I.P.O. Legal Counsel

CALGARY INITIAL PUBLIC OFFERING LAWYER

Taking a company public through an Initial Public Offering is a complex process that is both highly demanding and heavily regulated, such that it must be strictly complied with and attuned to the particular of the specific business situation and its component parts. The general steps of the initial public offering process can be depicted as follows:

A. Initial Considerations

- Ascertain the pros and cons of becoming a public company.

- Ajudge the appropriate approach from the various methods of going public in Canada (i.e., initial public offering, reverse takeover, capital pool transaction, etc.) and various stock exchanges that may be appropriate for the listing of the company's publicly-traded securities (i.e., TSX, TSX Venture Exchange, Canadian National Stock Exchange, etc.).

- Understand Canada's regulatory environment for the public offering of securities.

- Review pre-transaction preparations, key participants in the process, cost considerations, transaction timelines (3–6 months) and potential risks and liabilities.

- Understand the legal consequences of becoming a public company including annual and quarterly financial statement filing, ongoing disclosure of material facts and changes related to the business, preparation and filing of annual information forms and shareholder meeting materials, insider reporting and compliance with rules of exchange where the company's securities are listed.

B. Pre-Transaction Preparation + Organization

 - Initial planning should commence as far as 6 months in advance and may include the creation or updating of a business plan; the assembly of the transaction team (underwriters, lawyers, auditors, printers and transfer agent); the strengthening of the board of directors, management and internal systems and procedures; corporate restructuring; tax planning for shareholders; the creation of new shares; the creation of a stock option plan; the review of accounting policies and financial records; the review and/or settlement of outstanding litigation involving the company; the review of material contracts; the compilation of due diligence materials; discussion of escrow considerations; etc.

- The underwriters host a formal organizational meeting to launch the process.

C. Preliminary Prospectus + Due Diligence

-To complete a public offering, the company must clear a prospectus with the applicable securities regulator.

- The prospectus serves the twin roles of (i) a marketing document pursuant to which the business story is sold to prospective investors and (ii) a consumer protection document designed to give prospectus investors "full, true and plain disclosure of all material facts relating to the securities being sold."

- Corporate compliance on the prospectus is driven by multiple regulatory disclosure requirements, including those set forth in National Instrument 41-101, General Prospectus Requirements, and Form 41-101F1, Information Required in a Prospectus.

 - During the course of drafting the preliminary prospectus, the underwriters and the legal counsel are concurrently conducting due diligence as to the company to ensure that the prospectus does not contain a misrepresentation [an untrue statement of a material fact or an omission to state a material fact that is required to be stated or that is necessary to make a statement not misleading in light of the circumstances in which it was made].

- Misrepresentations are particularly serious, given that the company and parties preparing the prospectus are held personally liable for misrepresentations in the prospectus, unless such party, other than the issuer or any selling security holder, can prove that it conducted "due diligence" and therefore had "reasonable grounds to believe" that the part of the prospectus for which it was responsible contained neither false statements nor omissions.

- Due diligence must be taken very seriously by all parties, given the legal exposure that one risks from a lawsuit based on a misrepresentation claim.

D. Regulatory Review + Marketing Phase

- In the 4 to 8 weeks prior to closing, the preliminary prospectus is vetted by the securities commission for comments.

- Issues are then negotiated and settled, and the prospectus is changed to reflect the regulator's comments.

- Also during this phase, the underwriters and key members of the company's management team make a series of presentations to institutional investors and investment dealers over a period of 5 to 10 days (the "road show").

- The underwriting agreement is also negotiated and finalized, and an application for listing is filed with the applicable stock exchange.

E. Final Prospectus Phase

- Once all outstanding matters have been resolved with the applicable securities commissions, clearance is obtained to file final material with such regulators.

- The preliminary prospectus is updated to include any changes to the information that was provided in the preliminary prospectus, including the disclosure relating to the pricing of the offering and the information derived therefrom and any additional disclosure requested of the regulators through the review process.

- Assuming the market is still receptive and subject to any final due diligence issues and board approval, the issue is priced, the underwriting agreement is executed and the final prospectus is filed and commercially printed.

F. Closing

- Closing documents are signed, the securities and the proceeds from the issue are exchanged and the company’s shares begin to trade in the public market.. 

For more information on the legal services of Neufeld Legal P.C., with respect to orchestrating and implementing the appropriate growth plan for your privately-held company and thereby taking it public through an Initial Public Offering unto the stock exchange, contact Neufeld Legal PC:

Email: Chris@NeufeldLegal.com

Telephone: 403-400-4092