Going Public in Canada: A Strategic Guide for U.S. Private Companies

– January 27, 2025 –

Introduction

Is your growth trajectory limited by a lack of access to capital? Are you seeking a public market that values innovation, early-stage growth, and specific sectors like technology, cannabis, and mining? For many U.S. private companies, these questions are a driving force behind considering a public listing. While the U.S. stock market, with its established giants like the NYSE and NASDAQ, often takes center stage in these discussions, many U.S. businesses could benefit from the strategic advantages of a public listing north of the border in Canada.

The Canadian Securities Exchange (CSE), along with the Toronto Stock Exchange (TSX) and its TSX Venture Exchange (TSXV), present viable, well-regulated alternatives for U.S. companies looking to access public markets. The CSE, in particular, has gained significant traction as a destination for emerging growth companies with 74 new listings in the first 10 months of 2024[1] (see also, Canadian Securities Exchange CEO Richard Carleton’s Year-End 2024 Interview, which highlights the exchange’s focus on “entrepreneurial activity and small to medium-sized businesses.”[2]) offering a more streamlined and often less costly route to public capital. In fact, a recent report by the Canadian Venture Capital & Private Equity Association (CVCA) noted a significant increase in Canadian capital market activity, emphasizing the attractiveness of the Canadian market for both domestic and international companies.[3]

But why consider a Canadian listing over a U.S. one? While both offer unique benefits, here’s a brief overview of what a Canadian public listing can provide for U.S. private companies:

  • Potentially Faster and More Cost-Effective: The listing process in Canada can often be completed more quickly and at a lower cost than a traditional U.S. IPO (this is particularly the case for a listing on the CSE), reducing the financial burden and time to market for businesses looking to access public capital.
  • Access to a Different Investor Base: A Canadian listing opens doors to a broad international investor pool, particularly those familiar with the Canadian markets’ focus on sectors such as technology, cannabis, mining, and clean energy. Many Canadian investors have an appetite for these sectors and may not be as present in other exchanges.
  • Early-Stage Friendly Listing Requirements: Canadian exchanges like the TSXV and CSE allow earlier-stage companies to go public with lower financial and revenue thresholds, providing faster access to capital and growth opportunities compared to major U.S. exchanges.
  • Simplified Regulatory Landscape: Although compliance is essential, the Canadian regulatory structure, in some respects, is less complex and may offer a more streamlined pathway for certain types of businesses when compared with a listing on exchanges such as the NYSE or the NASDAQ.
  • Strong Cannabis Market Focus: For U.S. companies operating in legal or ancillary cannabis businesses, the Canadian market is much more established, as it legalized recreational cannabis at the federal level in 2018, making it a prime market for access to capital.

This article will explore the key benefits and options for U.S. private companies looking to go public in Canada, focusing on these strategic advantages and outlining the practical steps involved. We will set-out various listing strategies, including initial public offerings, streamlined non-offering prospectuses, and corporate re-domiciliation strategies.

II. Is a Canadian Listing Right for Your U.S. Company? (Initial Assessment)

Deciding whether a Canadian public listing is the right strategic move for your U.S. company requires a thorough evaluation of your business’s unique circumstances, financial standing, and growth objectives. While the allure of a potentially faster and more cost-effective listing is tempting, it’s crucial to understand if this path aligns with your company’s long-term vision.

Assessing Your Readiness: Key Questions for U.S. Companies

Before pursuing a Canadian listing, U.S. companies should carefully evaluate their readiness. This involves asking critical questions about your stage of development, financial health, and long-term growth goals. While some questions apply to any company considering going public, others are particularly important for U.S. businesses exploring a cross-border listing in Canada. This self-assessment will help determine if the Canadian market aligns with your company’s strategic objectives:

  • What is your current stage of development? Are you an early-stage startup, a rapidly growing company, or an established business? The CSE often caters to earlier-stage ventures with a strong growth narrative, while the TSX and TSXV are generally suited to more established or emerging companies. This is particularly true with technology and industrial companies as the requirements for listing on the TSX and TSXV for those companies are much higher than the CSE requirements.
  • What are your capital requirements? How much capital do you need to raise through the public markets, and what are your long-term financing objectives? A Canadian listing can provide access to a different set of investors who may be more interested in your company’s growth narrative.
  • What is your company’s industry sector? Certain sectors have a strong affinity with the Canadian market. The Canadian market has established itself as a leader in resource-based industries, technology, and cannabis, which can influence investor interest and valuation.
  • Do you have the resources for cross-border compliance? Are you prepared for the potential complexity of cross-border reporting and compliance requirements? Companies will need a strong legal and accounting team to navigate the Canadian requirements.
  • Do you have a cohesive and well-articulated business model and plan for growth? Are you confident in your business plan and that it can be easily understood by the Canadian market? Companies that are well prepared with a strong plan for growth are often more attractive to the market.
  • Are you looking for a less onerous disclosure regime? Are you in a position to structure your company to become a foreign private issuer and take advantage of the simplified disclosure requirements that are available?

When a Canadian Listing Makes Strategic Sense

A Canadian public listing may be particularly advantageous for U.S. companies in the following situations:

  • High-Growth Potential: If your company demonstrates strong growth potential and is seeking a market that values this, the CSE and TSXV may provide a favorable environment for fundraising.
  • Targeting Canadian Investors: If you believe your business aligns well with Canadian investors’ preferences and interests, a Canadian listing may offer increased investor support and higher trading volume. Companies in the natural resource sector, or those with Canadian operations, may find Canadian investors particularly engaged.
  • Cannabis Sector: U.S. companies in the cannabis sector face restrictions in the U.S. markets. The Canadian markets present a clear route to listing without those restrictions. As stated by James Black, Vice President, Listings Development of the CSE, “the CSE has listed over 150 cannabis companies that have collectively raised more than $15 billion, and represent some of the most storied names in the cannabis industry.”[4]
  • Desire for Streamlined Processes: The Canadian listing process, especially on the CSE, can often be faster and less expensive than a U.S. IPO, particularly if utilizing the non-offering prospectus method.
  • Foreign Private Issuer (FPI) Status: The ability to qualify as a Foreign Private Issuer (FPI) after structuring your company correctly, offers a less complex disclosure regime than a domestic U.S. filer. This can be a significant benefit to many companies as it will allow them to access the public markets without many of the onerous reporting obligations. More information about FPI status and its benefits is discussed later in this article.

Addressing Common Misconceptions

It’s important to dispel some misconceptions about Canadian listings. A common one is that Canadian exchanges are “second-tier” markets. While the NYSE and NASDAQ are certainly the largest exchanges, the CSE and TSXV are well-regulated markets that are home to a variety of companies with compelling growth stories.

Another misconception is that a Canadian listing will inherently make a company less appealing to U.S. investors. This is simply not the case, as many U.S. institutions and retail investors are active in the Canadian markets. Further, with a dual-listing approach, companies can be listed on both U.S. and Canadian exchanges at the same time.

Conclusion of Section II

Understanding your company’s readiness and long-term objectives is crucial before proceeding with a Canadian listing. By honestly assessing these key considerations, U.S. companies can make an informed decision about whether a Canadian listing aligns with their strategic goals.

III. Understanding the Canadian Stock Exchanges (CSE, TSX, TSXV)

For U.S. companies considering a public listing in Canada, it’s essential to understand the nuances of the three primary stock exchanges: the Canadian Securities Exchange (CSE), the Toronto Stock Exchange (TSX), and the TSX Venture Exchange (TSXV). Each exchange caters to different types of companies, with varying listing requirements, investor bases, and costs. Choosing the right exchange is a critical decision that can significantly impact your company’s success in the public markets.

The Canadian Securities Exchange (CSE): The Emerging Growth Leader

The CSE is known for its more streamlined listing process and is often the first port of call for early-stage and emerging growth companies. It is particularly attractive for smaller businesses with a high-growth narrative or unique value proposition. The CSE provides an alternative listing option for companies not yet ready for the stricter requirements of the TSX and TSXV. The CSE’s website highlights its focus on supporting “innovative companies as they access public capital markets.”[5] Many companies operating in innovative sectors, such as technology, cannabis, and mining have found a suitable home on the CSE.

The CSE is designed to be accessible to a broader range of companies by offering lower listing and ongoing maintenance costs compared to the TSX and TSXV. It is generally viewed as a more “entrepreneur friendly” exchange where companies will typically experience a less onerous compliance regime. However, companies considering a CSE listing should ensure they understand the different rules, regulations and reporting requirements to ensure they are compliant with securities laws.

The Toronto Stock Exchange (TSX): The Senior Exchange

The TSX is the premier Canadian stock exchange and is home to many of the country’s largest and most established companies. The TSX attracts larger, more established businesses with solid financial track records and proven operating models. The TSX is a global exchange that attracts institutional investors looking for stability, strong liquidity, and transparency. The TMX Group, the operator of the TSX, has stated that the TSX is the “market for established businesses and management teams with experience in public markets.”.[6]

The TSX has the most stringent listing and reporting requirements among Canadian exchanges, which can provide added credibility and investor confidence for eligible companies. However, this means that the process to list on the TSX can be more complex, lengthier and will be more costly than other Canadian exchanges.

The TSX Venture Exchange (TSXV): For Emerging Public Companies

The TSXV is positioned between the CSE and the TSX, serving as a marketplace for emerging public companies that are seeking to grow their business and eventually graduate to the TSX. The TSXV attracts companies that are on a growth trajectory and have demonstrated the potential to scale their operations. The TSXV focuses on early-stage companies, as many of these companies are just moving beyond the startup phase and looking to access new capital. The TSXV states on its website that it “exclusively serves small and early-stage companies that need access to public capital to finance their growth.”[7]

The TSXV is typically easier to access than the TSX with more flexible listing requirements, but more onerous than the CSE. It acts as an important stepping-stone for many companies as they work towards becoming a senior issuer on the TSX. In 2024, nine TSXV companies uplisted to the TSX.[8]

Comparison Table of Canadian Stock Exchanges

FeatureCanadian Securities Exchange (CSE)TSX Venture Exchange (TSXV)Toronto Stock Exchange (TSX)
Ideal Company ProfileEarly-stage, emerging growth, lower market cap companies to Established, large market capGrowing companies, mid-market cap.Established, large market cap, ETFs, and Funds
Listing RequirementsMore flexible, lower hurdlesMore structured than CSEMore stringent, higher standards
Reporting RequirementsGenerally less burdensomeMedium, similar to US OTC for financialsStringent reporting akin to the NYSE/NASDAQ
CostLower listing fees, more budget-friendlyModerate listing and ongoing costsHigher initial and ongoing costs
Investor BaseMix of retail and institutionalMix of retail and institutionalInstitutional investors
Listing TimelinesShorter, typically more streamlinedMedium timelinesLonger, more complex process
Exchange SuitabilityCannabis, tech, mining, emerging industriesListing rules favor resource and revenue growth companiesAll industries with a focus on established businesses

Choosing the right stock exchange is a pivotal step for U.S. companies seeking to go public in Canada. Each exchange offers its own advantages and presents different considerations depending on your business’s growth stage, financial health and long-term goals. Understanding these differences is essential to making an informed decision that will contribute to your success in the Canadian public markets.

IV. Pathways to Public Listing in Canada (For U.S. Companies)

For U.S. private companies considering a public listing in Canada, there are several strategic pathways available. Each approach offers its own unique benefits and challenges, and the optimal choice depends heavily on a company’s specific circumstances, objectives, and readiness. This section will briefly outline these three primary methods: (1) a Canadian IPO with a concurrent U.S. Regulation A or S-1 registration, (2) a Canadian prospectus relying on Regulation S, and (3) re-domiciliation into a Canadian jurisdiction.

A. Option 1: Canadian IPO with Concurrent U.S. Regulation A or S-1 Registration (Dual-Listing Strategy)

The “dual-listing” approach involves simultaneously conducting an Initial Public Offering (IPO) in Canada while also qualifying a U.S. offering under either Regulation A or a full S-1 registration with the Securities and Exchange Commission (SEC). This approach allows for the securities that are sold in the Canadian market to become immediately free trading in both the U.S. and Canada once qualified. As noted by the Corporate Finance Institute, “Cross-listed companies are able to access more potential investors, which means access to more capital.”[9]. This strategy is particularly beneficial for U.S. companies that want to expand their investor base to include both U.S. and Canadian investors.

A key benefit of this dual listing approach is the streamlined filing process where the Canadian Securities regulators will generally defer to the SEC review staff with respect to the content changes that are needed in each filing. This is often referred to as a “wrapper approach”, where the Canadian prospectus will largely mirror the content of the U.S. filing, thereby reducing the legal and compliance costs.

The process involves preparing a Canadian prospectus and concurrently preparing a U.S. Regulation A offering statement, or a full S-1 registration statement. It’s important to align the timelines of both filings to ensure a cohesive and simultaneous listing. Upon qualification of the filings and the listing of the security on the Canadian Exchange, the shares will become free trading in both the U.S. and in Canada. Furthermore, if the company chooses to become a reporting issuer in the U.S. they will have the ability to utilize either U.S. GAAP/GAAS or IFRS. If the company chooses not to become a reporting issuer then they must utilize IFRS for their ongoing filings in Canada. It should be noted, however, that if the company chooses not to become a reporting issuer under the United States Securities and Exchange Act of 1934 (1934 Act), then it may be required to follow U.S. state blue sky laws for future secondary sales of securities. Finally, the company would need to file a Form 8A with the SEC within 5 days of the qualification of the U.S. filing.

The key consideration for U.S. companies is that the underwriter for the offering must be a Canadian registered underwriter in Canada and a U.S. registered broker in the United States and they will need to complete due diligence on the company. The company must also ensure that the U.S. filings are in line with the U.S. rules and regulations for both Regulation A and S-1 offerings. The complexity of this approach can be greater than a streamlined approach however the benefit of a dual-listing is also significantly greater.

B. Option 2: Canadian Prospectus Relying on Regulation S (Streamlined Option)

For U.S. companies seeking a quicker and more cost-effective path to a Canadian public listing, leveraging a Canadian prospectus and U.S. Regulation S offers a streamlined approach. This strategy often involves filing either a non-offering or offering prospectus in Canada (depending on if new capital is being raised in the Canadian market). The offering of the securities in the Canadian market would rely on Regulation S to avoid the requirement for U.S. registration with the SEC. This approach works for new securities being sold and also for trades that are occurring in the Canadian market before the Regulation S hold period or compliance period has expired.

A key advantage to this approach is that the company may be able to access the Canadian markets more quickly, and at a lower overall cost than a dual listing using an IPO. This route may be particularly appealing to U.S. companies that don’t have a strong requirement to access the U.S. capital markets and are focused only on the Canadian market. The company would need to meet the exchange’s requirement to have a sufficient public float and a minimum number of shareholders. For the CSE this means having at least 150 public shareholders of record, and for the shares to represent a minimum of 10% of the issued and outstanding shares.

The U.S. securities would be considered restricted under U.S. securities laws unless the U.S. investor held the securities for at least 12 months. Securities being traded in Canada before this 12 month period are required to have a “Dot S (.s)” at the end of their trading symbol. The “Dot S (.s)” indicates the shares are subject to the restrictions of Reg S and are not considered freely tradable in the U.S. After the 12-month period, the “Dot S (.s)” can be removed. There is no restriction on the resale of the shares in Canada.

A key consideration in this approach is whether or not the company already meets the exchange requirements of having the requisite number of shareholders and public float. If this requirement is not satisfied, the company will have to do a “pre-listing” financing in order to meet the exchange requirements before the non-offering prospectus can be filed. The company will also need to be aware of blue sky laws in the U.S.

C. Option 3: Re-domiciliation into Canada (Becoming a Foreign Private Issuer)

For some U.S. companies, a strategic re-domiciliation – or changing the company’s legal jurisdiction to Canada – offers a compelling pathway to a Canadian public listing. This process involves a fundamental restructuring of the company to establish a Canadian legal presence, which can lead to Foreign Private Issuer (FPI) status under U.S. securities laws and provide access to the Canadian public markets. Re-domiciliation is often chosen by U.S. companies that want a long-term strategic benefit and want to benefit from certain advantages that are given to a foreign private issuer under U.S. regulations. A key advantage is the ability to take advantage of more simplified disclosure and reporting requirements in the U.S.

There are two primary approaches to achieving re-domiciliation:

  1. Reverse Merger: A reverse merger involves a U.S. private company merging with a Canadian “shell” company that is usually already a reporting issuer in Canada but not necessarily listed on a Canadian exchange. A reverse takeover (RTO) occurs when a private company becomes a reporting issuer in a Canadian jurisdiction through a transaction with a reporting issuer, without filing a prospectus. This approach leverages the existing reporting status of the Canadian shell company to expedite the Canadian listing process and to reduce the number of steps required to complete a Canadian listing. Typically, the U.S. company shareholders would receive shares in the new public Canadian entity in exchange for their shares in the U.S. company. An important consideration in this approach is that the shell company will likely have inactive or very small shareholder base that would likely need to be “activated” through a rights offering to ensure that the public float and number of shareholders are satisfied before the company is able to file a non-offering prospectus. Often this transaction is completed using a triangular merger to avoid the need for a shareholder meeting of the shell.
  2. New Company Formation: Alternatively, a U.S. company can form a new subsidiary in Canada. The U.S. company would then transfer its business and assets to this new Canadian entity. The new Canadian company would then complete the required filing on a Canadian exchange and seek a listing on that exchange. In this approach, the old U.S. company may be dissolved, or it may remain as a subsidiary to the new public Canadian company. This approach avoids the complexities of dealing with the shell company’s shareholders but still requires some level of restructuring and reorganization of your U.S. business.

In both of these approaches, the Canadian listing is typically completed by filing a non-offering prospectus, which is much simpler and more cost effective than completing a prospectus connected to an initial public offering transaction. After the restructuring of the company, it is vital that the new Canadian entity complies with the criteria to qualify as a FPI under U.S. securities law.

To be considered an FPI, a company must be incorporated or organized under the laws of a foreign country and must also pass one of two tests, the shareholder test and the business contacts test. The shareholder test is met if more than 50% of the company’s outstanding voting securities are directly or indirectly held of record by non-U.S. residents. Meeting this test automatically qualifies the company as a foreign private issuer. To meet this requirement shareholders of the U.S. operating entity will often receive a combination of voting and non-voting stock that is exchangeable into voting stock upon certain conditions on completion of a reverse takeover transaction with a Canadian company. The business contacts test is a harder test to meet for most issuers. It requires less than 50% of the company’s executive officers or directors be U.S. citizens or residents, 50% or less of the company’s assets be located in the United States, and that the company’s business is not administered principally in the United States. FPI status is determined annually, typically as of the last business day of the company’s most recently completed second fiscal quarter; or 30 days prior to filing an initial registration statement. Companies should choose to re-domicile their business if the long term benefit of FPI status outweighs the complexities involved in restructuring the company.

A key advantage of this approach is that, if the company is successful in restructuring to become a FPI, it may benefit from simplified reporting requirements, reduced compliance costs, and more flexibility on certain governance and disclosure matters under U.S. securities law. Once re-domiciled, the company would still need to meet all of the Canadian stock exchange listing requirements. U.S. companies also need to consider US tax issues associated with any proposed redomicile outside of United States.

Conclusion of Section IV:

Selecting the optimal path to a Canadian public listing is a critical strategic decision for U.S. companies. By carefully evaluating each option’s nuances, including the dual listing strategy, utilizing Regulation S, and exploring a re-domiciliation, U.S. companies can align their chosen pathway with their specific needs, capabilities, and long-term goals. Each approach has implications on the listing timeline, legal complexity, costs, compliance requirements, reporting obligations, and U.S. shareholder implications.

V. Key Legal and Regulatory Considerations for U.S. Companies in Canada

Navigating the legal and regulatory landscape when seeking a Canadian public listing requires a comprehensive understanding of both Canadian and U.S. securities laws. This section touches on some of the key legal and regulatory considerations but it does not cover everything that may apply when a U.S. company is considering a Canadian securities exchange listing.

Canadian Securities Regulators: Provincial Authority, National Coordination

Unlike the U.S. which has a Federal securities regulator, Canada does not have a national securities regulator. Instead, securities regulation is primarily managed at the provincial and territorial level by securities regulators in each province and territory. Each province and territory has its own securities regulator, and these regulators work together through the Canadian Securities Administrators (CSA) to harmonize regulations and policies, resulting in mostly consistent rules across the country, with some jurisdiction-specific requirements. U.S. companies listing on an stock exchange in Canada must comply with the rules of the provinces where they have a strong connection (such as operations, management, or incorporation), where the  stock exchange they are listed on is located (Ontario for TSX and CSE, Alberta for TSXV), and where they plan to raise capital. This complexity highlights the need for experienced Canadian securities counsel.

Disclosure and Reporting: Key Differences from U.S. Regulations

Both Canada and the United States require public companies (reporting issuers in their respective jurisdictions) to meet ongoing disclosure obligations; however, while there are many similarities in the type and content of this disclosure, there are some notable differences in their respective requirements.

Similarities in Disclosure Obligations

Both countries require reporting issuers to provide regular financial statements, and management’s discussion and analysis (MD&A). Companies must also promptly disclose material changes or events that could affect the company’s stock price. Both countries use electronic systems for filing disclosures; Canada uses SEDAR+ (documents are filed as PDFs), while the U.S. uses EDGAR (documents are filed as HTML and XBRL). Also, both countries require insiders to report their security holdings and transactions.

Key Differences in Disclosure Obligations

While the overall approach to ongoing disclosure is similar, the specific requirements and deadlines can differ significantly between Canada and the United States. Some of the key differences are as follows:

  • Filing Deadlines: Canadian filing deadlines for financial statements vary between non-venture and venture issuers. Non-venture issuers must file annual statements within 90 days and interim statements within 45 days. Venture issuers have 120 days for annual filings and 60 days for interim filings. U.S. deadlines vary based on filer status but are generally shorter than Canadian deadlines.
  • Annual Information Form (AIF): Canada requires a specific Annual Information Form for reporting issuers that are not a venture issuer. While the U.S. does not have a direct equivalent, similar information is included in the Form 10-K. U.S. reporting issuers can file their Form 10-K as an AIF with Canadian securities regulators.
  • Quarterly Reporting: Canada requires quarterly financial statements and MD&A. The U.S. requires more detailed quarterly reports on Form 10-Q.
  • CEO/CFO Certifications: Both countries require certifications for annual and interim filings, but the U.S. requires more extensive certifications under the Sarbanes-Oxley Act.
  • Corporate Governance Disclosure: Canada has specific requirements for corporate governance disclosure under National Instrument 58-101 – Disclosure of Corporate Governance Practices. The U.S. requirements are more extensive under the SEC rules and stock exchange listing standards.
  • Industry-Specific Disclosure: Canada has specific disclosure requirements for industries like mining and oil & gas (e.g., National Instrument 43-101 – Standards of Disclosure for Mineral Projects and National Instrument 51-101 Standards of Disclosure for Oil and Gas Activities). U.S. industry-specific disclosure is generally less prescriptive.
  • Foreign Issuer Exemptions: Canada offers exemptions under National Instrument 71-102 – Continuous Disclosure and Other Exemptions Relating to Foreign Issuers for certain foreign issuers. The U.S. also provides some accommodations for foreign private issuers, but generally requires more extensive ongoing reporting.

It’s important to note that failure to comply with disclosure requirements that apply to your company in either country can result in regulatory actions, including cease trade orders or delisting. U.S. companies must be aware of these differences and seek proper counsel to ensure their filings meet all regulatory requirements that may apply in both countries.

Rule 144, Regulation S, and Trading of Restricted Securities

Rule 144 of the U.S. Securities Act of 1933 governs the resale of restricted securities in the U.S., which are securities acquired in a non-public offering. This includes shares from Regulation D offerings, Regulation S offerings, private placements, and reverse mergers.

Regulation S provides an exemption from U.S. registration requirements for offers and sales of securities that occur outside the United States. Holders of restricted securities of a FPI may resell these securities on a Canadian securities exchange in accordance with Regulation S. FPI restricted securities can generally be resold on a Canadian securities exchange under Regulation S, subject to Canadian hold periods and resale restrictions, which are generally shorter than U.S. holding periods. Alternatively, those FPI restricted securities can be resold in the United States under Rule 144 of the U.S. Securities Act after a one-year holding period has been met, even if the company is not a U.S. reporting company.

Secondary trading rules that apply to U.S. companies that are not FPIs but listed on a Canadian stock exchange are more complicated. A clear understanding of Rule 144, Regulation S, and the unique treatment of a particular company’s securities is essential for both issuers and investors involved in a Canadian listing.

Director and Officer Liabilities

Canadian directors and officers have a fiduciary duty to act in the best interests of the company and its shareholders. They can be held liable for misrepresentations in disclosure documents and ongoing reporting, as well as a lack of due diligence. A strong understanding of their responsibilities is vital to their protection, as is a proper insurance policy. Directors and officers should ensure proper corporate governance and compliance protocols are in place to protect themselves from liability.

Conclusion of Section V

Navigating the legal and regulatory requirements of a Canadian public listing is essential for the success of U.S. companies. By taking steps to fully comply with all applicable U.S. and Canadian laws, companies will be able to avoid costly litigation and ensure they are set up to comply with all regulatory obligations. Working with experienced securities counsel is the key to navigating this complex area.

VI. Tax Implications for U.S. Companies Listing in Canada

U.S. companies considering a public listing in Canada must carefully evaluate the potential tax implications for both the company and its U.S. shareholders. This section provides a general overview of key tax considerations but is not intended to be tax advice.

U.S. Tax Considerations for a Canadian Listing

Going public in Canada can trigger U.S. tax implications for U.S. shareholders. The tax consequences can vary significantly depending on the chosen method of listing, such as a traditional IPO, reverse merger, re-domiciliation transaction, or listing using a non-offering prospectus. For instance, re-domiciling a U.S. company into a Canadian entity may result in U.S. shareholders being subject to U.S. taxation on what is deemed a constructive sale of their shares.[10] The specific tax implications can differ greatly based on the transaction’s structure and circumstances.

Section 367 and Section 7874 Issues

Section 367 of the U.S. Internal Revenue Code (IRC) addresses the tax consequences of certain property transfers (such as shares) by U.S. persons to foreign entities. This section may apply when a U.S. company re-domiciles to Canada or completes a reverse takeover transaction, potentially resulting in immediate tax obligations for U.S. shareholders. Additionally, Section 7874 of the IRC contains anti-inversion rules that can disallow certain tax benefits if the resulting company is considered a U.S. company for U.S. tax purposes. These rules are complex and require careful consideration in any cross-border transaction.

Potential Tax Benefits Using Exchangeable Share Structures

Companies may explore exchangeable share structures to defer some U.S. tax implications that could arise under Sections 367 or 7874. These structures often allow existing shareholders to defer U.S. tax consequences until the exchangeable shares are actually sold or converted. However, these structures are complex and require expert guidance to achieve the desired tax results.

Canadian Tax Considerations

It’s important to note that there are no Canadian corporate taxes applicable to capital raised in Canada through a listing on Toronto Stock Exchange or TSX Venture Exchange.[11] However, U.S. companies must be cautious about whether their activities constitute “carrying on business in Canada” for tax purposes. A U.S. company that “carries on business in Canada” is required to file a Canadian tax return and may be liable for Canadian taxes depending on the circumstances.[12]

Conclusion

U.S. companies considering a Canadian listing must be aware of the potential tax implications for themselves and their U.S. shareholders. Tax planning is a vital part of the overall strategy and can significantly impact the success of a listing transaction. It is essential to engage professional tax advisors to address these issues prior to any transaction to avoid potential pitfalls associated with the cross-border listing process.

VII. Conclusion: Making an Informed Decision

Listing in Canada offers a strategic alternative for U.S. companies seeking access to capital, broader investor exposure, and, in some cases, a less complex regulatory environment. However, selecting the right path requires thoughtful evaluation and expert guidance. Whether pursuing a dual IPO, a streamlined non-offering prospectus, or a strategic re-domiciliation to Canada, each option presents unique benefits and challenges. Carefully assessing your company’s circumstances and long-term goals is essential to choosing the best path for sustainable growth.

Venture Law Corporation has extensive experience in cross-border listings and is able to offer the legal guidance necessary to navigate this process successfully. Our team has a deep understanding of both U.S. and Canadian securities laws, collaborates effectively with U.S. legal counsel, and strategically divides responsibilities to ensure efficiency. We can help you evaluate your options, develop a strategic plan, and execute your listing smoothly and compliantly.


[1] Canadian Securities Exchange. (Nov. 17, 2025). Canadian Securities Exchange Reports October 2023 Performance Figures https://v2.thecse.com/en/about/publications/cse-news/canadian-securities-exchange-reports-october-2023-performance-figures

[2] Carleton, Richard. Canadian Securities Exchange. (Dec. 17, 2024). Canadian Securities Exchange CEO Richard Carleton’s Year-End 2024 Interview. https://blog.thecse.com/canadian-securities-exchange-ceo-richard-carletons-year-end-2024-interview/

[3] Canadian Venture Capital & Private Equity Association. (2024). 2023 Canadian Venture Capital Market Overview. https://www.cvca.ca/insights/market-reports/year-end-2023/

[4] Black, James, the Canadian Securities Exchange. (July 2024). The Canadian Securities Exchange Magazine: The Cannabis Issue. https://blog.thecse.com/cse-magazine/

[5] The Canadia Securities Exchange. (n.d.). The CSE – About Us: We are Canada’s entrepreneurial securities exchange. https://thecse.com/about/about-us/

[6] TMX Group. (2024). 2024 Guide to Listing Toronto Stock Exchange and TSX Venture Exchange, p. 12. https://www.tsx.com/ebooks/en/2024-guide-to-listing/

[7] TMX Group. (Jan 28, 2022). TSXV 101: A Deep Dive into the Small and MicroCap Marketplace. https://www.blog.tmx.com/markets/tsxv-101-a-deep-dive-into-the-small-and-microcap-marketplace

[8] TMX Group. (Jan. 8, 2025). TMX Group Equity Financing Statistics – December 2024. https://www.tsx.com/en/resource/3278

[9] Corporate Finance Institute. (n.d.) Cross Border Listing. https://corporatefinanceinstitute.com/resources/equities/cross-border-listing/

[10] TMX Group. (n.d.). Cross-border Legal and Tax Considerations for U.S. issuers. https://tinyurl.com/44t2tnwa

[11] See note 10.

[12] RSM US LLP. (Aug. 16, 2020). U.S. companies doing business in Canadahttps://rsmus.com/insights/services/business-tax/us-companies-doing-business-in-canada.html

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