Filling an Offering Memorandum in Canada

Speaker 0: you explain the process of filing the offer memorandum offering memorandum in canada and when a startup would need one?

Speaker 1: certainly. so one of the exemptions that we talked about is called the offering memorandum exemption. now that is a whole set of rules about capital raising for startups, that talks about who the investors can be, what the startup has to be in order to qualify using this set of rules, and how the investment can sort of take place. in order to use the offering memorandum exemption, you have to do some filings, with the government in advance of starting to raise capital. the main benefit of using the offering memorandum exemption is if you want to start raising large amounts of capital over two million dollars, i would say, probably closer to five or ten million dollars, and you want to raise that from the general public in canada. you wanna be able to run ads and really sort of broadcast your capital raise. and in order to do that, you have to use the offering memorandum exemption to be able to go out to the general public. now the main requirements for the offering memorandum exemption are annual audited financial statements and the offering memorandum itself. the offering memorandum is a very long document that essentially explains everything that an investor would need to know about investing in your business. this document is usually around one hundred pages long, and it needs to be prepared for you by a securities lawyer, not just a regular lawyer, but a lawyer with experience in securities law. an offering memorandum itself usually costs between fifty and one hundred thousand dollars in fees to that lawyer to prepare. once you have that offering memorandum, then you can work with one of the licensed exempt market dealers to allow the investors to come in and invest into your deal. so, again, this is one of the most sophisticated ways to raise capital in canada. you will see a lot of private investment funds raising fifty, one hundred million dollars using this type of rule, this offering memorandum rule. but when do you actually have to file this and what is that like? so you're getting ready to raise capital. you've got your offering memorandum finished. you've got your audited financial statements. you're taking both of those documents, and you're filing them with the regulator. and you're using the regulatory filing site called sedarplus, s e d a r p l u s. that is the location where these filings take place. so either yourself or your securities lawyer would go on to sedarplus, and they would make the filing. you file the offering memorandum, the audited statements, and then you can start raising capital. once you wanna do a closing, when you actually you've raised the capital and you wanna take it into the business, then you also have to file something else, which is called a report of exempt distribution. so this is a one time filing every time you raise capital and essentially says, hey. i raised five million dollars from these fifteen people. this is my company name. these are all the details. again, that's also filed on sedar plus. so, certainly, the offering memorandum is an effective way to raise capital if you're doing, a mega raise, like a huge series a or a series b, and you wanna be able to get a large number of the general public participating. now i know this isn't directly your question, craig, but if you wanted to do equity crowdfunding, for example, equity crowdfunding has something called an offering document, which is not the same as the offering memorandum. it's much smaller. it's usually prepared by the platform and you combined. so the cost of preparing the document is almost zero dollars, and that document doesn't have to be filed in advance of your raise. so if you're doing equity crowdfunding, you prepare that document with the platform in advance. you post that to the platform, and then you can raise capital during your equity crowdfunding round. no problem. and then you simply file that at the end of your equity crowdfunding round.