Listing Requirements of the Canadian Securities Exchange – CSE

– *updated August 30, 2015 –

canadian securities exchangeThe Canadian Securities Exchange (CSE) began operation in Canada in 2004. It originally operated as the Canadian Trading and Quotation System Inc. (CNQ). It changed its name to the Canadian National Securities Exchange (CNSX) in November of 2008. It changed its name from CNSX to its current name, the Canadian Securities Exchange (CSE), in January 2014.

At the close of 2014, the CSE had 244 listed companies, debt securities and structured products trading on its exchange. This represented a 34% increase in the number of securities trading on the exchange since the start of the year. As of July 31, 2015, there are 291 listed companies, debt securities and structured products trading on the CSE.

The listing requirements for the Canadian Securities Exchange are as follows:

  •  fully reporting in at least one province in Canada,
  • not a blank check or inactive company,
  • minimum of 150 public stockholders holding a minimum board lot of 100 shares each,
  • minimum of 500,000 shares publicly held,
  • freely tradable shares must be worth a minimum of C $ 50,000,
  • operating companies must have achieved revenue from sale of goods or services,
  • non-operating entities must have a reasonable plan to develop an active business and the financial resources to carry out that plan,
  • either a cash generating capacity, or a recent history as a listed company and minimum working capital of C $50,000, or a minimum working capital of C $100,000,
  • officers, directors, related persons and investor relations persons associated with the company must have a clean record (clean RCMP and regulatory record),
  • company must not have entered into a settlement agreement with a securities regulator or other authority, known to be related to another offender, or have a consistent record of business failures (particularly with public companies),
  • agreement to comply with corporate governance requirements,
  • must have letter from market maker agreeing to act as a market maker for securities of company once approved for listing, and
  • business plan projecting the activities and financial condition of the company for 12 months from application date.

If you are planning to list of the CSE feel free to print off our CSE Listing Application Checklist.

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    Alixe Cormick is the founder of Venture Law Corporation in Vancouver, British Columbia and a member of Commercialization Advisory Board of the Life Science Institute at the University of British Columbia, the Advisory Board of the National Crowdfunding Association and two private tech companies. She is also a member of the Pacific Northwest Keiretsu Forum, an association of accredited private equity angel investors, venture capitalists and corporate/institutional investors, and Vantech Angel Technology Network, a Vancouver angel group. You can reach Alixe by phone at 604-659-9188, by email at acormick@venturelawcorp.com, on twitter @AlixeCormick or on Google+.

    Going Public in Canada & the United States

    – *updated August 30, 2015 –

     going-publicThere are four main ways a company can “go public” in the United States and Canada. One is issuing securities in an offering or transaction registered with all relevant securities commissions (initial public offering). A second is registering your company and its outstanding securities with the Securities and Exchange Commission (the “SEC“), State and or provincial regulators (non-offering registration of existing securities). The third is conducting a reverse takeover of a public shell company or other public vehicle. The fourth is through a listing on the TSX Venture Exchange (“TSX-V) as a capital pool company. In the US, the last option is not available and the routes open to going public are the first three. In Canada, all four means of going public are available to companies.

    Initial Public Offering

    Going public via an initial public offering is theoretically available to companies of all sizes. Traditional initial public offerings, however, require an underwriter. Finding a willing underwriter in the US and Canada is often difficult if not impossible to accomplish by small and micro-cap companies. Many small companies are using direct public offering as a non-traditional initial public offering. One of the main advantages of a direct public offering is companies avoid the expense and complications of an underwriter and underwriter’s counsel. A direct public offering can be very effective particularly when the amount being raised is under $2,000,000 and the internet is utilized to sell all or part of the offering. Direct public offerings are more effective in the US than in British Columbia, since in BC, companies need to be listed on a recognized exchange (the US OTC Markets are not recognized by Canadian securities regulators).

    Registration of Existing Securities

    In 1999, hundreds of companies filed Form 10SB documents with the SEC to register their companies and their outstanding securities with the SEC to become fully reporting under the federal securities level. This rush to register was caused when the OTC Bulletin Board imposed eligibility requirements on OTCBB quoted companies, which included being a reporting company with the SEC. The disclosure required in a Form 10SB is similar in content to that required in a prospectus. Unlike a prospectus, however, not all Form 10SB documents are reviewed by the SEC.

    Canadian resident or operating companies may also become US reporting companies by registering their outstanding securities with the SEC. They may choose to register using the forms provided by the SEC for foreign issuers (Form 20F) or use Form 10 which is provided for US domestic issuers. There are several differences between the two forms of registration and perceived and real advantages and disadvantages.

    Companies may also elect to register their outstanding securities in the US or Canada by filing a prospectus qualifying these securities for resale. Canadian transactions will need an underwriter if the shares are to be registered in Canada and the company wishes to become a reporting issuer in Canada.

    Reverse Takeovers

    Going public via a reverse takeover remains a popular method for small and micro-cap companies in the US and Canada. A reverse takeover is where an operating private company merges into or is acquired directly or indirectly by a non-active or shell company. The value of the shell company is in its reporting issuer status and/or the fact that its securities are listed or quoted for trading. After the merger, the former management, the board of directors and the majority of the stockholders of the operating company control the former shell company.

    Reverse takeovers are popular with small and micro-cap companies for a number of reasons:

    • generally a reverse takeovers tends to take less time to complete than either an initial public offering or US Form 10 registration filing;
    • often the public shell company provides the shareholder spread and public float requirements needed to list on an exchange or quotation service;
    • there is no risk of the transaction not closing due to unstable market conditions, which is a real risk when conducting an initial public offering;
    • initial public offerings and US Form 10 registrations tend to require greater attention from management than reverse takeover transactions;
    • there is no need for an underwriter to complete a reverse takeover; and
    • there is often less dilution of ownership.

    Capital Pool Companies

    In Canada, the TSX-V has allowed companies to list whose sole purpose is to conduct a reverse merger or acquire the assets of promising company or venture. They are called capital pool companies (“CPC“) and are exclusive to the TSX-V. A CPC must merge or acquire a company or asset within 18 months of listing on TSX-V. This is called a qualifying transaction. After a successful qualifying transaction, the CPC becomes a regular listed company on TSX-V. All CPCs must comply with TSX-V policy 2.4.

    A CPC which fails to merge or acquire a company or asset within the required time frame is de-listed from the TSX-V and may or may not be subsequently listed on the NEX Board which was recently created by the TSX-V for companies which no longer meet the listing standards of the TSX-V. A CPC which has been delisted from the TSX-V can still complete a reverse merger or acquisition which would qualify it to re-list on the TSX-V, the CSE or the TSX so long as at the end of the transaction the company meets the listing standards or the exchange it proposes to be listed on.

    Much of the information in this section has been taken from the TSX Group website and the CSE website.

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    Other Articles You May Find of Interest:

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    Alixe Cormick is the founder of Venture Law Corporation in Vancouver, British Columbia and a member of Commercialization Advisory Board of the Life Science Institute at the University of British Columbia, the Advisory Board of the National Crowdfunding Association and two private tech companies. She is also a member of the Pacific Northwest Keiretsu Forum, an association of accredited private equity angel investors, venture capitalists and corporate/institutional investors, and Vantech Angel Technology Network, a Vancouver angel group. You can reach Alixe by phone at 604-659-9188, by email at acormick@venturelawcorp.com, on twitter @AlixeCormick or on Google+.