Can Canada afford to pass on Crowdfunding?

posted May 10, 2012, 5:17 PM by Bruce P. D'Sena   [ updated May 12, 2012, 7:58 PM ]
The US recently passed the JOBS (Jump-Start Our Business Start-Ups) Act , which signals a significant change in the country’s approach to company financing that's exempt from most securities-related regulatory requirements. This act now makes it possible for  “crowdfunding” to assist startup companies with capital fundraising, subject to certain requirements & conditions. 

Crowdfunding in simple terms, is about raising small amounts of money from large numbers of investors on-line using social media and similar technologies. Although it has been used in the non-profit sector, at this time crowdfunding to finance a business is not permitted under Canada's existing securities laws. Startups can generally raise financing from 50 or fewer investors who have certain relationships with the principals of the company, or from accredited investors (i.e, high net worth individuals or institutional investors). 

But given these developments in the US, should Canadian Small Businesses and Entrepreneurs start getting better organized to take advantage of the potential opportunities here - in the event Canada decides to follow suit? It could certainly help create more jobs, and spur economic growth - to start with.

* Note that this is a simplified interpretation of complex legal and securities related developments. We are not a law firm nor do we make any claims with regard to the above and readers are advised to seek qualified counsel as appropriate.

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