On July 26, 2016, the Alberta Securities Commission (ASC) adopted a start-up business exemption (ASC Rule 45-517 Prospectus Exemption for Start-up Businesses), which is designed to be a simpler and less costly capital-raising alternative for Alberta-based start-up businesses. The start-up business exemption is intended to respond to the difficulties that start-up businesses may encounter when they are unable to cost-effectively rely on other capital-raising exemptions.

The start-up business exemption provides a prospectus exemption for Alberta-based start-ups for capital raising up to $250,000 per distribution and up to a lifetime aggregate of $1 million. In addition, the exemption can be used with or without a funding portal or other registered dealer.

In addition, the ASC has also proposed to adopt a crowdfunding exemption (Multilateral Instrument 45-108 Crowdfunding), which provides a prospectus exemption for crowdfunding financings conducted through an online funding portal. If adopted, the crowdfunding exemption would facilitate larger financings than those permitted under the start-up business exemption.

The Start-up Business Exemption

1. Who can Use the Exemption?

The start-up business exemption is available to an issuer who is not an investment fund or reporting issuer in any jurisdiction of Canada and is not subject to similar reporting obligations in a foreign jurisdiction. The head office of the issuer must be located in Alberta or a jurisdiction of Canada that has adopted a corresponding prospectus exemption substantially similar to the Alberta rule.

An issuer may concurrently conduct a "start-up business distribution" (referring to a distribution under ASC Rule 45-517 or a corresponding exemption) in both Alberta and one or more of the jurisdictions with a similar rule; however, the corresponding exemptions currently in existence do not contemplate a start-up business distribution under ASC Rule 45-517.1

2. What Type of Securities are Eligible?

To rely on the start-up business exemption, an issuer may only distribute the following eligible securities:

  1. common shares;
  2. non-convertible preference shares;
  3. securities convertible into common shares or non-convertible preference shares;
  4. non-convertible debt securities linked to a fixed or floating interest rate;
  5. limited partnership units; or
  6. investment shares that are non-convertible preference shares issued by a cooperative organized under the Cooperatives Act (Alberta).

3. What are the Capital-Raising Limitations?

Issuer Limitations

Under the start-up business exemption, the issuer cannot raise more than $250,000 per distribution. In addition, the issuer can only conduct two start-up business distributions in each calendar year with a lifetime aggregate limit of $1 million for all start-up business distributions. All funds raised by the "issuer group" count towards these limits.

The capital-raising limitations are applicable to an issuer and other members of the "issuer group", which includes each affiliate of the issuer and each other issuer that is engaged in a common enterprise with the issuer or within an affiliate, or has the same founder as the issuer does. A "founder" is a person who takes the initiative in founding, organizing or substantially reorganizing the business of the issuer, and at the time of the distribution or trade is actively involved in the business of the issuer.

Investment Limits

The exemption also sets forth a limit on the amount that can be raised from any particular investor. The maximum amount of any single subscription cannot exceed $1,500; however, if a registered dealer provides advice that the subscription is suitable for the investor, then the maximum subscription from that purchaser increases to $5,000.

No Commissions or Fees

The exemption prohibits payment of a commission, fee or similar payment to the issuer group or any of their principals, employees or agents with respect to a start-up business distribution; however, this is not intended to prevent payments for professional services in connection with a distribution, such as accounting or legal fees.

4. What are the Disclosure Requirements?

Offering Document and Risk Acknowledgements

To rely on the start-up business exemption, the issuer or the dealer is required to deliver to each investor an offering document to enable such investor to make an informed investment decision. Such offering document must be in the required form, which includes certain information about the issuer's business, its management, the offering and the minimum offering amount. In addition, a signed risk acknowledgement in the prescribed form must be obtained from each investor, which sets out certain risks associated with the distribution.


Investors may cancel their offers to purchase the securities within 48 hours by delivering a notice to the issuer or the dealer (if any).

Closing Requirements

If the minimum offering amount has been raised within 90 days, the issuer may proceed to close the distribution. Within 30 days following the closing, the offering document and a report of exempt distribution must be electronically filed through SEDAR. Also, within such period, the issuer must deliver to each investor a confirmation setting out: (a) the date of the subscription and the closing of the distribution; (b) the quantity and description of the securities purchased; (c) the purchase price per security; and (d) the total commission, fee and other similar amounts.

The Crowdfunding Exemption

If adopted, the crowdfunding exemption would allow Alberta issuers to raise somewhat larger amounts through crowdfunding offerings across multiple jurisdictions in Canada. The framework of the proposed exemption consists of the following two parts:

  1. a prospectus exemption; and
  2. a requirement that the distribution be conducted through a funding portal that is registered as either a "registered dealer funding portal" or a "restricted dealer funding portal".

Both the offering parameters and investment limits are higher under the crowdfunding exemption than under the start-up business exemption as follows:

  • The total proceeds raised by the issuer group in reliance on the crowdfunding exemption cannot exceed $1,500,000 within a 12-month period.
  • If an investor is not an accredited investor, the issuer cannot accept a subscription of more than $2,500 per distribution from that investor (and in Alberta and Ontario, not more than $10,000 in all distributions under the crowdfunding exemption in a calendar year).

If an investor is an accredited investor (but not a permitted client), the issuer cannot accept a subscription of more than $25,000 per distribution from that investor (and in Alberta and Ontario, not more than $50,000 in all distributions under the crowdfunding exemption in a calendar year).


  1. On May 14, 2015, British Columbia, Manitoba, Nova Scotia, New Brunswick, Québec and Saskatchewan adopted local blanket orders, which provide registration and prospectus exemptions for crowdfunding offerings. ASC Rule 45-517 is drafted to facilitate a start-up business distribution in Alberta and one or more of the jurisdictions that have adopted these local blanket orders; however, the blanket orders do not contemplate a distribution under ASC Rule 45-517.