There are some things that you will need to do before you start speaking to potential investors and raising capital. The information below may help you prepare to raise capital and comply with the terms and conditions of the Exemption and Ontario securities laws.
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Step 3: Establish and apply policies and procedures
The Early-Stage Business Registration Exemption (Exemption) requires your business to create, maintain and apply policies and procedures to help you comply with the Ontario securities laws.
What policies and procedures must a business relying on the Exemption establish, maintain and apply?
In general, a comprehensive set of written policies and procedures may help your business manage risk, keep up-to-date with compliance and regulatory changes, improve internal processes and help you navigate business changes.
To rely on the Exemption, an eligible business must establish policies and procedures sufficient to provide reasonable assurance that it complies with the Exemption’s terms and conditions, as well as applicable securities laws. Each business should tailor its policies and procedures based on its business activities.
Examples of policies and procedures that you may want to consider for your business include the following:
internal controls the business will use to ensure compliance with the exemption and applicable securities legislation, and to manage risk.
preparation, review, and approval processes for marketing materials.
procedures to ensure that there are no misrepresentations in offering documents.
procedures to explain to potential investors the terms and conditions of the prospectus exemptions relied on.
procedures to maintain an updated shareholder registry.
set out the standards of conduct for compliance with securities and other applicable legislation and the systems for monitoring and enforcing compliance with those standards.
clearly outline who is expected to do what, when and how.
ensure that policies and procedures are readily accessible by everyone who is expected to know and follow them.
update policies and procedures when regulatory requirements and the business’ practices change.
consider the business’ obligation to deal fairly, honestly and in good faith with its clients and investors; and
consider the business’ obligation to address conflicts of interests.
What books and records must a business relying on the Exemption maintain?
A business relying on the Exemption must maintain relevant documentation for a period of seven years from the date a record is created. Documentation includes books and records that accurately record the business’ activities and demonstrate the extent of its compliance with the Exemption and securities laws.
Examples of acceptable books and records include records that do the following:
demonstrate compliance with internal control procedures.
demonstrate compliance with the business’ policies and procedures.
record the review and approval of marketing material.
maintain signed agreements with service providers.
document the communications with prospective investors.
maintain copies of marketing or other materials provided to prospective investors.
maintain documents and records related to participation at demo days.
maintain signed investor subscription agreements, verification documents, confirmations of qualification, risk acknowledgement forms; and
maintain a copy of other forms required to be provided to the OSC.
