Nov 12, 2015
New equity crowdfunding rules are being hailed as good news for small businesses looking to expand, however, some experts warn of the challenges in managing a broad base of retail investors. In a recent article, The Globe and Mail’s Brenda Bouw highlights the new equity crowdfunding rules slated to come into effect in January 2016.
Effective January 25, 2016, small businesses looking to expand in Ontario, Manitoba, Québec, New Brunswick and Nova Scotia, are able to raise up to $1.5-million annually through equity crowdfunding. Until recently, only accredited investors could buy into a private deal. These new rules could create its own challenges. Notes Chad Bayne, Osler partner and co-chair of the emerging practice group, “it could be a distraction to have hundreds of investors and a huge administrative burden for small companies with limited resources.” He expects few companies will use equity crowdfunding, rather “the new rules are a nice to have.”
While some experts greet the new rules with optimism, Chad advises small businesses to “look at all other options before you go down this path because this is going to be an expensive way to raise capital.”
Whichever side of the debate you are on, it’s clear that raising capital continues to challenge small businesses.
To further understand the new equity crowdfunding rules, read Despite new rules, equity crowdfunding is no picnic.