Invest Crowdfund Québec

Pour l'adoption d'Invest Crowdfunding au Québec | For the adoption of Invest Crowdfunding in Quebec

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Response to the AMF Equity Crowdfunding Exemption Proposal

We are honoured to take part in the consultative process of what we believe to be this decade’s most innovative solution to Canada’s financial gap. Without further a due, we present to you our response to the Autorité des marchés financiers with regards  to the new equity crowdfunding exemption REG 45-108.

We applaud the Autorité des marchés financiers (hereinafter «Autorité») on their initiative to expand the application of equity crowdfunding to established businesses and start-ups. We would also like to thank the National Crowdfunding Association of Canada and team for their support and awareness-building initiative.

Our feedback was requested on the following set of 27 questions:

Crowdfunding Exemption
Issuer qualification criteria

1) Should the availability of the Crowdfunding Exemption be restricted to non-reporting issuers?

2) Is the proposed exclusion of real estate issuers that are not reporting issuers appropriate?

3) The Crowdfunding Exemption would require that a majority of the issuer’s directors be resident in Canada. One of the key objectives of our crowdfunding initiative is to facilitate capital raising for Canadian issuers. We also think this requirement would reduce the risk to investors. Would this requirement be appropriate and consistent with these objectives?

Offering parameters

4) The Crowdfunding Exemption would impose a $1.5 million limit on the amount that can be raised under the exemption by the issuer, an affiliate of the issuer, and an issuer engaged in a common enterprise with the issuer or with an affiliate of the issuer, during the period commencing 12 months prior to the issuer’s current offering. Is $1.5 million an appropriate
limit? Should amounts raised by an affiliate of the issuer or an issuer engaged in a common enterprise with the issuer or with an affiliate of the issuer be subject to the limit? Is the 12-month period prior to the issuer’s current offering an appropriate period of time to which the limit should apply?

5) Should an issuer be able to extend the length of time a distribution could remain open if subscriptions have not been received for the minimum offering? If so, should this be tied to a minimum percentage of the target offering being achieved?

Restrictions on solicitation and advertising
6) Are the proposed restrictions on general solicitation and advertising appropriate?

Investment limits

7) The Crowdfunding Exemption would prohibit an investor from investing more than $2,500 in a single investment under the exemption, and more than $10,000 in total under the exemption in a calendar year. An accredited investor can invest an unlimited amount in an issuer under the AI Exemption. Should there be separate investment limits for accredited investors who invest through the portal?

Statutory or contractual rights in the event of a misrepresentation

8) The Crowdfunding Exemption would require that, if a comparable right were not provided by the securities legislation of the jurisdiction in which the investor resides, the issuer must provide the investor with a contractual right of action for rescission or damages if there is a misrepresentation in any written or other materials made available to the investor (including video). Is this the appropriate standard of liability? What impact would this standard of liability have on the length and complexity of offering documents?

Provision of ongoing disclosure

9) How should the disclosure documents best be made accessible to investors? To whom should the documents be made accessible?

10) Would it be appropriate to require that non-reporting issuers provide financial statements that are either audited or reviewed by an independent public accounting firm? Are financial statements without this level of assurance adequate for investors? Would an audit or review be too costly for non-reporting issuers?

11) The proposed financial threshold to determine whether financial statements are required to be audited is based on the amount of capital raised by the issuer and the amount it has expended. Are these appropriate parameters on which to base the financial reporting requirements? Is the dollar amount specified for each parameter appropriate?

12) Are there other requirements that should be imposed to protect investors?

Crowdfunding Portal Requirements
General registrant obligations

13) The Crowdfunding Portal Requirements provide that portals will be subject to a minimum net capital requirement of $50,000 and a fidelity bond insurance of at least $50,000. The fidelity bond is intended to protect against the loss of investor funds if, for example, a portal or any of its officers or directors breach the prohibitions on holding, managing, possessing or
otherwise handling investor funds or securities. Are these proposed insurance and minimum net capital amounts appropriate?

Additional portal obligations

14) Do you think an international background check should be required to be performed by the portal on issuers, directors, executive officers, promoters and control persons to verify the qualifications, reputation and track record of the parties involved in the offering?

Prohibited activities

15) The Crowdfunding Portal Requirements would allow portal fees to be paid in securities of the issuer so long as the portal’s investment in the issuer does not exceed 10%. Is the investment threshold appropriate? In light of the potential conflicts of interest from the portal’s ownership of an issuer, should portals be prohibited from receiving fees in the form
of securities?

16) The Crowdfunding Portal Requirements restricts portals from holding, handling or accessing client funds. Is this requirement appropriate? How will this impact the portal’s business operations? Should alternatives be considered?


17) Are there other requirements that should be imposed on portals to protect the interests of  investors?

18) Will the regulatory framework applicable to portals permit a portal to appropriately carry on business?

Start-Up Exemption

19) Considering that the Start-Up Exemption will be substantially harmonized amongst the  Participating Jurisdictions, it is our intention to allow a portal established in one Participating Jurisdiction to post offerings from issuers established in another Participating Jurisdiction.

Also, portals established in one Participating Jurisdiction would be allowed to open their offerings to investors from other Participating Jurisdictions. Do you see any problems with this approach?

20) One of the major differences between the Crowdfunding Exemption and the Start-Up Exemption is that there is no registration requirement for the portal under the Start-Up Exemption. Do you think there are appropriate safeguards to protect investors without the registration of the portal? If not, please indicate what requirements should be imposed to the portal in order to adequately protect investors.

21) We are considering imposing a limit per calendar year of 2 capital raises by an issuer of a maximum amount of $150,000 under the exemption ($300,000 per year). Are these limits appropriate? If not, please provide what you would consider acceptable limits given the parameters of the proposed exemption.

22) The Start-Up Exemption would prohibit an investor from investing more than $1,500 in a single investment under the exemption. Is this limit appropriate? Should there also be a limit on the dollar amount that may be invested on a yearly basis by an investor?

23) Should there be minimal ongoing disclosure that issuers be required to provide to their security holders? If yes, what should it be?

24) We expect issuers using the Start-Up Exemption to maintain the information provided in the Issuer Information form and the Offering Document form updated throughout the distribution period. Should there be an obligation for issuers to further update that information outside the distribution period?

25) Should investors have the right to withdraw their subscription at least 48 hours prior to the disclosed offering deadline, as proposed under the Crowdfunding Exemption?

26) For Nova Scotia only, should Community Economic Development Investment Funds (CEDIFs) be eligible to use the Crowdfunding Exemption and/or Start-Up Exemption? If so, why? If not, why?

27) Are there other requirements that should be imposed to protect investors, taking into account the stage of development of the issuers susceptible to issue securities under the exemption?



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[Nouvelles de dernière heure] Et c’est parti pour une période de consultation

Alors que les Etats-Unis ont raison de célébrer – 5 Etats ont légalisé le crowdfunding par capital  et 16 autres suivront – , voici que les autorités réglementaires de 4 provinces publient leur projet de dispense pour le crowdfunding par capital et lance ainsi la période de consultation. Il s’agirait non pas d’une mais de deux dispenses ciblant les PME et les entreprises en démarrage (start-ups).  Nous saluons leurs efforts dans ce sens.

C’est donc avec grand intérêt et enthousiasme que notre équipe, composée de représentants de différentes industries et professions, épluchera les 300 pages et plus et émettra un avis. Nous vous tiendrons informés de notre analyse.

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[Breaking News] Canadian Regulators Open Consultation on New Proposal

As the United-States have good reason to celebrate – 5 States have legalized equity crowdfunding  and 16 others to follow -, our own provincial authorities – four provinces to be exact – have published two new crowdfunding exemption proposals and seek comment. In consideration of two different sets of client needs: SMEs and start-ups. We salute their effort in doing so.

Our team,  with representatives of diverse industries and professions,  shall scour the 300+ page documents with great interest and attention to detail. We will provide an update of our analysis.

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Equity Crowdfunding Upfront Costs : No Laughing Matter

Adoption of Equity Crowdfunding for ordinary investors may come sooner than we think. First in the US and not far behind, Quebec and Ontario. [Note: Saskatchewan has gone forward with a smaller-scale model as allowed by law 
(150,000$ raises and under), but for the purpose of this post and considering investment statistics, we assume that companies will aim higher – much higher, and this has yet to be legalized]. We thought the time was well chosen to outline the costs a Canadian company may incur given the possible regulatory framework that will come into force.

I sat down with Paul Niederer, CEO of ASSOB, the largest equity crowdfunding platform, to compare notes. We may be more conservative than our Australian counterparts and demonstrate a lower tolerance to risk. That is why we are assuming that the bar will be set higher for Canadian companies. For a minimum investment of 500,000$ (USD), to prove their credentials, here’s what companies may be expected to pay upfront prior to launching an equity crowdfunding campaign:

COMPLIANCE FEES $3,000-8,000

1-Legal writing of offering document compliant with legislation

2-Investment summary


3-Value proposal, storytelling, business case, video

4-Community building, SEO, content strategy

This article was initially published on NCFA

PORTAL FEES $40,000 – 50,000

5-Due diligence on company and executive team $1,000

6-Offer document review: $3,000$-4,000 (Note: Crowdcube in the UK charges $3,000 or 1,800 pounds that are subsequently deducted from capital raise)

7-Portal success fee: 2-3% of min. proceeds

8-Broker success fee: 5-6% of min. proceeds (a broker is necessary for larger amounts)

Note: Australia’s ASSOB charges 8% of which 2.5% goes to portal and 5.5% to broker.


9-Certified Public Accountant costs (higher for raises above $500,000)

10- Financial Planning

All in all, companies may be required to put in somewhere between 12 and 15% of the money raised. That’s 52,000$ to 75,000$ to raise $500,000. The SEC estimates are even more pessimistic, as indicated below.

Add to that, ongoing fees: Marketing/Social Media/PR/Advertising which represent roughly 5-10% of the minimum proceeds, quarterly reporting costs and legal defense costs.


Credit: Crowdfunding Capital Advisors – Venturebeat

Suffice it to say, under the proposed framework, this model is not a solution to all ills. Upfront costs are and will be a barrier to entry for early-stage start-ups.

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Retour sur la consultation publique de l’Autorité des marchés financiers

Le 20 mars s’est tenue la consultation publique de l’Autorité des marchés financiers qui a souhaité entendre les parties-prenantes sur le dossier du financement participatif en capital (Equity Crowdfunding). L’équipe Invest Crowdfund Quebec attendait ce moment avec impatience à force de voir les “success story” défiler. Ce que nous revendiquons depuis le début: un modèle de financement qui offre l’opportunité aux entreprises en démarrage et PME de lever des fonds sur Internet. Un modèle complémentaire aux existants ce que les anges et les VC de ce monde valident et revendiquent au même titre.

Je vous invite à lire le récapitulatif sur le site de notre partenaire National Crowdfunding Association. Voici quelques-uns des principes qui ont été abordés en séances et que vous retrouverez prochainement dans notre document de positionnement :

  1. Notion de risque. Une entreprise fait son pitch sur un portail de crowdfunding. L’investissement qu’elle demandera comportera des risques selon son stade de développement. Une start-up au stade du prototype ou du concept pourrait ne pas avoir de valorisation à afficher. L’investisseur devra être à l’aise avec cette réalité (risque de ne pas avoir de retour) et s’appuyer sur ses propres connaissances ou celle de ses pairs dans sa décision d’investir. En revanche, pour l’entreprise qui a à son actif des clients et un chiffre d’affaires, il faudra que sa valorisation tienne la route.
  2. Faire confiance à la foule (investisseurs non accrédités). Il y aura surement des erreurs de parcours dès la première année. Et c’est attendu. Il suffit de se rappeler le e-commerce des années 90 et ses premiers pas précipités. Des investisseurs posant des choix rapides, insatisfaits de leur investissement et qui chercheront peut-être un coupable. Mais nous pensons également que passé cette phase d’apprentissage, ils gagneront en confiance, seront mieux conseillés par leurs pairs.
  3. Etablir un cap supérieur à celui publié dans la dispense d’offre assurerait une pénétration plus grande de ce modèle. Nous avons proposé un cap de 1M$ sur une période de 12 mois car nous sommes d’avis que la fourchette 50 000-500 000$ s’applique surtout aux entreprises en démarrage et non à celles au stade avancé, encore moins aux PME.
  4. S’appuyer sur la force des réseaux sociaux. Il peut parfois être difficile d’imaginer que de simples conversations sur Internet permettent de détecter les fraudeurs. Pourtant, c’est ce qui se produit. Comme dirait le fondateur de Kickstarter “les gens les pointent du doigt, et ils ne reçoivent pas de dons. Internet pose des questions. ” (People have called them out and they don’t get funding. The internet asks questions.)
  5. la convention des actionnaires a fait l’objet de discussions animées étant donné le nombre important d’avocats présents. Ces derniers nous apprennent que les entreprises se rabattent sur l’accord des actionnaires en y intégrant des clauses très restrictives voire frauduleuses et que le financement participatif en capital serait le terrain propice pour ce type de pratique. Certes. Nous proposons donc de standardiser ces accords (même format pour tous) afin de limiter les dommages collatéraux.
  6.  le statut des portails de financement participatif en capital. Nous sommes d’avis que les portails, à l’instar de l’Angleterre, la France, la Finlande, la Belgique et l’Australie, doivent agir à titre d’entremetteur et en aucun cas prodiguer conseils aux investisseurs ni aux émetteurs. Il incombe à l’investisseur d’aller chercher conseils (cf. point 2) et à l’entreprise de savoir se vendre/expliquer en termes familiers. Limiter la gestion du portail aux courtiers seuls ou limiter l’accès au portail aux investisseurs accrédités uniquement, c’est retirer le “crowd” de l’équation, c’est du capital de risque sur Internet ce que fait déjà FundersClub.  Les portails sont en cours de montage au Québec, en Ontario, en Alberta. Ils attendent le feu vert.

A Invest Crowdfund Québec, nous poursuivons le travail avec les instances règlementaires et demeurons optimistes que le modèle de financement participatif en capital sera adopté dans un avenir rapproché.

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L’AMF: Consultation publique sur le financement participatif en capital

amf2“Consciente des besoins de financement des entreprises en phase de démarrage et des petites et moyennes entreprises, l’Autorité des marchés financiers (AMF) examine des alternatives pouvant aider à répondre à ces besoins,” dont le financement participatif en capital (“Equity Crowdfunding”). L’AMF avait déjà en décembre dernier rendu une décision visant à alléger certaines exigences liées à l’utilisation de la dispense pour placement au moyen d’une notice d’offre. Cette décision servant de canevas pour la mise en place d’un éventuel régime de financement participatif en capital au Québec.”

Pour échanger sur le sujet, l’AMF tiendra une consultation publique le 20 mars prochain au cours de laquelle l’équipe de Invest Crowdfund Québec et d’autres organisations, individus présenteront les avantages de ce mode de financement et comment il viendra répondre à un besoin pressant des PME et start-ups. Depuis notre première rencontre avec l’AMF en septembre dernier, l’écosystème international a connu une évolution importante dans cette sphère et les “success stories” se multiplient. C’est très encourageant pour le Québec.

À qui s’adresse cette consultation? À toutes personnes intéressées, notamment :

– les membres de la direction des entreprises en recherche de financement, particulièrement les sociétés en phase de démarrage et les petites et moyennes entreprises;

– les investisseurs de détail et institutionnels;

– les courtiers, représentants et autres personnes inscrites;

– les avocats, comptables et autres professionnels offrant des services aux émetteurs

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The AMF To Facilitate Access to Capital by SMEs…One Step Closer to Equity Crowdfunding

hands-moneyThe AMF To Facilitate Access to Capital by SMEs…One Step Closer to Equity Crowdfunding

To facilitate access to Capital by SMEs, the securities commission from 9 provinces have each published a harmonized interim local order that provides exemptions from financial statement-related requirements. In short, individual investors – non-accredited and with no relationship to the equity-funded business – will be able to invest and those businesses issuing equity will not be required to file a prospectus (onerous expenditure) for investments under $500K.

In addition, the Commission is prepared to consider applications for registration by funding portals on a case-by-case basis.