What is a security?

A financial asset which can represent either partial ownership in a company (via shares) or a creditor relationship with a company (via bonds). Some types of securities include: common and preferred shares, warrants, bonds, units in a resort property, and more. Learn more about how this affects your business here.

What is a Security Regulatory Authority (SRA)?

An organization that administers the security act in each province or territory in Canada. Click here to visit the Ontario Securities Commission’s site. Click here to learn more about how this involves crowdfunding.

Do Security Acts in Canada regulate only Public Companies?

No. In Canada, both Public and Private companies are regulated by the Security Acts, and by extension, a Security Regulatory Authority. 

We are a private company issuing securities to raise funds, do securities law apply to us?

Yes, securities law applies to any issuer. Securities laws tend to apply from the moment of incorporation.

Can I raise the private capital I need without using a prospectus exemption?

No, as doing so would be a violation of all Canadian security acts. Click here to skip to prospectus exemptions.

Has my company been benefiting from relying on an exemption without knowing it?

Probably; many SMEs benefit from relying on a Private Issuer exemption from their inception. If your company isn't a public company or an investment fund, it has probably relied on the private issuer exemption.

How do I know that I qualify as a private issuer?

In exchange for partial ownership in your company (security), you can raise money from your family, friends and close business associates, and/or reach out to the general public for private funds; by choosing this path you are officially a private issuer and are required to issue your private security using a prospectus exemption.

What does “close personal friend” or “close business associate” mean?

Whether a person qualifies as either your close personal friend or a close business associate, depends on the length of the time the two individuals have known each other, the nature of the relationship (including frequency of contact), and the total number of close personal friends or close business associates being claimed. A person can’t qualify as either of these solely because you are members of the same club.

What are the implications to me if I raise private capital without a prospectus exemption?

If you or your firm is found to have acted in a manner that the SRA considers:
a) Contrary to the public interest,
b) Misleading, inaccurate or untrue,
c) Fraudulent or fictitious or
d) Did not consider the appropriateness of the investment with respect to the suitability to the investor, the SRA can issue fines and sanctions that could prevent you from operating your business.

Can I sell my securities privately without being registered with an SRA?

Yes; however, if you are issuing securities using a prospectus exemption, you are participating in the exempt market and you need to use a registered dealer like Equivesto, which is an exempt market dealer (EMD).

What is the exempt market?

It’s a section of Canada’s capital markets where securities can be sold. In order to sell securities in the exempt market, you need to be registered with an SRA.

How do I manage the number of shareholders?

We help every company we work with to prepare for this. As part of your application, our team reviews your current structuring, shareholder’s agreement, and cap table and provide recommended and required changes to discuss with your lawyer before moving forward. We provide several documents which we provide to each company, and we have detailed recommendations and instructions related to managing that number of shareholders In addition, we will work with you directly to ensure you are comfortable and understand everything clearly before moving forward with any transactions.