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Equity Crowdfunding And The Frontfundr Difference

Posted by FrontFundr on February 4, 2016
FrontFundr

The Canadian Securities Administrators (CSA) and provincial securities regulators help regulate equity crowdfunding through the requirement that all offerings run through an online portal, like FrontFundr, that is registered with the provincial regulators. This helps ensure the portals have the necessary credentials to issue such securities for private companies. Here we’ve answered some common questions about the FrontFundr difference, and how we help companies raise funds through equity crowdfunding.

Can I go over 50 shareholders?

Yes, once a company has more than 50 shareholders, they can raise funds using a separate prospectus exemption for several different categories of investors. In utilizing these separate exemptions, the company does not become a reporting issuer or a public company. Learn more about having more than 50 shareholders.

Will my risk to have an audit increase?

No, we can create an agreement to avoid an audit. The requirement of audited financial statements remains unchanged by taking on 50 or more shareholders. Companies are still required to obtain consent from all shareholders to waive the appointment of an auditor. This is no different than what companies already must comply with.

Will each shareholder have to vote on business activities?

No, we can create an agreement that will assign their voting rights to be voted in a specific manner.  The voting rights determine how the trustee will vote based on the actions of the larger shareholders. Learn more about managing a large number of shareholders.

Will a larger cap table impact subsequent financing or make my company less attractive to VCs?

No, we can create an agreement that will consolidate shareholder voting rights in order to eliminate these complications.  With these added protections, a VCs attractiveness is not altered, and a good deal is a good deal— thus, having retail investors on board won’t prevent an exit or subsequent round of financing from happening. Learn more about managing a large number of shareholders.

Can my investors invest through their RRSP or TFSA?
Yes, we can work with companies to help set up their company so that they are a tax efficient vehicle for investors to invest. This will further help to attract and incentivize investors and we facilitate these types of transactions.

Will I be overwhelmed with investor questions?

No, we help manage investor communication during and after your raise.  During the raise, we screen investor questions and answer them on your behalf. After the raise, we have a reporting tool that helps keep shareholders informed of updates.

For more information on getting started with an equity crowdfunding raise, visit our Entrepreneur Suite where we’ll walk you through the basics of how it works. And if you’re looking to make an investment, visit our Prospect Lounge for companies who are planning to raise funds in the near future, or Pitch Place for our current listings of companies raising funds.  

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This article is for general information only. It is not intended to provide specific customized advice including, without limitation, investment, financial, legal, accounting or tax advice. A decision by FrontFundr to list an investment opportunity on its platform should not be interpreted as an opinion with regards to future return on investment. The contents of this article are given in summary form and do not purport to be complete. FrontFundr recommends companies and investors to obtain professional legal advice before any capital raise or investments are considered. For further information regarding private placements in BC, please visit the BC Securities Commission website.

 

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