the product the supporter is funding) but could not raise money in exchange for a stake in their company. Once finalized, the Crowdfunding Exemption would be a game-changer for SMEs looking for venture capital and broaden the pool of prospective investors.
Related: Two equity crowdfunding specific exemptions taking hold in Canada
In a typical securities distribution, SMEs must comply with strict guidelines with respect to the type and size of offering, what kinds of disclosure must be prepared for prospective shareholders, and who can participate in the offering. The proposal put forth by the OSC is an exemption that allows equity crowdfunding investments with certain limits and conditions.
The Crowdfunding Exemption will introduce significant changes for investors, issuers, and portals through regulation that will allow for equity investments from, generally, non-accredited investors. The use of technology will create efficient and low-cost mechanisms for raising capital and making securities offerings online. The OSC has proposed the following safeguards:
Issuer Requirements
- To qualify for this proposed exemption, a company must be incorporated or organized under Canadian laws and have its head office in Canada. The majority of the company's directors must also be resident in Canada;
- The Crowdfunding Exemption will be available to both public companies (reporting issuers) and private companies (non-reporting issuers);
- A company's raise is capped at $1.5 million for any calendar year under the Crowdfunding Exemption;
- The offering must be completed within 90 days, and must disclose the minimum offering size and whether there is a maximum offering size. A successful offering must fully subscribe the minimum offering and the issuer must have the financial resources to carry out activities outlined in the business plan;
- Equity can only be issued in the form of common shares, non-convertible preferred shares, non-convertible debt securities linked only to fixed or floating interest rates, securities convertible into common shares, units of a limited partnership, and flow-through shares under the Income Tax Act; and
- The company can only solicit for their campaign through a crowdfunding portal or on their own website and through the use of limited marketing materials, but are free to leverage social media to drive traffic to their fundraising page.
Related:
-
OSC proposes four new capital raising exemptions
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Canadian securities regulators propose new crowdfunding exemptions
Investor Protection Measures
- An investor may contribute up to $2,500 per investment under the proposed exemption, and no more than $10,000 in a calendar year;
- The company must provide investors with an abbreviated information statement at the time of investment (for example, on the company's crowdfunding portal landing page) that outlines basic information about the company, the fundraising platform, and one year of financial statements;
- Investors must sign a risk acknowledgement confirming investment eligibility, and consent to the prospect of losing their entire investment. In connection with this acknowledgement, the proposed exemption includes a two-day "cooling off" period that allows the investor to withdraw if there is lingering uneasiness;
- The company is required to produce and distribute streamlined disclosure – at its most basic form, disclosure of the issuer's cash and annual financial statements – and to maintain accurate records regarding the use of capital raised. Following the campaign, issuers must provide ongoing continuous disclosure; and
- Resale of securities is subject to a four-month hold period for reporting issuers and an indefinite hold period for non-reporting issuers.
Continue to the full article --> here
Crowdfunding proposals support economy, says NCFA
Advisor.ca | Staff | March 25, 2014
Last week, six provincial regulators released proposals for crowdfunding prospectus exemptions that would help early-stage companies raise capital.
The proposals represent a significant leap forward and positive progress for economic growth, as well as for crowdfunding advocates such as the National Crowdfunding Association of Canada (NCFA Canada).
“[Last year] was [about] awareness and community building for us,” says Craig Asano, executive director of NCFA Canada. Now, “2014 [will] be busier than ever” since the crowdfunding industry is full of emerging entrepreneurs and investors.
Related: Two equity crowdfunding specific exemptions taking hold in Canada
The industry continues to grow, adds the association, with global crowdfunding markets increasing from US$1.5 billion in 2011 to US$5.1 billion in 2013, according to U.S.-based research.
Background
Proposed start-up exemptions (one has already been adopted in Saskatchewan last December) would allow start-ups and SMEs in more provinces to raise up to $300,000 per 12-month calendar year.
As well, investors could offer up to $1,500 per deal on crowdfunding portals that distribute offerings for up to 90 days online. The start-up exemption is based-on the Saskatchewan model, and provincial regulators in B.C., Manitoba, Quebec, New Brunswick and Nova Scotia are seeking public comment until June 18, 2014.
Ontario is offering a second version of the proposals, says NCFA Canada. It’s called the crowdfunding exemption and its creation has been a collaborative effort between Ontario, Manitoba, Quebec, New Brunswick and Nova Scotia, with the OSC leading the initiative by setting up a dedicated task force.
View: OSC proposes four new capital raising prospectus exemptions (public comments until June 18, 2014)
That force has conducted research, hosted numerous town halls and reached out to various community stakeholders to engage in consultation sessions. The new crowdfunding exemption has higher caps and limits than the Saskatchewan model: start-ups and SMEs could raise up to $1,500,000 per 12-month calendar year, with investors being able to invest up to $2,500 per deal and up to $10,000 per year.
Canadian “regulators should be commended for their thoughtful and consultative approach,” says Daryl Hatton, CEO and founder of FundRazr, Canada’s leading crowdfunding portal. “The proposed regulations have some great characteristics and will help propel Canadian early-stage companies from the farm team to the big leagues.”
Continue to the full article --> here
Canada’s National Crowdfunding Association Applauds Regulators for Setting the Stage for Crowdfunding Success
CNW - NCFA Press Release | March 24, 2014
TORONTO, March 24, 2014 /CNW/ - On March 20, 2014, a total of six (6) provincial regulators announced two main proposals for new Crowdfunding prospectus exemptions that would allow early stage companies such as start-ups and SMEs to raise up to $1.5 million of capital online through the issuance of securities.
This represents a significant leap forward and positive progress for Crowdfunding advocates such as the National Crowdfunding Association of Canada (NCFA Canada), who has been working diligently with key industry stakeholders, government, regulators, media, eco-system partners and academia, since launching in October 2012, to provide education, research and valuable input into the developmentof a viable 'made in Canada' framework.
"While 2013 was a year of 'awareness and community building' for NCFA Canada, 2014 should prove to be busier than ever. We want to thank all of the Association's founding members, sponsors, directors, advisors, ambassadors, and members for all of their support. We are on the cusp of building something great together - we need your continued support", said Craig Asano, Executive Director of NCFA Canada.
The crowdfunding industry is exploding with entrepreneurs, investors, portal operators, third party service providers and experts from around the world who are all jockeying for position to take advantage of a promising and brand new fundraising channel for small to medium sized enterprises (SMEs). The industry continues to grow at a tremendous rate with global crowdfunding markets increasing from $1.5 billion in 2011 to $5.1 billion in 2013, according to US-based Massolution's industry research report. NESTA, a UK charity focused on innovation initiatives predicts that within 5 years crowdfunding could grow to £15 billion pounds in the UK alone.
The proposed "Start-up Exemption", which has already been adopted in Saskatchewan (SK) last December 2013, would allow start-ups and SMEs to raise up to $300,000 per 12 month calendar year. Investors can invest up to $1,500 per deal on crowdfunding portals that distribute offerings for up to 90 days online. The Start-up Exemption is based-on the Saskatchewan model and provincial regulators in British Columbia, Manitoba, Quebec, New Brunswick and Nova Scotia are seeking public comments until June 18, 2014.
A second proposal is Ontario's version called the 'Crowdfunding Exemption', which has been a collaborative effort between Ontario, Manitoba, Quebec, New Brunswick and Nova Scotia, with the Ontario Securities Commission leading the initiative by setting up a dedicated task force that has conducted a remarkable amount of research, hosted numerous town halls and reached out to various community stakeholders to engage in consultation sessions. The 'Crowdfunding Exemption' has higher caps and limits than the SK model, and would allow start-ups and SMEs to raise up to $1,500,000 per 12 month calendar year with investors being able to invest up to $2,500 per deal and up to $10,000 per year.
Related:
-
Two equity crowdfunding specific exemptions taking hold in Canada
-
Canadian securities regulators propose new crowdfunding exemptions
"The regulators should be commended for their thoughtful and consultative approach. The proposed regulations have some great characteristics and will help propel Canadian early stage companies from the farm team to the big leagues," said Daryl Hatton, CEO/Founder of FundRazr, Canada's leading crowdfunding portal based in B.C.
"Crowdfunding powers business growth and is a strong economic generator for start-ups and SMEs who need capital and investors to fuel innovation, create jobs and compete on the global stage. SMEs are the backbone of Canada's economy representing approximately 50% of GDP an employing 55% of all the jobs in Ontario alone," said Debra Chanda, President of Launch 120, and newly appointed Advisor at NCFA Canada.
In international jurisdictions such as Australia, where equity crowdfunding has been legally permitted for over 5 years, leading portal ASSOB (Australian Small Scale Offerings Board) has raised over $130 million in seed and growth capital for over 130 companies of which 83% of them are still operating without a single incident of fraud.
Crowdfunding was in the spot light in 2013 with the number of Canadian portals more than tripling from 17 in 2012 to over 70 in March 2014, according to the NCFA Canada Crowdfunding Directory. "We've enjoyed high growth last year and the demand for portal software continues to ramp up," said Brock Murray, CEO and Co-founder of Katipult, Canada's leading crowdfunding portal software provider.
View: NCFA Canada equity crowdfunding principles and response to OSC staff consultation paper 45-710
Craig Asano enthused, "We're thrilled that there is such wide support to adopt equity crowdfunding exemptions in various provinces across Canada. The proposed regulations will benefit all Canadians and the entire capital raising eco-system by working to fill the 'funding gap' and pave the way for Canada to support a thriving entrepreneurial culture to compete with other international regions that accelerate growth and provide supportive funding environments."
"We're hopeful that over time, data collected from crowdfunding transactions will enable regulators to 'right size' policy and edge closer to a harmonized set of rules and also lay the foundation for a second market. Education and due diligence will be of the highest importance to ensure early stage crowdfunding markets formed around 'The Start-up Exemption' and the 'Crowdfunding Exemption' proposals are efficient, sustainable and safe for investors," said Myles Harding, President of Inline Reference Check, a leading background and due diligence company.
The National Crowdfunding Association of Canada (NCFA Canada) is Canada's Crowdfunding Advocate. Newly formed, dynamic and inclusive, the NCFA Canada works closely with industry groups, government, academia, other business associations and affiliates to create a strong and vibrant crowdfunding industry and voice across Canada. Membership is comprised of a network of professional individuals, companies and non-profit associations (students are most welcome) interested in crowdfunding markets in Canada and beyond. The National Crowdfunding Association of Canada is a networking and solutions-based organization to provide advocacy, education, support and leadership to Canadian crowdfunding communities. For more information please visit ncfacanada.org.
SOURCE: National Crowdfunding Association of Canada (NCFA Canada)
For further information: Craig Asano, National Crowdfunding Association of Canada, Executive Director, (416) 618-0254, ncfacanada.org, casano@ncfacanada.org
Market regulator unveils crowdfunding rules
The Toronto Star | By: Madhavi Acharya-Tom Yew | March 21, 2014
Proposed rules would protect investors by putting caps on how much equity companies could raise through online sites that raise capital.
Canada’s premier stock market watchdog has proposed a set of new rules that would lay the groundwork for small companies in Ontario to be able to raise capital online via the Internet.
The new proposals, released by the Ontario Securities Commission on Thursday, would also protect investors by putting caps on how much equity companies could raise through so-called crowdfunding, and requiring these online sites to be registered with securities regulators.
More broadly, the guidelines are meant to give start-ups and small and medium-sized companies – firms that may find it difficult, costly and time consuming to go through the process of issuing a prospectus – access to a broader pool of potential investors.
“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,” Howard Wetston, chair and chief executive officer of the Ontario Securities Commission said in a release.
View: Six provinces propose a new start-up crowdfunding exemption based on the Saskatchewan crowdfunding exemption model
The conditions would allow companies to raise up to $1.5 million in a 12-month period through an online portal that is registered with the securities commission.
Investors would be able to put up no more than $2,500 in a single investment and $10,000 in a calendar year. In return, they would receive a form that highlights key risks associated with the investment and receive ongoing disclosure from the company.
“We’re cognizant of the challenges associated with investing. We also recognize that no matter what level of investing, we want to ensure investors have some appreciation of the risk,” Wetston said in an interview.
Since the portal, or crowdfunding site, would be registered with the OSC as a “restricted dealer,” it would be required to perform background checks on companies and criminal record checks on directors and officers. It would also be required to carry insurance and deny access to an issuer “that appears to be false, deceptive, misleading or contains a misrepresentation,” according to the proposal.
Related: Two Equity Crowdfunding Specific Exemptions Taking Hold in Canada
The OSC would have oversight of the portal through its registration, Wetston said.
Those requirements are meant to balance the issues of capital raising with investor protection, he said. “It’s also important for the issuer that’s raising money. They want to raise capital and if they are going to do it this way, they need to be in a system that has the appropriate opportunities but also the appropriate protection.”
Crowdfunding is relatively new territory for the Ontario Securities Commission. In September, 2013, the OSC registered MaRS VX, a not-for-profit online portal for “impact investing” as a restricted dealer in Ontario. The site aims to connect accredited investors, those deemed to have a certain level of net assets, income and knowledge, with ventures that address social or environmental challenges.
The other guidelines would allow “a wide range of businesses at different stages of development” would be able to raise capital based on an offering memorandum, rather than a prospectus.
