2024 GUIDE TO LISTING 15 FOREIGN PRIVATE ISSUER VS. U.S. DOMESTIC ISSUER While many U.S. companies list on TSX or TSXV and remain U.S. incorporated, a reverse takeover into a foreign jurisdiction and qualifying as a Foreign Private Issuer requires careful consideration and can result in: • favorable exemptions available to foreign issuers under U.S. securities laws • single jurisdiction financial reporting • streamlined access to the Canadian short form and base shelf prospectus system. For a company to qualify as a Foreign Private Issuer, it must be incorporated outside the U.S. and have 50% or more of its voting stock held by non-U.S. residents. Even if a majority of a company’s voting stock is held by U.S. residents, a company may still qualify as a Foreign Private Issuer so long as none of the following exist: • the business is principally administered in the U.S., • a majority of the issuer’s assets are in the U.S., or • a majority of the directors or executive officers are U.S. citizens or residents. Companies that do not qualify as Foreign Private Issuers are treated as U.S. Domestic Issuers by the SEC and must comply with all U.S. corporate governance requirements regardless of which exchange they are listed on. Determination of U.S. Domestic Issuer versus Foreign Private Issuer should be discussed with your legal counsel early in the planning process. U.S. TAX CONSIDERATIONS A company, whether a U.S. Domestic Issuer or a Foreign Private Issuer, can generally raise capital by issuing shares or other securities without adverse tax consequences. However, a U.S. Domestic Issuer that elects to proceed with a reverse takeover into a foreign jurisdiction to become a Foreign Private Issuer may subject itself and its shareholders to significant and adverse U.S. federal income tax consequences. Generally, the exchange of a U.S. corporation’s securities for securities of a foreign corporation will be a taxable transaction for U.S. taxpayers. Some of these adverse U.S. tax consequences may be avoided if the foreign corporation is treated as a U.S. corporation for U.S. federal income tax purposes. Such tax restructuring should be thoughtfully considered by the corporation and its tax advisors.
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