Start-up crowdfunding in BC

Langley and Surrey Business Law and Tax Lawyer

Start-ups and small businesses are always looking for new ways to raise much-needed capital. When bank and other loans are unavailable or insufficient, businesses often look at offering securities (such as shares or bonds) to the public. Securities (equity) crowdfunding is the process of offering securities to public investors over an online crowdfunding portal. In recent years, US-based crowdfunding portals such as Kickstarter and Indiegogo have proliferated as an alternate method for start-ups and small businesses to raise funds.

Securities laws and crowdfunding

Securities laws come into play whenever a security is issued or traded. In BC and many other jurisdictions, the default rule is that any person who wants to issue securities (shares, bonds, or otherwise) must first (i) file and obtain a receipt for a prospectus; and (ii) utilize a registered dealer to distribute the securities.

A prospectus is a highly detailed document that includes substantial financial and legal disclosure about the investment. It may come as no surprise that the cost of preparing and filing a prospectus is prohibitive for most private companies.

Fortunately, there are exemptions to the default requirement of filing a prospectus. You may have heard of some of the more common exemptions available in BC, such as the Accredited Investor exemption, the Offering Memorandum exemption, and exemptions related to employees, executive officers, directors and consultants of an issuer. In this article, we are talking specifically about the crowdfunding exemption.

The crowdfunding exemption

In 2015, BC (together with Saskatchewan, Manitoba, Quebec, New Brunswick and Nova Scotia) allowed small businesses to raise money using online crowdfunding portals approved by the BC Securities Commission, without having to file a prospectus.

Subject to certain restrictions, BC businesses (issuers) can raise a maximum of $250,000—up to $1,500 per investor—from investors in any of the six above-noted provinces without filing a prospectus. As of May 2016, BC issuers can also raise limited amounts from investors in other jurisdictions that have adopted Multilateral Instrument 45-108 Crowdfunding, subject to the laws of those jurisdictions (including Ontario and, as of October 31, 2016, Alberta).


There are a number of other considerations worth noting under the BC rules:

  • The issuer has 90 days to raise a minimum amount (up to $250,000, as determined by the issuer), starting on the first day of the crowdfunding campaign. Money is held in trust by the funding portal until the offering closes. If the minimum amount is not reached within the 90-day period, the portal must return the money to the investors.
  • The issuer must comply with securities laws in its home province, as well as with any securities laws in any jurisdiction where its investors are located.
  • The issuer must prepare an offering document and post it on the funding portal when the crowdfunding campaign begins. It includes information about the business and the offering, how the money will be used, the minimum amount that must be raised, and any risk to the project.The offering document must be updated if information changes during the campaign.
  • Only one crowdfunding campaign can be live at the same time, to a maximum of two campaigns per calendar year.
  • Within 30 days after the campaign is closed, the offering document and a report of exempt distribution must be filed with the securities regulators in each jurisdiction where investors are located.

As well, businesses should be aware that if they decide to issue securities, this may involve giving up partial or substantial ownership and control of the business.

In summary

Securities crowdfunding is available to qualifying start-ups and small businesses in BC, subject to certain restrictions. When traditional sources of funding (such as bank loans or private loans) are not available, securities crowdfunding may be an option for BC issuers.

A final word of caution: qualifying for the crowdfunding exemption or any other exemption from the prospectus requirement involves very precise compliance with securities laws, often across multiple jurisdictions. Failure to comply with the rules can lead to significant penalties, including fines and in extreme cases, imprisonment. For these reasons, seek legal advice before offering shares or other securities to anyone, whether they live in BC or elsewhere.

Further information

At the date of writing, the BC Securities Commission has permitted seven different online crowdfunding portals for use in BC.  A list of available portals can be found on the BC Securities Commission website, along with much more detailed information about securities crowdfunding.


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