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Initial Public Offerings in Canada

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Initial Public Offerings in Canada INITIAL PUBLIC OFFERINGS IN CANADA From kick-off to closing, Torys provides comprehensive guidance on every step essential to successfully completing an IPO in Canada. A Business Law Guide i INITIAL PUBLIC OFFERINGS IN CANADA A Business Law Guide This guide is a general discussion of certain legal matters and should not be relied upon as legal advice. If you require legal advice, we would be pleased to discuss the matters in this guide with you, in the context of your particular circumstances. ii Initial Public Offerings in Canada © 2017 Torys LLP. All rights reserved. CONTENTS 1 INTRODUCTION ...................................................................................... 3 Going Public .......................................................................................................... 3 Benefits and Costs of Going Public ...................................................................... 3 Going Public in Canada ........................................................................................ 4 Importance of Legal Advisers ............................................................................... 5 2 OVERVIEW OF SECURITIES REGULATION AND STOCK EXCHANGES IN CANADA ............................ 8 Securities Regulation in Canada .......................................................................... 8 Where to File a Prospectus and Why .................................................................... 8 Filing a Prospectus in Quebec ............................................................................. 9 Introduction of Cooperative Securities Regulator .............................................. 9 Stock Exchanges ................................................................................................ 10 Listing on the Toronto Stock Exchange .............................................................. 13 Listing on the TSX Venture Exchange ................................................................ 14 3 PREPARING FOR THE IPO ......................................................... 14 Timing the Offering ............................................................................................. 14 Structuring the Offering ...................................................................................... 14 Company Valuation ............................................................................................. 14 Determining Which Securities Are Being Offered ............................................. 15 Share Structure and Public Interest Considerations ........................................ 15 Escrow for Initial Public Offerings ...................................................................... 15 Selling Shareholders .......................................................................................... 17 Dual Class Structures ......................................................................................... 17 Reorganization and Recapitalization ................................................................. 18 Identifying the Required Financial Statements ................................................. 19 Accounting Standards ........................................................................................ 19 Significant Acquisitions ...................................................................................... 19 Preparing for Due Diligence ............................................................................... 19 iii Initial Public Offerings in Canada Identifying Third-Party Consents ........................................................................ 20 Changing the Board of Directors ........................................................................ 20 Employment and Incentive Compensation Arrangements ............................... 21 4 OVERVIEW OF THE IPO PROCESS .................................... 23 Length of Time ................................................................................................... 23 Indicative IPO Timetable .................................................................................... 23 Contact with Media ............................................................................................. 23 Testing-the-Waters ............................................................................................. 23 Preliminary Prospectus ...................................................................................... 26 Additional Documents to Be Filed with the Preliminary Prospectus ................ 27 Personal information forms ............................................................................... 27 Material contracts and other documents .......................................................... 27 Quiet Filing .......................................................................................................... 28 Preparation of Financial Statements ................................................................. 28 The Waiting Period .............................................................................................. 29 Road Show .......................................................................................................... 30 Resolving Comments from Regulators .............................................................. 30 Pricing ................................................................................................................. 31 Final Prospectus ................................................................................................. 32 PREP Procedure as a Pricing Alternative ........................................................... 32 Withdrawal Rights ............................................................................................... 32 Prospectus Amendments ................................................................................... 33 Closing ................................................................................................................ 33 5 UNDERWRITERS ............................................................................... 35 Definition of “Underwriter” ................................................................................. 35 Role and Formation of the Underwriting Syndicate .......................................... 35 Lead Underwriter or Bookrunner ....................................................................... 35 Engagement Letter ............................................................................................. 37 Underwriting Syndicate ...................................................................................... 37 Underwriters and Potential Conflicts of Interest ............................................... 37 Types of Underwriting ......................................................................................... 38 Firm-Commitment or Marketed Underwriting ................................................... 38 Best-Efforts Underwriting ................................................................................... 38 Underwriters’ Commission ................................................................................. 38 Due Diligence ...................................................................................................... 39 Importance of Due Diligence .............................................................................. 39 Types of Due Diligence ....................................................................................... 39 Business diligence .............................................................................................. 39 Financial diligence .............................................................................................. 40 Legal diligence .................................................................................................... 40 The Due Diligence Process ................................................................................. 40 Management Due Diligence Session ................................................................ 41 Underwriting or Agency Agreement ................................................................... 41 Over-Allotment Option ........................................................................................ 42 Distribution Obligations ..................................................................................... 43 Complete Distribution ........................................................................................ 43 Several Obligations ............................................................................................. 43 Indemnification .................................................................................................. 44 Contribution ........................................................................................................ 44 Expenses ............................................................................................................. 45 Termination Rights .............................................................................................. 45 Disaster ............................................................................................................... 45 Market Out .......................................................................................................... 46 Material Change ................................................................................................. 46 Regulatory ..........................................................................................................
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