Most first-time Canadian sponsors raise money one exemption at a time, not through a prospectus. Here is how the actual exemptions work, and where the templates come from.
Key takeaways
STEP 01 OF 10
A committed blind-pool fund raises capital once, against a mandate, and deploys it across multiple deals — the LPA is signed before any specific target is known, and investors are committed to fund calls as deals are found. A deal-by-deal model instead raises a fresh special-purpose vehicle for each transaction, with investors deciding deal by deal whether to participate. Both are legitimate, common structures for a first-time Canadian sponsor, and the choice shapes which exemptions get used most heavily and how often the compliance calendar in Step 10 has to run.
A deal-by-deal sponsor typically runs the exemption analysis in Steps 2 through 5 fresh for every transaction; a fund sponsor runs it once at the fund’s formation and then manages capital calls against a single, already-qualified investor base.
STEP 02 OF 10
National Instrument 45-106 defines “accredited investor” through several individual-level tests: an individual who, alone or with a spouse, holds financial assets with an aggregate realizable value exceeding $1,000,000 net of related liabilities (para. (j)), or exceeding $5,000,000 alone (para. (j.1)); an individual whose net income before taxes exceeded $200,000 in each of the two most recent calendar years (or $300,000 combined with a spouse) and who reasonably expects to exceed that level again this year (para. (k)); an individual with net assets of at least $5,000,000 (para. (l)); and a non-individual person with net assets of at least $5,000,000 shown on its most recent financial statements (para. (m)).
Note the Ontario carve-out: several of the individual paragraphs come from a different source in that province — the Instrument records that certain categories are drawn from “subsection 73.3(1) of the Securities Act (Ontario)” rather than from NI 45-106 itself. Never present the accredited investor list as uniformly national without that qualification. Source: OSC’s NI 45-106 page.
STEP 03 OF 10
A “private issuer” is an issuer that is not a reporting issuer or an investment fund, whose securities carry transfer restrictions in its constating documents, and that is beneficially owned by not more than 50 persons (excluding employees and former employees). Permitted purchasers under this exemption include directors, officers, employees and founders and their affiliates, listed family members, a close personal friend or close business associate of a director, executive officer, founder or control person, existing security holders, accredited investors, and — in the Instrument’s own words — “a person that is not the public.”
The trap: “No commission or finder’s fee may be paid to any director, officer, founder, or control person of an issuer or an affiliate… in connection with a distribution” under the family-friends-business-associates exemption. If a founder is being compensated for bringing in capital under this route, structure that compensation somewhere other than a commission tied to the raise itself.
STEP 04 OF 10
The base exemption reaches directors, executive officers and control persons of the issuer or an affiliate, listed family members, close personal friends, close business associates, and founders and their own family, friends and associates. In Ontario, this exemption does not apply unless the issuer is not an investment fund and a risk acknowledgement is signed by the purchaser, by an executive officer of the issuer other than the purchaser, and by the specific director, officer, control person or founder with the relevant relationship — with the signed form retained for eight years. Saskatchewan imposes its own signed risk-acknowledgement requirement in the same spirit.
Build the retention obligation into your compliance calendar from the first raise, not as an afterthought — an eight-year document-retention requirement outlives most people’s informal filing habits.
STEP 05 OF 10
The minimum-amount investment exemption is available where the purchaser is not an individual, purchases as principal, and the security has an acquisition cost of not less than $150,000 paid in cash at the time of distribution, of a single issuer’s security — with entities created or used solely to rely on it specifically blocked. The asset-acquisition exemption instead permits an issuer to distribute its own securities as consideration for acquiring the assets of the recipient, where those assets have a fair value of not less than $150,000 — the share-for-assets mechanism, distinct from the parallel exemption for a statutory amalgamation or arrangement.
These are useful where a single institutional or high-net-worth investor is writing a large enough cheque that the accredited-investor or private-issuer route feels like unnecessary paperwork — confirm the $150,000 threshold is actually met before relying on either.
STEP 06 OF 10
CVCA’s fund-formation document library offers three annotated templates: a CVCA Annotated ILPA Subscription Agreement, a CVCA Annotated ILPA Limited Partnership Agreement, and a CVCA Annotated ILPA Term Sheet, each based on the Institutional Limited Partners Association’s own documents and explicitly Canadianized. The page is careful to describe these as “not CVCA model documents” but rather starting points requiring customization and legal review — treat that framing literally rather than as boilerplate caution.
Use them as a drafting baseline that captures Canadian market structure and language, not as a template you can execute unmodified. Every fund’s actual terms still need counsel to fit the specific capital structure, investor base and strategy.
STEP 07 OF 10
CVCA’s model documents are Canadianized on structure and mechanics — but they state no fee rate, hurdle rate or benchmark anywhere. There is no Canadian published source for fund-economics rates at all. That means every number in your LPA — the management fee, the preferred return, the carry percentage, the catch-up structure — is a drafting choice you and your investors negotiate, not a market rate you look up.
The honest way to present a worked example to prospective investors: “To illustrate the mechanics only — the rate itself is a drafting choice, not a benchmark — suppose the LPA sets a 7% preferred return, a management-fee stepdown after the investment period, and a 100% GP catch-up once the preferred return is paid.” That framing describes the mechanism honestly without implying a rate exists that you simply adopted from the market.
STEP 08 OF 10
If the acquisition vehicle is a corporation rather than a limited partnership, a unanimous shareholder agreement under CBCA s. 146 is the standard way to lock in what co-investors bargained for — see structuring a first Canadian acquisition vehicle for the full incorporation mechanics. Where the vehicle is a limited partnership instead, the LPA itself is the governing document, and CVCA’s annotated template from Step 6 is the natural starting point for it.
STEP 09 OF 10
Decide and document, before the first close, how often investors receive updates, what those updates contain — capital account statements, portfolio company performance, capital-call and distribution notices — and through what channel. A first-time sponsor who leaves this informal tends to end up negotiating reporting expectations investor by investor, which is both more work and a source of perceived unfairness between investors who ask for more and those who don’t.
STEP 10 OF 10
Pull together, in one calendar: the eight-year retention obligation for any Ontario or Saskatchewan risk-acknowledgement forms signed under Step 4, the exemption analysis that needs to be redone for each new investor or each new deal-by-deal raise, and any provincial securities-filing obligations that follow a distribution under an exemption. A sponsor running deal-by-deal raises frequently will find this calendar has more recurring items on it than a single-fund sponsor who does this analysis once at formation.
A high-net-worth individual meeting one of the five accredited-investor tests: use the accredited investor exemption, and confirm the Ontario carve-out doesn’t apply to the specific paragraph relied on. A tightly held group of fewer than 50 owners, including founders and their networks, with no commission being paid to insiders: the private issuer exemption. A genuine friend, family member or close business associate of a director or officer, particularly in Ontario or Saskatchewan: the friends-and-family exemption, with the signed risk-acknowledgement form. A single institutional investor writing a $150,000-plus cheque who doesn’t cleanly fit the other categories: the minimum-amount exemption. Someone contributing existing business assets rather than cash: the asset-acquisition exemption.
More than one exemption can apply to the same investor — where that happens, document which one the issuer is actually relying on for that specific distribution, since the compliance obligations (and, in Ontario and Saskatchewan, the risk-acknowledgement paperwork) differ by exemption even when the investor would qualify under several.
They are Canadianized, annotated versions of ILPA’s own subscription agreement, limited partnership agreement and term sheet — genuinely useful for capturing Canadian market language and structure that an unmodified American template would get wrong. They are explicitly not CVCA’s own model documents, and they do not supply a fee rate, hurdle rate, or any other economic benchmark anywhere in the published materials. A sponsor who treats the blank fee fields in these templates as needing a market number to fill in, rather than a negotiated one, is looking for something that does not exist in any Canadian published source.
Yes — different investors in the same raise can qualify under different exemptions (one as accredited, another as a close business associate, for instance), provided the specific exemption relied on for each investor is properly documented and its own conditions are met.
No — it caps the number of beneficial owners at 50, not the dollar amount. A tightly held vehicle with very few investors can raise a large amount under this exemption; it's ownership concentration, not size, that the test measures.
The specific statutory requirement described in Step 4 applies in those two provinces under the friends-and-family exemption; confirm the requirements in any other province where investors are located, since securities regulation is provincial and this sheet does not cover every province's variant.
It matters for reliance — treat the templates as a well-informed drafting starting point rather than as CVCA-endorsed terms a court or regulator would treat as a market standard. Full legal review of the final document is still necessary.
Not automatically — deal-by-deal shifts the exemption analysis and investor-qualification work to a recurring, per-transaction basis rather than a one-time fund-formation exercise, which can be more total compliance work over several deals, not less.
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