Resources for businesses

General rule

The Exemption requires businesses to deal fairly, honestly and in good faith with all investors and prospective investors. When drafting materials that will be provided to potential investors, or creating website content, businesses should be careful to only include statements that are factual and not misleading. 

A statement may be misleading to potential investors if it includes:

• overly promotional language (e.g., “you are guaranteed to triple your investment this year”); 
• forward-looking information and unsupported certainty about future events (e.g., “the company will have revenues of $100 million next year”);
• unsupported assertions about future growth of markets or demand for a product (e.g., “millions of people will be using x technology by the end of 2025”).

It is an offence under securities law to make a misrepresentation in an offering memorandum (e.g. materials provided to potential investors).

Permitted advertising 

The Exemption permits you to advertise the sale of securities by one or more of the following: 

• posting the terms of the offering on your business’ website.
• posting on social media to announce the sale of securities. This announcement must include a link to the terms of the offering on your business’ website.
• participating in sponsored demo days where you can showcase your business.

A business can prepare materials that include the terms of the offering, such as pitch decks, and present them to potential investors that express interest; however, these materials cannot be publicly advertised (e.g., posted on a website or social media). They also must comply with Ontario securities laws.  

See also, What types of materials can be used to market or advertise the sale of securities?

Soliciting investors

Under the Exemption, a business may only contact potential investors to solicit investment if the business (1) has a pre-existing relationship with the potential investor or (2) the person being contacted has consented to receiving the message or communication. 

For the purposes of this requirement, consent can be inferred from a person’s conduct if there are reasonable grounds to believe that the consent is genuine and relevant to the message. 

This requirement is intended to prevent businesses from “cold” contacting (e.g., calling, emailing, sending direct messages via social media) potential investors. However, if a person becomes aware of the sale of securities through the business’ website, through a mutual business contact or through a presentation at a demo day, and reaches out to the business, it is acceptable for the business to provide information to, and solicit investment from, that person.

A business using a dealer to help with raising capital must direct potential investors to the dealer facilitating the sale of the eligible securities (1) to answer any questions that are unrelated to the business or that seek information beyond the terms of the offering and (2) to facilitate the sale. For example, exempt market dealers are required by securities laws to deal with clients, including the onboarding of investors, the collection and assessment of investor information for suitability determination purposes, and being involved with the actual investment process. The business’ website should have a link to direct any prospective investors interested in investing to the dealer’s website.

If a business is conducting concurrent offerings, one with a dealer and one without, the business should have two separate terms of the offering located in two separate sections/pages on the business’ website, even if the terms are similar or identical. The terms of the offering that relates to the sale of securities through a dealer must include the name of the dealer and link to its website.

See also, Can my business conduct concurrent offerings under the Exemption – one with a dealer and one without?

A business relying on the Exemption to raise capital without a dealer must not provide any person or company with compensation for finding investors or pay any transaction-based compensation in connection with the sale of securities. If a business is working with a registered dealer such as an exempt market dealer, the exempt market dealer may have referral arrangements in place.

 If the business is working with a registered dealer such as an exempt market dealer, the exempt market dealer may have referral arrangements in place. 

To find potential investors, a business can engage in permitted activities to advertise the sale of securities and attend demo days to showcase the business. A business may also consider potential investors within its existing network with whom it has a pre-existing relationship. If a business is working with a dealer, the dealer may also assist with finding potential investors.

If the business is working with a dealer, the dealer may also assist with finding potential investors.

A demo day is a seminar, meeting or event that is hosted by a sponsor, where multiple businesses participate to showcase their businesses. Demo days can provide opportunities for start-ups to present their innovations and businesses to a diverse audience and to network with other founders, potential partners, experienced mentors, and potential investors. In the context of the Exemption, a sponsor that can host a demo day is a college, university or other institution of higher education, government, not-for-profit group, angel investor group, incubator, accelerator, or innovation hub.

In the context of the exemption, a sponsor that can host a demo day is a college, university or other institution of higher education, government, not-for-profit group, angel investor group, incubator, accelerator, or innovation hub.

A business relying on the Exemption may participate in a demo day either in-person or virtually. If such a business participates in a demo day, the type of information provided to attendees regarding a sale of securities by the business must be limited to a notification that the business is in the process of selling, or planning to sell, securities and the terms of the offering.  

When presenting to potential investors on demo days, the business must also provide the following statement: “This presentation does not provide full disclosure of all material facts relating to the securities offered. This is a risky investment.”

Before participating in a demo day, unless the sponsor is an angel investor group that relies on the exemption from dealer registration set out in Ontario Instrument 32-508 Not-for-Profit Angel Investor Group Registration Exemption (Interim Class Order) or is registered as a dealer, the business must confirm that the sponsor of the demo day does not: 

1. refer to a sale of securities by the business/issuer, or any other issuer, in any advertisement of the demo day. 
2. provide a recommendation or advice in connection with any trade in a security of an issuer to attendees of the demo day.
3. allow attendees to participate in a demo day held virtually if the attendees are not any of the following: 
1. individuals who are members of or are otherwise associated with the sponsor.
2. individuals that the sponsor reasonably believes are accredited investors or eligible to be self-certified investors.
3. individuals who have been invited to the virtual demo day by the sponsor based on industry or investment-related experience reasonably selected by the sponsor in good faith and disclosed in the public communications about the demo day.
4. charge attendees of the demo day any fees, other than reasonable administrative fees.
5. receive any compensation for making introductions between issuers and attendees of the demo day, or
6. engage in any investment negotiations between the business/issuer and investors attending the demo day.