Legal & Tax Guide for U.S. Issuers

3 Going Public in Canada Corporate structure and jurisdiction Corporate structure and jurisdiction of formation are important considerations for a U.S.-based company that is considering going public in Canada. Early planning can maximize a company’s valuation, minimize regulatory compliance costs and offer an efficient capital-raising structure in the future. U.S. incorporated companies may elect to list directly on Toronto Stock Exchange (TSX) or TSX Venture Exchange (TSXV) without changing their jurisdiction of incorporation. However, many U.S. incorporated companies decide to reincorporate in Canada or another non-U.S. jurisdiction prior to going public. With careful planning and under certain circumstances, the reincorporated company may qualify as a “foreign private issuer” 1 under the rules of the Securities and Exchange Commission (SEC). Being a foreign private issuer provides certain exemptions and accommodations from the stricter reporting and compliance requirements applicable to U.S. domestic companies. While TSX and TSXV do not require listed companies to be incorporated in Canada, certain minimum corporate protections for shareholders, similar to those that exist under Canadian law are required. Note TSX and TSXV do not require that a business be organized as a corporation. In some cases a limited partnership, trust or other structure appropriate for tax purposes may be the listing vehicle. Determine corporate structure One of the most important decisions management will make early in the listing process is determining the public company’s corporate structure. Management should evaluate the following considerations in determining what corporate structure will best achieve the company’s and its shareholders’ objectives: • Jurisdiction of Incorporation • Status as a Foreign Private Issuer or U.S. Domestic Issuer • Tax Considerations • SEC Registration and Reporting Considerations • Access to Investors • Future Corporate and Financing Transactions Each of these considerations require thoughtful analysis by management to determine the best corporate structure to match a company’s business, operations, industry sector, management, shareholder base, assets and long term objectives. There is no single solution that is right for every company. These decisions are inter-related and may have legal and tax implications for the company and its shareholders. Jurisdiction of incorporation A company does not need to be incorporated in Canada to go public on TSX or TSXV. Many U.S. domestic corporations have gone public in Canada and are listed on TSX or TSXV. However, based on the considerations discussed below, U.S. corporations may want to consider reincorporation (or a change in the jurisdiction of incorporation) into a foreign jurisdiction, such as Canada or tax favorable jurisdictions (Bermuda, British Virgin Islands, Cayman Islands, etc.), prior to going public on Toronto Stock Exchange or TSX Venture Exchange. 1. A description of the requirements to qualify as a “foreign private issuer” and the initial structural considerations to meet such requirements is provided under the section heading “Determine Corporate Structure”.