The escalator guiding ambitious entrepreneurs up the crowdfunding ascent toward meaningful capitalization according to the unique requirements that characterize different stages of their evolution makes its next stop at the Offering Memorandum exemption.
Like the other exemptions under current consideration by Canada’s provincial regulators who are trying to assign parameters to crowdfunding legislation in this country, the Offering Memorandum exemption introduces a means of raising funds for Canadian startups in a way that gives the most amount of protection for investors and the least amount of cost and hassle for recipients.
Like the existing model that’s been available for a long while in most Canadian jurisdictions outside of Ontario, this proposed exemption is remarkable for the absence of limits it imposes on its fundraising abilities.
At the same time, however, this exemption — which is kind of like a baby IPO — distinguishes itself with a few more hoops for jumping through than those called for in proposed crowdfunding exemptions designed to cater to companies in earlier stages of their lives.
Among them: an obligation that the fund-seeking company put together a fairly detailed self-description and abide by a requirement for a detailed level of disclosure. In addition, audited financial statements are called for beyond a certain level of money raised. While there are no restrictions imposed on the issuer, there’s a $10,000 limit for individual investors unless they obtain suitability advice. More than that, investors taking advantage of this exemption are required to sign a risk acknowledgement form.
While the Offering Memorandum exemption has been available in most of Canada for some time, few companies have yet to take advantage of it. Speculation abounds, however, on whether it will attract more attention and usage as the corporate world turns its focus on the other crowdfunding exemptions under consideration.