SEC Issues No Action Letter Regarding Canadian Companies’ Registration of Rights Offerings on MJDS Form F-7

In December 2015, the Canadian Securities Administrators (CSA) announced an amended regime for a prospectus-exempt rights offering in Canada. This amended regime allows certain public companies in Canada to conduct a prospectus-exempt rights offering without prior CSA review of the rights offering circular, and using a greatly simplified rights offering circular that assumes, without incorporation...

OTCQX Update

In recent years, many Canadian companies have sought to create a U.S. market for their shares by listing on the OTCQX. Qualifying Canadian companies that have their primary listing on the Toronto Stock Exchange, the TSX Venture Exchange or the Canadian Securities Exchange may generally obtain a quotation on the OTCQX or the next lower...

DSU Plans Require Careful Review to Avoid Adverse U.S. Tax Treatment

A Canadian company is planning to adopt a deferred share unit plan (DSU plan) for its directors. Only one or two of its directors are U.S. citizens or U.S. residents (“U.S. Directors”). With only one or two U.S. Directors, you wonder whether it is important to consider U.S. tax implications. The answer is a resounding...

New Approach for the Assumption of Options in M&A

A Canadian SEC reporting company that looks to acquire a company with outstanding equity grants in the United States will frequently need to address the question: What alternatives are available for the assumption of the target’s outstanding options or other equity-based compensatory awards? Under U.S. law, both the grant of the equity award and the...

Reductions in Force and the Older Workers Benefit Protection Act

It is generally a good idea for companies not to disclose biographical information about their employees, such as marital status, religion, or age. Good HR professionals counsel managers not to ask for such information during interviews, for example, in order to avoid claims of discrimination in hiring. Under U.S. law, however, there is an important...

Reminder of Required IRS Cost Basis Reporting for Canadian Companies

Canadian companies should be aware that if they engage in certain “organizational actions” that affect the tax basis of shares held by U.S. persons (including many types of acquisitions and business combinations where shares are issued to U.S. persons), they are required by the U.S. tax laws to evaluate the effect of the action on...

SEC Provides Clarification of Foreign Private Issuer Calculation

For Canadian issuers and their advisers, compliance with U.S. securities laws generally begins with the question: Is the issuer a “foreign private issuer”? The FPI definition, which is set out in Rule 405 under the Securities Act and 3b-4(c) of the Exchange Act, involves the following four inquiries: Are more than 50% of the issuer’s...

What “At-Will” Employment Means for Canadian Companies with U.S. Employees

One of the biggest differences between employment in Canada and employment in the United States is the fact that, with the exception of a few jurisdictions, employment in the United States is “at will.”  While in Canada employees who are terminated without cause often must be paid severance, in the absence of a contract requiring...

The Importance of Monitoring Your Foreign Private Issuer Status

Being a “foreign private issuer” is very important to a Canadian company’s treatment under U.S. securities laws.  If a Canadian company ceases to qualify as a foreign private issuer under the rules of the U.S. Securities Exchange Commission (SEC), it must generally: Change the way in which it offers and sells its own securities to...

Staying Onside the Regulation D Bad Boy Disqualifications

Most non-underwritten private placements of securities by Canadian companies to U.S. investors are made in reliance upon Rule 506 of Regulation D. Since September 2013, this exemption has been subject to “bad boy disqualifications.” Generally speaking, a company is prohibited from relying on Rule 506 if the company, any of its predecessors, any of its...