Businesses
Early-stage capital is a critical resource that allows businesses to turn ideas into reality and build a strong foundation for future growth. The OSC TestLab initiatives aim to support Ontario’s businesses as they seek early-stage capital to start, grow and scale.
The resources in this section will help you understand how the the Early-Stage Business Registration Exemption, the Self-Certified Investor Prospectus Exemption and the Angel Investor Group Registration Exemption may be used by your business to raise capital.
The Early-Stage Business Registration Exemption
Raising awareness of a business’ capital needs
If your business is eligible to rely on the Early-Stage Business Registration Exemption, set out in Ontario Instrument 32-509 Early-Stage Business Registration Exemption (Interim Class Order), you are permitted to engage in the following activities to advertise the sale of securities:
- Posting the terms of an offering on your website.
- Announcing the offering on social media.
- Sharing the terms of the offering during a demo day organized by a government body, not-for-profit group, academic institution, angel investor group, incubator, accelerator, or innovation hub.
If your business is raising capital without using a dealer, it can raise up to $3,000,000 from accredited investors and self-certified investors (individuals who have completed certain courses that demonstrate financial or investment knowledge, or who have relevant industry experience).
If your business is raising capital using a dealer, it may rely on additional prospectus exemptions (in addition to the prospectus exemption that allow for the sale of securities to accredited investor and self-certified investors) to raise capital from other types of investors. In this case, your business would not be subject to limits on the amount of capital that can be raised, other than limits included in the prospectus exemption being relied on.
Eligibility criteria
Your business is eligible to rely on the Early-Stage Business Registration Exemption if it:
- has its head office and business operations located in the province of Ontario
- is in the early or development stages of its business and is seeking capital to start, grow or scale
- has fewer than 100 employees
- has a primary business purpose that is not investing in real estate, mortgages, other businesses, or other assets
- has a business purpose other than to identify and evaluate assets or a business with a view to completing a merger with, amalgamation with or purchase of the securities of an issuer, or the acquisition of a business
- is not engaged, directly or indirectly, in any of the following activities:
- holding, investing in or trading crypto assets, on the business’ own behalf or on behalf of its clients;
- gambling
- is not a reporting issuer, or the subsidiary of a reporting issuer, in any jurisdiction of Canada or in any foreign jurisdiction
- is not registered under securities legislation in any jurisdiction of Canada or in any foreign jurisdiction, and
- is not an investment fund.
If your business is interested in relying on the Early-Stage Business Registration Exemption but you are unsure whether it satisfies the eligibility criteria, we would like to hear from you. Please contact us at testlab@osc.gov.on.ca.
A business relying on the Early-Stage Business Registration Exemption will typically take the following steps in raising capital:
RESOURCES
The resources were prepared by staff and do not necessarily reflect the views of the Ontario Securities Commission. This information is provided for general information purposes only and does not constitute legal and other advice. Responsibility for complying with applicable securities laws remains with you and the business.
How do I participate
If your business is interested in relying on the Early-Stage Business Registration Exemption, you must submit a notification form to the OSC, Form 32-509F1 Early-Stage Business Notification before your business begins raising capital.
Form 32-509F1 - Early-Stage Business Notification
This form is available on the Ontario Securities Commission website and is to be completed and submitted online.
If your business raises capital without a dealer, you must periodically report the sale of securities to the OSC using Form 32-509F2 Alternative Report of Exempt Distribution. This is a new, streamlined e-form for reporting distributions, without an associated fee.
Form 32-509F2 - Alternative Report of Exempt Distribution
This form is available on the Ontario Securities Commission website and is to be completed and submitted online.
If your business raises capital with a dealer, you must report the sale of securities using Form 45-106F1 Report of Exempt Distribution.
Form 45-106F1 Report of Exempt Distribution
This form is available on the Ontario Securities Commission website and is to be completed and submitted online.
The Self-Certified Investor Prospectus Exemption
The Self-Certified Investor Prospectus Exemption, set out in Ontario Instrument 45-507: Self-Certified Investor Prospectus Exemption (Interim Class Order) allows your business to raise capital from individuals that do not meet the financial thresholds or other criteria to qualify as an accredited investor but possess the necessary business knowledge, through their education or experience, to make an informed investment decision. Details on the qualifying criteria for the Self-Certified Investor Prospectus Exemption are outlined in the Section 73.3 of the order.
If your business is not relying on the Early-Stage Business Registration Exemption, it may still rely on the Self-Certified Investor Prospectus Exemption to raise capital from self-certified investors. If your business is not relying on the Early-Stage Business Registration Exemption there is no limit on the amount that your business can raise under the Self-Certified Investor Prospectus Exemption, however a self-certified investor is limited to investing $30,000 during the calendar year across all businesses that sell securities in reliance on the Self-Certified Investor Prospectus Exemption.
A business relying on the Self-Certified Investor Prospectus Exemption must obtain a Confirmation of Qualifying Criteria and an Acknowledgement of Risks from investors and can use a streamlined form to report the sale of securities, Form 45-509F1 Alternative Report of Exempt Distribution.
Form 45-509F1 - Alternative Report of Exempt Distribution
This form will be available on the Ontario Securities Commission website and is to be completed and submitted online.
Angel Investor Groups Registration Exemption
Raising capital through groups that connect angel investors with Ontario early-stage businesses.
An angel investor group relying on the Angel Investor Group Registration Exemption, set out in Ontario Instrument 32-508 – Not-For-Profit Angel Group Registration Exemption (Interim Class Order) may be able to help your business raise capital by introducing you to its angel investor members that are interested in supporting and investing in early-stage businesses in Ontario. These angel investor groups may also support your business by:
- making information about your business available to its members, who are accredited investors and self-certified investors.
- providing you with opportunities to present your business for investment to its members.
- facilitating its members due diligence of your business, and
- providing you with educational resources on early-stage capital raising.
Each angel investor group may have its own criteria for the types of businesses it will support and processes for assessing the businesses that it will introduce to its members.
Generally, to raise capital from the members of an angel investor group your business will first need to connect with an angel investor group, which can happen through direct outreach, relationships with industry organizations such as innovation hubs, incubators, or accelerators, or through a referral from a member of the angel investor group.
Before being introduced to its members, the angel investor group will likely request information about your business and may also request a meeting with the founders. After meeting with members of the angel investor group, if members are interested in investing in your business, you will be responsible for preparing any offering or legal documents and working with the members and their legal counsel to complete the closing of the investment.
Additional resources
Below are some resources that may be generally useful for early-stage businesses beyond the scope of TestLab 2024.
They include information on starting and running a small business, different sources of funding that may be available to you, as well as different options for finding legal assistance.