In Canada there are three stock exchanges, namely:
- the Toronto Stock Exchange (TSX), where Canada’s largest companies are listed;
- the TSX Venture Exchange (TSX-V), which lists emerging companies; and
- the Canadian Securities Exchange (CSE) formerly known as CNSX, which is Canada’s newest stock exchange.
Canadian securities regulators require a high degree of transparency for listed companies. Listed companies are required to provide continuous disclosure in the form of news releases, and the filing of financial statements and reports in statutory form. All news releases, financial statements and reports must be uploaded to the www.SEDAR.com website where they can be accessed by securities regulators and the public.
Corporation in Good Standing
One of the requirements for listing is that the applicant corporation is in good standing under and not in default of applicable corporate law or other applicable laws of establishment and has the corporate power and capacity to own its properties and assets and to carry on its business as it is currently being conducted.
If the company applying for listing is not incorporated or created under the laws of Canada or any Canadian province, then the company may be required to complete and provide a jurisdictional reconciliation of its articles, bylaws and other constating documents and the corporate or equivalent law regimes of its home jurisdiction with that of the Canada Business Corporations Act. Such a reconciliation will be reviewed to determine whether significant deficiencies exist with respect to overall market and investor protections when compared with similar provisions in Canadian corporate law. If there are any significant deficiencies, then the company may be required to amend its articles, by-laws, any declaration of trust or equivalent documents.
Management of a listed company should have adequate experience and technical expertise relevant to the company’s business and industry. The stock exchange will review the conduct of related persons (including directors, officers, 10%+ shareholders, promoters or investor relations persons) as well as the company’s employees, agents, and consultants in order to satisfy itself that the business of the company is and will be conducted with integrity and in the best interests of its security holders and the investing public. The exchange may require that the company’s management has adequate public company experience and that at least two of the directors are independent of management.
Directors, officers, 10%+ shareholders, promoters and investor relations persons are required to file personal information forms (PIFs) with the stock exchange and may also be required to file PIFs with Canadian securities regulators.
A company will not be approved for listing if any related persons have been convicted of fraud, breach of fiduciary duty, violations of securities legislation or any other activity that concerns integrity of conduct, or if related persons have entered into a settlement agreement with a securities regulator or other authority, or have been prohibited or disqualified by a court or regulatory agency from acting as a director or officer, or are known to be associated with other offenders, or have a consistent record of business failures, particularly failures involving public companies.
The absence of evidence satisfactory to the exchange of a positive legal and regulatory track record can also constitute grounds for disqualification as a director or officer of a listed company.
Annual Shareholder Meetings
Public companies, like private companies, are required to have an annual meeting of the company’s shareholders. At each annual meeting of shareholders, the board of directors must:
- present the audited annual financial statements to the shareholders for review;
- permit the shareholders to vote on the appointment of an auditor; and
- permit the shareholders to vote on the election of directors.
Often the directors will table other matters at an annual meeting such as seeking shareholder approval for the company’s stock option plan.
Listed companies are required to prepare and file audited annual financial statements, together with an auditor’s report, after each financial year-end. Companies are also required to file interim financial statements for each quarter. Financial statements must be prepared in accordance with International Financial Reporting Standards (IFRS).
Auditor’s reports must be issued by an auditing firm that is registered with the Canadian Public Accountability Board (CPAB).
The foregoing requirements will apply no matter on which Canadian stock exchange the company’s shares are listed. In addition, each stock exchange has its own specific listing requirements.
Stock Exchange Listing
A stock exchange listing can be effected either via a prospectus filing or via a merger with a reporting issuer. There are advantages and disadvantages of each approach and these should be carefully reviewed with your company’s securities lawyer.
This summary is intended to provide general comment only and should not be relied upon as legal advice. For more information, contact Genesis Law Corporation at 1-604-669-8843 x22 or info @ genesislaw.ca.