The Ontario Securities Commission is proposing to allow Capital Pool companies to raise money in Ontario.

The commission has proposed new policy, which sets out its views as to whether issuers participating in the Canadian Venture Exchange Inc.’s capital pool company program should be permitted to conduct public offerings in Ontario.

The CDNX program permits an initial public offering to be conducted and an exchange listing to be achieved by a newly created capital pool company which has no assets, other than cash, and which has not commenced commercial operations. The capital pool company then uses this pool of funds to identify and evaluate assets or businesses which, when acquired, qualify the resulting issuer for listing as a regular Tier 1 or Tier 2 issuer on the CDNX.

The proposed OSC policy permits these companies to conduct public offerings in Ontario if they are participating in the capital pool copany program. However, it is unlikely that the OSC would issue a receipt for such a “shell issuer”, if they fail to complete a Qualifying Transaction. Issuers must continue to comply with all applicable Ontario securities legislation.

Historically, the OSC has been reluctant to issue a receipt for a prospectus where the prospectus revealed the issuer to have neither a business nor operations and no assets, other than cash. The commission has found that the benefits of being public should not be granted unless the issuer has a business to disclose to prospective investors.

Although these concerns remain relevant today, the commission says it is aware that the implementation of the program in Ontario may also confer benefits upon Ontario’s capital markets by providing entrepreneurs and emerging businesses access to the financial and other resources necessary to fully develop. Moreover, the commission has also noted that the program provides certain investor protection provisions, which help mitigate the potential for harm to investors.

Comments on the proposed policy are due by October 31.