What Emerging Managers Need to Know About Securities Law

A Conversation with BLG (Borden Ladner Gervais LLP)

Written By Raissa Espiritu & Hilary Kilgour, Audaxa Ventures in Collaboration with The National Bank Investor Hub at Platform Calgary

Preface

This is the fifth chapter in the Uncharted Capital series—a collaboration between Audaxa Ventures and Platform Calgary designed to equip emerging fund managers with grounded insights and real conversations from the people shaping the next generation of Canadian venture funds.

In previous pieces, we explored thesis design, portfolio construction, diverse founder engagement, and impact measurement. Here, we unpack one of the most misunderstood (and anxiety-inducing) parts of fund building: securities law.

For many new fund managers, the legal side feels like an alphabet soup of forms, filings, and exemptions designed for institutions, not builders. Yet how you navigate these early decisions determines your credibility, investor trust, and long-term stability.

Because governance isn’t a back-office function—it’s how you show up with integrity and accountability.

At Uncharted Capital, we’ve always said: building a fund is like building trust at scale. Legal structure isn’t just compliance—it’s infrastructure. It’s how you earn the right to raise, the right to deploy, and the right to lead.

For this chapter, Audaxa Ventures sat down with the investment management law team at the Calgary office of Borden Ladner Gervais LLP (BLG) to unpack the legal journey every emerging fund manager faces. We approached this conversation not as lawyers, but as operators, asking the questions we wish someone had answered before our first close.

Fund Formation: Getting the Foundations Right

The first legal decisions a fund manager makes can shape everything that follows — structure, registration, and who you can raise from

Questions: 

1. Why does securities law matter so much at the earliest stages of fund formation? What do first-time fund managers often underestimate about compliance when they’re just starting out?

BLG:

‍It is important to understand that every sale, trade and issuance of a security (be it a common share or some other form, such as a warrant, convertible debt, SAFE etc.) is subject to Canadian securities laws.  All funds, regardless of size, type or investment plan must comply with securities laws. There are several applicable securities laws, but at the core is the requirement to deliver a prospectus or fit within an exemption to distribute a security to an investor without a prospectus.  If relying on an exemption, a Fund needs to ensure that it fits squarely within those exemptions.  

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‍2. What’s the smartest way to structure a first fund under $50M in Canada? LP/GP structure, sidecar model, or corporate GP — what’s most practical at this scale?

BLG:

‍There is no one right way to structure a fund. The most common is a limited partnership structure with a corporate GP. The benefit of funds is that there is a lot of flexibility with structure. It will be business, tax or residency of investment base that will dictate the structure points of the fund.

Limited partnerships are preferred by managers who want structuring flexibility, flow-through tax treatment and statutory limited liability protection for investors. Corporations are not typically used because they are less tax-efficient vehicles than limited partnerships and trusts. Trust may be used to achieve eligibility for registered plans (RRSPs, TFSAs, etc).

Also, the size of the Fund is irrelevant for Canadian securities laws, this is a US securities law concept that has no Canadian counterpart.

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3. When should an emerging manager register as a fund manager, and when can they operate under exemptions? How do you know which side of the line you’re on, and what are the risks if you misjudge it?

BLG:

Canadian securities laws differentiate between “investment funds” and entities that are not classified as “investment funds”. If you are managing an Investment Fund as defined by securities law you must register, if you are operating something other than an investment fund – there is no requirement to register. 

The term “investment fund” refers to a “mutual fund” or a “non-redeemable investment fund”.  A mutual fund is an issuer whose securities can be redeemed on demand based on the fund’s net assets.  A non-redeemable investment fund is an issuer that is: (i) not a mutual fund; and (ii) does not invest with the intent of exercising control over an issuer or actively participating in the management of any issuer in which it invests.

Typically, funds operating in the "grey area" are reliant on this underlined section, such as private equity funds, venture capital funds and private credit funds), funds that engage in active business operations (such as funds that engage in direct lending), funds that hold certain alternative assets (such as funds that directly invest in real estate) or funds that take control positions of their portfolio companies and are actively involved in the management. 

This grey area can be polluted easily. Funds should be carefully monitoring their investments to ensure one investment doesn't put them outside of the grey area.  Operating a fund manager without proper registration can result in serious monetary fines and sanctions. 

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4. What are the most common formation mistakes you see from sub-$50M funds, and what do they cost later? (e.g., missing management company agreements, unclear waterfalls, or selecting the wrong jurisdiction.)

BLG:

‍Have a clear exit strategy and timeline. Many funds forget to include a term in their agreements or continuously extend the term waiting for investments to realize. Have a clear idea as to when the fund will liquidate. I have seen many funds desperate to leverage or sell their assets, often having to take a loss, to appease angry investors who have been held without a return for too long. 

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5. How should managers think about operating across provinces? Are there material differences between Ontario, BC, Alberta, or Quebec in compliance, filings, or costs?

BLG:

‍Other than income tax considerations there are no material differences in costs for fund set up across Canada. Due to the language rules in Quebec, depending on the investor, you may have to translate your agreements in French.  Additionally legal costs in Ontario are generally 15-20% more expensive than the rest of Canada.  

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‍6. When is the right time to engage a lawyer? What should be in place before that first call, and what can safely wait?

BLG:

It is never a bad idea to start cultivating a relationship with a securities lawyer. Having a lawyer knowing what you are working on will save you time and money and they will likely give advice along the way. Lawyers create and work with various funds, so they are a great resource.  

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General Solicitation: What You Can (and Can’t) Say Publicly

Visibility matters for emerging managers, but in Canada, there’s a fine line between building a profile and marketing a security.

Questions:

1. What actually counts as “general solicitation” in a Canadian context, and what crosses the line? How do you raise money without General Solicitation? What can fund managers safely share publicly before first close — and what changes after?

BLG: 

‍In the Canadian context, "general solicitation" is not a defined term in securities legislation, but the concept falls under the broader regulatory framework that restricts public promotion or advertising of financings unless exemption applies.

Events, promotional material, online advertising or direct communications advocating investment with the general public, hosting public seminars, distributing materials through social media and maintaining a publicly accessible investing webpage are all examples of General Solicitation.

The line is typically crossed when communications or invitations to invest are directed to the general public or an unrestricted audience, instead of to a limited group of known, pre-qualified investors (such as accredited investors or close business associates).

What you can disclose to the public doesn't change after your first close. There are also rules about what can be disclosed to pre-qualified investors and in some jurisdictions marketing materials can be deemed an "offering memorandum" which requires disclosure to the regulators and statutory rights of in respect of a misrepresentation. It is important to seek advice before circulating investor presentations and pitches.

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2. Can emerging managers discuss their thesis, focus area, or impact goals publicly (e.g., LinkedIn, panels, or media) without breaching the rules? How do you recommend they communicate authentically but safely?

BLG: 

Public communications should be strictly informational and not promotional. If you are putting the statement out with the objective of enticing investors, it's probably promotional. The safest course of action is to say as little as possible and have a portal where investors can pre-qualify and learn more. 

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3. How do you handle inbound interest during fundraising? What’s the right response when someone “cold” asks to invest?

BLG:

You will need to pre-qualify any investor that asks to invest. Typically, this is done through a questionnaire. 

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4. What are the most common “grey zone” mistakes you see on social media or in press coverage?  What’s harmless visibility, and what becomes solicitation?

BLG:

It is easy to cross over the line. If anything, that you are saying could reasonably influence someone to invest in your fund that could be solicitation. Also important to remember that overly promotional language, over exaggeration, misrepresentation though omission are easy ways to end up under the scrutiny of the securities commission. 

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Investor Eligibility, Registration, and Partnerships

Most early-stage funds rely on the Accredited Investor Exemption, but the nuances around verification, filings, and delegation are often misunderstood.

Questions:

1. What’s the simplest and safest way for a small fund to raise under $50M from accredited investors in Canada? What are the key compliance steps and filings required?

BLG: As part of your fund package, you should have your lawyers prepare a subscription agreement. This agreement will set out all the key compliance steps. There are no regulatory requirements unless you go over 50 investors (excluding management). After 50, you have to pay fees and file reports of trade with the Canadian securities regulators.

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2. How should GPs verify investor accreditation without damaging relationships? What counts as “reasonable verification” under NI 45-106?

BLG:

“Reasonable verification” means making a genuine, good-faith effort to gather and, where warranted, independently confirm information about an investor’s accredited status, supported by documentation and clear procedures, and not simply accepting self-declarations.

If information provided is unclear or raises concerns, the issuer should follow up with additional inquiries and, where necessary, request supporting documentation such as tax returns, to independently confirm the investor’s status. If an investor is insulted by the information request this should present as a red flag. Investors complete these documents regularly and are quite experienced with them. 

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3. When does capital-raising activity itself become a registerable act? How should fund managers structure their outreach or partnerships to avoid being treated as dealers or brokers?

BLG:

Capital raising becomes a registerable activity when fundraising crosses the threshold from isolated or incident to the "business" of the fund. This assessment is contextual and can be based on factors such as: (a) trading with repetition, regularity or continuity; (b) direct or indirect solicitation of trades; (c) receiving or expecting to receive compensation for trading/selling; and (d) engaging in activities similar to those of a dealer, such as promoting the sale of securities, setting up a business for trading or intermediating trades. 

A venture capital firm is typically not required to register as a dealer or adviser if it follows common industry practices such as raising capital under a prospectus exemption (such as the accredited investor exemption) or requiring investors to commit capital for a defined period.

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4. Should fund managers consider engaging an Exempt Market Dealer (EMD)?  What should fund managers consider before doing so?

BLG: EMDs typically will not be engaged by venture capital firms where there will be a small number (2-3) capital raising rounds and the fund is expected to be close ended. Where an EMD will be used is for open ended funds that are redeemable and solicit sales using an offering memorandum. These types of funds are in continuous distribution and sales, with monthly closings. There is a cost and time component to working with an EMD but this type of fund could not raise capital without the registrations held by an EMD. It is important to note that it is possible that this type of open-ended fund may also require fund manager registrations

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Legal Due Diligence & Governance in Deals

Compliance doesn’t stop once a fund is formed. Deal-level diligence — especially in climate, health, and tech sectors — carries its own legal risks.

Questions:

1. What are the top legal red flags fund managers should look for during deal review? (e.g., IP ownership, shareholder agreements, look up company standing on registries)

BLG:

Beware of the messy capitalization table. Shares in and out without explanation, cancelled founders shares, transfers among insiders, pricing of share issuances without reference to value. Ensure you do a minute book review and get a history of all security issuances – you don't want disgruntled shareholders coming out of the woodwork. 

IP ownership is another important point if its integral to the product/service of the portfolio company. Partnerships with Universities can be dangerous depending on the institution and IP rights may be hard to secure. 

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2. How can small funds build efficient due diligence processes without over-lawyering deals? What’s a lean, risk-based approach that still meets LP expectations?

BLG: Fund managers should be able to value and evaluate the financial and business side of a portfolio company. Lawyer due diligence should be limited to IP searches, minute book reviews and material contract reviews.  Managers can keep the legal team on a short leash when it comes to due diligence by setting out the scope and materiality threshold at the outset. Management should use legal as a second opinion or reference for their findings. 

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Myths vs. Realities: What New Fund Managers Get Wrong

Even experienced operators misjudge the nuances of fund law. For new GPs, understanding what not to do can be just as valuable.

Myth 1: “General solicitation doesn’t apply in Canada.”
Reality: It absolutely does. Even though the rules differ from the U.S., Canada’s provincial regulators have strict limits on how and when you can market a fund. Publicly sharing that you’re “raising” or naming your fund before close can trigger compliance issues.

Myth 2: “If I’m under $50M, I don’t need to worry about registration.”
Reality: The size of the fund is irrelevant is the actions and structure of the fund that is determinative of what registrations and filings you need to make. You may qualify for exemptions, but exemptions still require documentation and filings. Getting it wrong can lead to enforcement, reputational damage, or future fundraising issues.

Myth 3: “I can just use a syndicate,” “I don’t need to file anything,” “It’s the same as angel investing.”
Reality: Syndicates can be useful, but they aren’t a shortcut. Be careful of the business trigger – are you in the business of raising capital? Have you sold to more than 50 holders?  Remember, every action of a fund is subject to securities laws, you have to make sure you fit in the exemption. 

Myth 4: “You should tell the world you’re raising the moment you start getting interest.”

Reality: Announcing too early - before your fund is formed or commitments are secure - can trigger compliance obligations and erode trust if details change. Not having a fully flushed out game-plan. Have the scope, a few targets in mind and some investors before you start pulling it all together. Make sure you consider the end game – where is the fund going and how / when will it get there. The best time to go public is once your legal foundation and investor documents are ready. Quiet confidence beats premature promotion.

Myth 4: “I can share my fund thesis online if I’m not asking for money.”
Reality: Intent matters less than appearance. Even well-meaning public posts can be interpreted as solicitation. You can discuss trends but never reference your own fundraise while actively raising.

Myth 5: “Lawyers slow things down.”
Reality: The right legal partner saves time and cost in the long run, helping you structure properly, avoid rework, and stay compliant with investor expectations. Lawyers know the market and can give helpful tips as you get started.

Do’s and Don’ts for Emerging Fund Managers

Do:

• Do Establish relationships with potential LPs before discussing your fund or sharing materials.
• Do personalize communications to each potential limited partner
• Do engage a lawyer early, even before your first close or public mention of the fund. File once sufficient funds secured
• Do keep fundraising materials private and password protected.
• Do understand which exemptions you’re relying on (and document them).
• Do ask your lawyer how to do something based on your unique situation.
  
  

Don’t:

• Don’t announce or imply that you’re “raising a fund” publicly.
• Don’t share presentations or offer materials with people you don’t know.
• Don’t have a public fund website with your investment thesis or with a contact link while fundraising
• Don’t send mass emails
• Don’t post your fund name, deck, or investment details on social media while fundraising.
• Don’t speak at events, seminars, webinars or meetings where strangers are invited and where you talk about the fund Thesis or investments while fundraising
• Don’t rely on verbal investor commitments without proper filings or documentation.
• Don’t assume that U.S. or European rules apply directly, Canadian securities laws differ by province.

These best practices are meant to compliment advice from local lawyers familiar with the general solicitation regulations.

TIP: When asking advice from lawyers, don’t ask if you can do something, but, rather, ask how to do something.

Closing

Legal fluency signals care, discipline, and integrity. It’s how you show investors you’re building for the long game. It’s also an act of equity, clarity and transparency level the playing field for founders, investors, and partners who haven’t always had access to this world.

In a market where anyone can design a deck, compliance is what separates credibility from chaos. And for this new generation of GPs, mastering it isn’t about constraint, it’s about building trust, impact, and longevity.

Each of these questions helps GPs design their fund with intention, communicate transparently, and avoid pitfalls that can derail fundraising before it even starts.

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About Borden Ladner Gervais LLP (BLG)

BLG and its lawyers have a deep knowledge of the asset management business. The number of clients they have in the industry allows them to have their pulse on the most topical issues facing fund companies. 

Whether you are looking to set up an investment fund in Canada, need help with understanding whether you need to register to operate your business and how to comply with regulatory requirements, or are looking to enter the Canadian market from abroad, we understand the business, regulatory and administrative issues that affect you.

With over 60 years’ experience, BLG’s large team is rated by Chambers Canada as one of Canada’s best law firms for investment funds and asset management.  We provide clients with national, multi-dimensional legal services in a disciplined, cost effective manner.

About Platform Calgary and the National Bank Investor Hub

Platform Calgary is a non-profit, community-based organization with a mandate to bring together the resources of Calgary's tech ecosystem to help startups launch and grow at every step of their journey, from ideation to scale. The National Bank Investor Hub at Platform Calgary is a dedicated space designed to bridge the gap between investors and Calgary’s high-potential startups, accelerating growth and innovation. Through this strategic initiative, we foster faster connections between investors, founders, and capital, driving Calgary’s tech ecosystem forward. 

About Audaxa Ventures

Audaxa Ventures is a women-led venture capital fund backing the most promising technology solutions at the intersection of climate and health. 

We prioritize investments that not only improve the world and our communities but also provide our portfolio companies with the market access needed to expand their ventures and foster growth. We focus on women and non-binary founders who bring lived experience, diversity of thought, and bold approaches to solving some of society’s most urgent challenges. With a commitment of impact-driven capital, we prioritize return on impact alongside financial performance — supporting founders who are building companies that deliver measurable outcomes for people and the planet.

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