If I Had $ 5 Million: New Capital Raising Options in Alberta and Saskatchewan – Corporate / Commercial Law

(1. Introduction

On September 1, 2021, the Alberta Securities Commission and the Saskatchewan Financial and Consumer Affairs Authority announced a three-year pilot of a new small business financing exemption, through MI 45-539, which allows issuers, other than publicly traded companies or investment funds, in Saskatchewan or Alberta to raise an aggregate lifetime maximum of $ 5 million through a public offering. savings using a streamlined offer document process.

The exemption is only available for the distribution of securities in Saskatchewan and Alberta.

(2) Justification

Securities regulators are always aware of the bottlenecks that prevent start-ups and small businesses from raising capital for further growth. The prospectus exemption for small business financing promotes a streamlined process for businesses that still provides appropriate investor protection. The ultimate goal of the exemption is to improve opportunities for companies attempting to raise capital that may not have the profile or prospects for growth to stimulate venture capital investment or facilitate the public placement. The small business exemption was also drafted to address the concerns of issuers reluctant to access the equity crowdfunding prospectus exemption that was announced earlier this summer by the Canadian Securities Administrators (see our article
here for more details).

(3) Key points of the summary

For issuers

The $ 5 million exemption limit is an aggregate lifetime limit that applies to the issuer, its affiliates, other issuers engaged in a joint venture, and issuers who share the same founder (s) as the or the founders of the issuer.

To access the exemption, the issuer must provide an offer document via Form 45-539A1 which includes information identifying the company and the person in charge of the offer. The offer document should also specify the minimum and maximum offer amounts and how these funds will be used. The remainder of the Offer Document describes the structure and business activities, significant investments and contracts, directors and management, capital structure and other details of the Offer.

The exemption limits the types of securities available under the offering to one or more of the following:

  • Ordinary actions
  • Preferred shares
  • Debt securities
  • Limited partnership units
  • Membership or investment shares (when the issuer is a cooperative)
  • Convertible or exchangeable securities when the conversion or exchange results in one of the securities listed above

Issuers should also be aware that any offer or aggregate of offers that results in more than $ 1,500,000 raised over a 12-month period will require that the offer be accompanied by financial statements that comply with GAAP principles.

The issuer has 120 days from the submission of the Offer Document to increase the minimum amount of the offer. If the bid does not meet the minimum bid amount at that time, the issuer must return all funds to the buyer.

Once the offer is closed, the issuer has 30 days to file a completed offer document, a Form 45-106A1 Exempt distribution report with applicable fees. Depending on whether the company is a Tier 11 or level 22 company, the issuer (in the case of a Class 2 company) will be required to file a commitment to deliver its annual financial statements and to make those statements reasonably available to each purchaser of the exemption.

For investors

Before investing in a business under the Small Business Finance Exemption, an investor must complete an enhanced risk acknowledgment through Form 45-539F2.

Investors should be aware that whether an issuer is a Tier 1 or Tier 2 company will have an impact on the bid and round. When the issuer is a Class 1 corporation, an investor is limited to an investment of $ 2,500 over a 12-month period, with the maximum investment being increased to $ 10,000 when an investor’s personal net income for the last two years is greater than $ 75,000 or $ 125,000 with their spouse (“Minimum income investor“).

When the issuer is a Level 2 company, the investment limit is $ 5,000 with a potential investment increase to $ 20,000 when the investor is a minimum income investor or the buyer has obtained the notice from a registered broker that the investment is suitable for the buyer.

(4) Final comments

The small business finance exemption is a tool that is not limited to tech and high growth start-ups. The Alberta Securities Commission has actively outlined the purpose of the exemption is to create opportunities for co-ops, small town corporations and rural communities to help fund local initiatives.

For issuers, preparation and filing costs are significantly reduced, allowing the issuer to focus their time and energy on developing and creating value for investors instead of creating complex prospectus documents. For investors, investment limits and disclosure requirements in offering documents always promote a level of transparency that allows an investor to assess the level of risk of any investment and make an informed decision about their choice. investment.

At McKercher, we interact with start-up founders, angel investors, venture capitalists and government funders on a daily basis. We are proud to offer a set of legal resources to start-ups at fixed rates and we regularly advise our clients on all kinds of financing transactions. Please contact us if you are a start-up looking to raise capital.


1. Level 1 companies are issuers with greater financial resources. A Tier 1 listing comes with more onerous minimum registration and maintenance requirements than Tier 2 companies. These requirements vary by industry. McKercher LLP can provide additional guidance on these registration and maintenance requirements based on your specific industry.

2. Level 2 companies are typically start-ups or junior companies in all industry sectors. Level 2 issuers can achieve Level 1 status if they subsequently meet the Level 1 listing requirements. Listing requirements for Level 1 and Level 2 companies vary by industry sector. McKercher LLP can provide additional guidance on these registration and maintenance requirements based on your specific industry.

The content of this article is intended to provide a general guide on the subject. Specialist advice should be sought regarding your particular situation.

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