KPMG A Guide To Going Public Interactive

A Guide to
GOING
PUBLIC
kpmg.ca/ipo
Contents
Contents Introduction
Deciding whether
to go public
Introduction. . . . . . . . . . . . . . . . . . . . . . . . . 2 Applying for a stock exchange listing. . . . . . . . . . . . . . . . . 29
Regulatory review. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Deciding whether to go public. . . . . . . . . . . 4 Developing marketing materials. . . . . . . . . . . . . . . . . . . . . 31
Preparing to go public
Why go public?. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 Marketing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Executing your IPO
What are the advantages and disadvantages for Pricing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
your company?. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Finalize documents. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33 Continuing as a
Is your company ready?. . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
The closing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33 public company
Are the markets ready for you?. . . . . . . . . . . . . . . . . . . . . . 8
Pricing considerations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 Continuing as a public company. . . . . . . . . 34 Further information
Assess the impact on your company. . . . . . . . . . . . . . . . . 9 Transition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Costs of going public. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 Implement strategic operating plans. . . . . . . . . . . . . . . . . 36 Appendices
Duration of the process. . . . . . . . . . . . . . . . . . . . . . . . . . . 10 Regulatory matters. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Make the decision. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 Continuous disclosure requirements. . . . . . . . . . . . . . . . . 37
Investor relations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Preparing to go public. . . . . . . . . . . . . . . . . 12
Perform a thorough review of your company. . . . . . . . . . 14 Further information. . . . . . . . . . . . . . . . . . . 43
Deciding on the corporate and management structure. . . . 17 Tax considerations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Assembling the team: internal and external members. . . . 17 Markets and forms of going public. . . . . . . . . . . . . . . . . . 47
Develop a timeline and framework for Acronyms defined. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
project management. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Glossary. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
Developing the offering . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Appendices . . . . . . . . . . . . . . . . . . . . . . . . 54
Executing your IPO. . . . . . . . . . . . . . . . . . . 23
Appendix 1: Contents of a prospectus. . . . . . . . . . . . . . . 55
Preparing your prospectus. . . . . . . . . . . . . . . . . . . . . . . . . 26
Appendix 2: Selecting and working with
Content of a prospectus. . . . . . . . . . . . . . . . . . . . . . . . . . . 28 the underwriters. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
Underwriters’ due diligence. . . . . . . . . . . . . . . . . . . . . . . . 28 Appendix 3: Stock compensation plans. . . . . . . . . . . . . . 63
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© 2015 KPMG LLP, a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
2 A Guide to Going Public
INTRODUCTION
Are you thinking of taking your company public?
Contents
Introduction
Deciding whether
to go public
Executing your IPO
Continuing as a
public company
Further information
Appendices
T aking your company public is an the beginning of a new life in the

exciting and challenging process public spotlight. For others, it may
for leaders like yourselves – the be the achievement of a major
entrepreneur, the chief executive business and financial reward. Being
officer, the chief financial officer – public brings prestige and visibility
and for all the other stakeholders with all the players in the market –
involved in the process. For some, customers, suppliers, employers,
going public may be the culmination and the financial community.
of one long-term strategic goal and
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L ike any other initiative that brings high long-term

rewards, the going public process is not without its
challenges: complex accounting rules and reporting
requirements, pressures on time and resources, and
managing new stakeholders – the board, shareholders,
and, possibly, new management. But you can confidently
face these by managing their impact if you are well Contents
informed and prepared for the challenges that lie ahead.
That’s where KPMG comes in – we work with our

clients to help examine whether going public is the Introduction
right choice for their company. Then, if they decide
that they want to follow this route, we can help them Deciding whether
through the IPO process and beyond, as they operate to go public
in the public company environment.
“We had been thinking about our
Executing your IPO
strategy for growth and value creation
for quite some time and considered
Continuing as a
a number of other options – but then
public company
going public was the best option that brought together
multiple business goals. We committed to the process
Further information
as a team, listened to our advisers, maintained control
of the process, and it worked out more smoothly than
Appendices
we had expected.”
We have developed this publication to help you gain

that understanding. By providing you with a practical,
realistic perspective of what is involved in this process,
we want to help you make an informed decision.
We review factors to consider before you make the
decision. Then, if you decide to take your company
public, we discuss how you can plan and execute your
IPO, and ultimately, what you might expect from life as
a public company.
We hope you find this book to be a useful source of

reference as you embark upon this exciting journey.
kpmg.ca/ipo
Contents
Introduction
Deciding whether
to go public
Executing your IPO
Continuing as a
public company
Further information
Appendices
DECIDING
whether to go public
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5 A Guide to Going Public Deciding whether to go public
KEY CONSIDERATIONS
Contents
1 Why go public?
Your decision to go public should follow from your longer-term strategic objectives –
seeking opportunities for growth, value creation or an exit strategy. It’s a big decision. You Introduction
will need to have a clear understanding of the process and assess the impact it will have
on you and your company. Deciding whether
to go public
2 Is your company ready?
You must step back and evaluate your company and its future potential from an investor’s Preparing to go public
perspective. Most successful companies invite investor confidence, have the “right stuff”
and structure to provide for profitable growth, and have a solid core business to generate Executing your IPO
shareholder value over the longer-term.
Continuing as a
3 Are the markets ready for you? public company
Assess how the markets will receive the offering. The timing of the offering is
critical. Timing decisions depend on economic factors, market conditions and pricing Further information
considerations – right up to the day the securities are offered for sale. You should expect
that your underwriters will play a vital role in advising you on market readiness.
Appendices
4 Assess the impact on your company and make the decision

Before going public, assess the impact that this change will have on you and your
company’s infrastructure, and decide whether you are ready to make the necessary
commitment – before, during, and after the IPO process.
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1 Why go public? What are the advantages

Growing companies constantly search for new capital. Going public is one way to obtain and disadvantages for your
that capital, but it takes time and money – and a lot of both.
company?
Typically, this decision is the culmination of a longer-term strategic plan for your company.
Some of the advantages
You may be an entrepreneur who started a business around a good idea. A successful
Access to capital
strategic formula has created shareholder value and now your company is ready
Contents
Going public provides opportunity for
for the next step. Reaching where you are today may have stretched your internal
growth and expansion of your business
operational and external borrowing capacity. You are seeking access to the public
by offering a wider range of sources to
equity markets for additional investors.
raise capital. You may want to finance key
acquisitions, retire existing debt, buy out
Consider what your life will be like afterwards. existing shareholders, invest in research Introduction
The IPO is not an end in itself – when you go public and development, or move into larger and
more diverse markets.
you will be dealing with investors, the press and will Deciding whether
face more public scrutiny. Improved financial status to go public
Going public increases your company’s
equity base and creates more leverage for
You may have founded a successful business and want to crystallize the value you have
financing growth. It can also improve your
built up in the company. Or, you may be an investor in the private equity sector, looking
for an exit strategy or to receive a return on your investment. You may have a succession debt to equity ratio, which can help you
plan, involving you, your family or your employees. borrow additional funds as needed and Executing your IPO
may allow you to renegotiate your existing
Think about the time and money. Remember that going public is only one of a number debt on more favourable terms.
of financing options. Before making your decision, it is not unusual to spend some time Continuing as a
determining whether going public is the best option for your company. Higher visibility public company
An IPO and distribution of shares to a
wider, more diverse investor base can
Further information
create greater public awareness of your
products and services. The visibility may
give you a competitive advantage over Appendices
privately held companies in the same
industry. This profile may make it easier for
you to expand nationally or internationally.
Increased employee motivation and

retention
A public company can provide an
enhanced stock-based compensation
strategy for attracting and retaining
managers and key employees. A stock-
based compensation plan is a way to give
employees an opportunity to share in the
financial success of the company through
an equity compensation component.
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Enhanced wealth and liquidity for Increased demands on time and Loss of control
the owner resources An IPO dilutes the ownership of the
Creation of a public market for your shares Going public creates extensive new company. At the IPO stage, the owners
increases liquidity, and provides a market reporting requirements, including can make certain that they maintain
guide to calculate your wealth and net preparing and filing annual and quarterly control after the completion of the IPO
worth. Subject to certain restrictions, you financial statements, MD&A, the AIF, and by ensuring they continue to hold the
may sell your shares in an IPO or sell your CEO/CFO certifications on disclosure majority of the voting shares. Future
shares into the market at a later date. controls and procedures as well as public financings or issuing shares for
Publicly traded shares may also be more
acceptable as collateral for personal loans.
internal control over financial reporting.
These requirements demand a significant
acquisitions will dilute their ownership
percentage, and create the possibility
Contents
commitment of time and resources by that the original owners will lose
The disadvantages senior management and other personnel. future control.
Increased scrutiny and accountability You may also need to make changes to
Potential for increase in income taxes Introduction
As a public company, you lose privacy your existing accounting and reporting
Current income tax laws provide for
in matters related to your company’s systems in order to meet these reporting
requirements.
special credits and deductions to Deciding whether
business operations, competition,
Canadian-controlled private corporations. to go public
executive officers’ compensation, material
Reduced flexibility in decision making These deductions and credits will not
contracts and customers. Extensive
Corporate decision making for major be available to the company once it
public disclosure rules require details in
activities, which may have been informal has gone public, and may result in an Preparing to go public
public offerings and continuous disclosure
and flexible, will now require approval of increase in taxes.
documents, such as the MD&A. As a
public company, the information you must
the board of directors or shareholders.
Costs
Executing your IPO
Obtaining director or shareholder approval
provide to the public is also available to Being a public company is costly. Costs
can be a lengthy process. For example,
your competition. Some of this information
if a special shareholder meeting must be
are incurred during the planning stage Continuing as a
may be sensitive (e.g., operating results
convened, appropriate advance notice
and for the initial offering. Underwriters’ public company
for the company or geographic segments, commissions are negotiated based on
must be provided to all shareholders
compensation of senior officers). the size of the offering. Other costs
and proxy-filing requirements must be
vary, depending on the structure and Further information
You are also under constant pressure to satisfied. Your management team must
complexity of each offering. Subsequently
meet market expectations and explain the consider the public shareholders’ rights
decisions made and actions undertaken to in any major decisions. An experienced
operating as a public company, you will Appendices
incur further costs.
your shareholders and different players in board, with independent directors, can be
the market. an invaluable ally in meeting expectations.
“I think very few people truly appreciate how demanding

the IPO process is, and how critical it is to understand what
you’re getting into before you begin the process. Planning
is key… it took longer than we expected and we were
surprised at how much behind-the-scenes work was required
at every stage of the process.”
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2 Is your company ready? 3 Are the markets ready

When considering whether your company is ready to go public, take into account the for you?
following questions:
The next critical step is considering the
1. Do you have a clear picture of the formula that your company uses to make money? timing and preliminary pricing for the
Can you communicate it? Can you provide investors with a proven track record? Do offering. Your underwriters play a key role
you have a strategic vision and business plan for the future? Can you demonstrate here. Most companies select more than
the strength of your competitive positioning – now and in the future?
Contents
one underwriter, with one who manages
2. Is your core business solid and capable of sustaining growth and shareholder value or leads the offering.
in the future?
The right underwriters
3. Are your processes aligned with your direction? The better the reputation your
4. Do you have the appropriate infrastructure to provide relevant, timely and reliable underwriters have for successful public
Introduction
information about your performance? offerings in your company’s industry,
5. Is your management team strong, well-rounded and experienced in applying and the more readily your offering is likely
supporting your company’s goals and objectives? to be accepted. Experience with IPOs Deciding whether
6. Do you have an experienced board, including outside, independent directors?
is also an asset. Underwriters who can to go public
assemble a strong underwriting syndicate
Do you have an experienced audit committee? Do your board and audit committee
can help the sale and distribution of
meet the regulatory independence requirements? Are the board members well
the offering. Since underwriters have
informed and willing to assume the responsibilities and personal liabilities taken
different distribution capabilities, you want
on by directors of a public company?
to match the underwriters with the size Executing your IPO
7. Are you and your management team ready to commit significant time – probably of the offering.
more than you anticipate – to the process of going public and managing the
aftermarket effects? Timing Continuing as a
8. Have you considered the impact of going public on the company’s tax status?
Your timing decision should consider public company
economic factors, market conditions and
On your compensation? On the compensation of your management team and
pricing. You want to minimize the risk of
employees?
going public at a time when the market
Further information
9. Are you willing and able to live in the public spotlight? To relinquish significant is not ready for your company.
control? To live with the risks and rewards of continuous pressure of growing Appendices
shareholder value? To deal with regulators? Economic and market factors
The stock market experiences cycles:
10. Have you obtained an independent assessment of your company’s potential
it reacts to business and political news
as a public company?
and events, suffers technical corrections
or can run hot on certain issues or
industries and cold on others. Because
You can perform your own assessment of readiness by IPOs generally take the form of common
starting to manage as a public company before you actually shares, the market for going public is
go through the offering process – from putting appropriate influenced by inflation, economic growth,
interest rates and general stock market
management teams, reporting systems and governance
conditions.
structure in place, to assessing whether you can live under
the constant pressure of meeting investor and regulator demands. This Judging timing in a cyclical market is
both a science and an art. Your objective
exercise will highlight areas that need attention. Preparing early, before
is to enter the market as it crests in your
you face undue time pressures from the offering process, will help you to favour. You and your financial adviser will
be well-prepared, reduce your risks and avoid significant surprises. undertake several actions.
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Research capital markets for the In reaching your decision you and your an intermediary – the underwriters.
industry sector underwriters assess the market’s The price you receive for the company
Information of this nature is readily predisposition to new shares. The market will be determined by your track record,
available and can be gathered early in for IPOs will vary. In periods of low IPO the company’s future potential and the
the process. Most investment firms activity, you may not achieve the full market into which you are selling.
specialize in certain industries and potential value of your company.
The public invests funds in search
technologies. It is important to have You will also conduct research into of growth and a return consistent
underwriters who can understand your
company’s products and your company’s
position in the industry.
comparable companies for pricing
indicators. Your company’s value is
with or better than other investment
opportunities. This expectation puts Contents
determined, in part, by comparing it to pressure on you and your management
Compare stock exchanges similar public companies in your industry team to continue building shareholder
To support the stock price, provide liquidity or closely related sectors. value through profitable growth,
to investors and increase the profile of the even after you have gone public. Introduction
The underwriters project the capital to
company, you want your stock to be actively be provided from the offering on your While you may not know most of the
traded. Different stock markets perform company’s financial position and the new investors in your company, you Deciding whether
differently. Think about the characteristics have significant responsibilities and
results of operations. They then use
accountability to them.
to go public
of your particular company when you projected financial statements and
assess your options. Refer to the “Markets key financial ratios, such as leverage After your company goes public,
and Forms of Going Public” section under ratios, earnings multiples, and efficiency
investors and securities regulators
“Further Information” which provides ratios, to compare your company with will expect to have extensive timely
information on some of the exchanges similar public companies. They consider and relevant information about the Executing your IPO
frequently used by Canadian companies. differences, review price earnings ratios, company and its prospects. Be
and obtain a valuation.
Consider the market for a secondary issue prepared for this scrutiny. For this Continuing as a
If you are seeking some personal liquidity, reason, determine whether your
you may wish to offer some of the existing
The next step is to consider the number
company is able to deal with this
public company
of shares to be issued and the issue price.
shares as a secondary offering along Your underwriters will suggest the number additional stress on its governance,
with the initial offering. Such an offering of shares that should be enough to obtain value chain and infrastructure. Often, Further information
may help obtain a broader distribution. It a broad distribution, provide liquidity and corporate information systems are
may, however, be viewed as a bail out by a sufficient public float in the aftermarket, neither designed for nor capable of Appendices
the investing public if the percentage of and interest institutional investors. providing the volume and variety of
secondary shares is high. information required.
A combination of good underwriters,
timing and an effective pricing strategy Assuming you perform well, however,
Pricing considerations can help you to manage the timing and the good news is that access to the
pricing risks associated with going public. public capital markets should continue
You and your financial adviser will conduct
to become easier.
a preliminary investigation and arrive at a
range of prices at which your shares could
be sold to the public. 4 Assess the impact on
This price range can change, sometimes your company
considerably, throughout the process.
Compliance with these requirements
Economic and market conditions up to
demands a level of commitment of
the day the securities are offered for
time and resources across the business
sale may significantly affect the offering
segments of a public company. In
price. In the end, however, both the
essence, you are selling a part of your
company and underwriters agree to
company to the investing public through
the offering price.
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Costs of going public Auditing and accounting The costs will vary depending on the
Fees are incurred for audits of financial complexity of the transaction and the
Underwriting statements required to be included in depth of the in-house skills. Typically the
The underwriters’ commission is one of the the listing or offering document, the costs of an IPO range between seven to
largest costs of going public. For IPOs, the auditors’ review of the related documents, 10 percent of the amount of the funds
commission typically ranges from five to including comment letters from securities being raised. This includes the underwriters’
seven percent of the size of the offering and regulators and for providing consents commission, the accounting, tax, legal,
is negotiated between the parties. Factors to the regulatory authorities and to the translation, marketing and other costs.
that affect the percentage negotiated include
the size of the offering, type of security
company, and comfort letters to the
underwriters.
It would be prudent to consult with Contents
your tax advisers on the related tax
being sold, nature of the underwriting
The costs will vary depending on the considerations for different types
commitment, nature of the company’s
incremental information required to be of costs. Refer to the section on
business and its state of development, Introduction
audited, the nature of the accounting “Tax Considerations.”
current market condition and the going
issues encountered, whether financial Costs need to be weighed against the
rate for similar types of offerings.
forecasts and pro forma financial strategic advantages of being public. Deciding whether
The underwriters are also often provided statements are included and the
with an over-allotment option, allowing
Make a strategic assessment of your to go public
nature of comments received from the company and use a team-based planning
them to subscribe for additional shares regulatory authorities. process to produce a well-articulated
from the company if they are able to sell
business plan. This process and the Preparing to go public
more shares than originally planned. The Marketing, translation and printing
resulting plan will help you judge the
over-allotment option is a way to allow the Expect to incur costs for preparing
marketing and presentation material
soundness of your reasons to go public. Executing your IPO
underwriters to participate in the offering.
The business plan can also serve as
Underwriters use it as a tool to generate for the road show to the investment
valuable input to your advisers if you
stability in the aftermarket trading. community. If the prospectus will be filed Continuing as a
decide to go public.
Legal
in Québec, you will also incur costs for public company
Legal fees are incurred for preparing the
translating all the required documents.
Printing costs will vary, depending on
Duration of the process
listing or offering document, and drafting
the size of the documents and whether The length of the IPO process – from Further information
and reviewing material contracts. Again, the time you make the decision to go
any amended versions of the documents
the costs will vary depending on the public to the day you close the IPO Appendices
are filed.
complexity of the public offering, structure transaction – can vary significantly.
of the company, level of restructuring Other costs Your timeline will depend on several
required and comments from the Other costs include securities factors, including how well you plan
regulatory authorities. commissions’ filing fees, listing fees, the process, how well positioned your
Both the company’s legal counsel and directors’ fees, travel expenses, costs company is in the market, the experience
the counsel for the lead underwriter for preparing any valuation, environmental of your underwriters, your management
will be involved throughout the process. or engineering reports, and indirect cost team and your professional advisers,
Typically, the underwriter’s agreement of the time commitment required from as well as other factors not within your
will require that the company reimburse management and staff involved in the control, such as market conditions and
the underwriter’s legal counsel fee. IPO preparation process. regulatory changes.
The key is to control the costs without sacrificing the

quality of the process and the public information produced.
It doesn’t take much to lose control of costs. The best way to
control ‘cost creep’ is to understand the process, be prepared
and manage the process with clear accountabilities.
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Keep in mind that this process and

the life that you have to get used to
afterwards might be very different,
not bad, just different. Remember the
decisions a public company makes
may have a pervasive impact on its
stakeholders.
Contents
Make the decision
Introduction
At this point, you should have sufficient understanding of the process, the level of
commitment of time and resources required and the costs involved. You have also
considered the advantages and disadvantages of taking your company public and Deciding whether
the alternative methods of financing available to you. You have assessed the market, to go public
considered the impact of going public on your company and assessed whether you are
ready to manage as a public company.
By this point, you should have incurred only a small fraction of the total time and costs
of going public. Given all the information available and assessments made to date,
additional questions to consider during this phase:
Executing your IPO
• Does going public fit into your strategic objectives?
Continuing as a
• Do you have the resources to execute your plan, bring the process to completion and public company
continue as a public company?
• Are you and your team committed to this process? Further information
Appendices
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Contents
Introduction
Deciding whether
to go public
Executing your IPO
Continuing as a
public company
Further information
Appendices
PREPARING
to go public
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13 A Guide to Going Public Preparing to go public
KEY CONSIDERATIONS
Contents
1 Perform a thorough review of your company
Presenting the market with a well-prepared company not only provides investors with a more
attractive investment alternative, but also gives a strong indication of how you do business. Introduction
This investor confidence will be a significant factor in determining the effort required to
sell your offering. Performing a thorough review of your company now will also facilitate its Deciding whether
transition to life as a public company.
to go public
2 Decide on the corporate and management structure Preparing to go public

Analyze your existing corporate and capital structure with your advisers. Select structures
that are simple and flexible, and can be adapted to the changing needs of a public Executing your IPO
company over time. In addition, re-examine your management structure, including
management roles, responsibilities, authorities and reporting structures.
Continuing as a
public company
3 Assemble the teams: internal and external
Going public is a big decision. The process involved requires specialized skills and
Further information
experience. Bringing together a talented team from the inside – members of your board
and company management – and from the outside (e.g., underwriters, lawyers, auditors,
financial or tax advisers investor relations) is a key element of a successful offering. Appendices
4 Develop a timeline and framework for project management

The execution phase, from preparing the preliminary prospectus to finalizing the
documents, is an intensive period of about three months. Many related activities also
occur during this phase involving your advisers, management and the regulators. You will
want to maintain control throughout this process. A person on your team experienced in
project management can help to manage and coordinate these activities.
5 Develop the offering

In developing the offering, build on the research done when assessing if the market is ready
for you. This step involves making preliminary decisions about:
• The type of securities to be issued
• The number of securities to be issued
• The price at which they will be issued
• The exchanges where the securities will be traded – options available in Canada,
and whether you would consider listing in the US, UK or another market.
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1 Perform a thorough review Potential investors often favour a focused required to devote time to the information
company with a strong position in a few gathering, due diligence and reporting
of your company markets over a company that dabbles in required in the process of going public.
The objectives of this review are to many markets. If your company operates Once the company is public, these
improve the likelihood of a successful more than one distinct business, you may additional responsibilities continue –
offering and to enable the company to decide to take only certain segments of under a higher degree of scrutiny.
continue as a public company. the company public.
Recruiting additional talent can bring
In creating this publication, we have
focused on the perspective of a company
Products
Assess your product line to identify
strength to your management team
and can help improve the chances Contents
that is planning to list on a Canadian stock products with good potential and those of a successful public offering. For
exchange and file a prospectus in every with more limited prospects. example, a CFO who has previously
province. undergone the going-public process
The investment community typically
can be a valuable addition to your Introduction
This review takes time. Consider the focuses on your company’s products
management team.
following aspects of your company: and services as drivers for the growth
potential to sustain shareholder value. Financial plans
Deciding whether
• Business definition
Your company may have opportunities to Refine or develop your financial plans, to go public
• Strategic assessment grow through product-line extensions, taking into account your business strategy
expanding geographic coverage, improving and the effect of the public offering on Preparing to go public
• Value chain activities (e.g., core
quality or planning for product succession. your company. Describing what you
operations)
Consider eliminating the losers and look intend to do with the money raised from
• Infrastructure (e.g., business closely at marginal products. the sale of your securities to the public
Executing your IPO
information systems, compensation
is an important part of telling the story
plans and redundant assets) Strategic assessment
of your company. Continuing as a
Strategic positioning of the company
• Governance (e.g., board of directors,
Establish the vision for your company Be realistic in your financial plans. If public company
contracts, litigation, audited financial underwriters or potential investors believe
and the primary objectives that will shape
statements and taxation).
the future direction, in both the short and that your plans are unrealistic, they can Further information
You will need to communicate the long term. quickly lose interest in your company.
story of your business and vision to the
underwriters and potential investors.
Define the formula that your company Value-chain activities Appendices
uses to make money and build shareholder Review core operations to ensure that
It is essential to clearly define the
value. Describe your strategic vision and they are consistent with your future
business and perform a detailed strategic
business plan for the future. direction and that they are efficient. You
assessment, establishing the vision and
shaping the future direction. Formalize the can expect underwriters to look closely
Be involved in developing the story of your
results of this review in a business plan. at your core operations. Value-chain
company. You are the best person to tell
processes focus on activities that add
this story.
Business definition value to the customer and, ultimately,
Management to the shareholder.
Markets
Assess the strength of your management
Review your current position in the You may want to analyze your value-chain
team. The investment community places
industries in which your company operates processes in several ways: improving
considerable focus on a company’s
and in the markets that it serves. Consider the efficiency and effectiveness of the
management team and its ability to
future trends. Decide which markets you process; helping to control support costs;
deliver shareholder value.
want to operate in going forward. Develop managing both cost and value; or finding
exit plans for segments that you no longer In addition to fulfilling its routine additional sources of differentiation.
want to pursue. responsibilities, management will be
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Infrastructure and retaining key employees. Refer to • Adopting a strategic-planning process

Business information systems the section “Appendices”, in particular and approving, on at least an annual
Assess whether your systems will be Appendix 3 for some of the options basis, a plan that takes into account,
adequate to provide relevant, reliable available to you, and their accounting among other things, the opportunities
timely, and appropriate information and tax implications. and risks of the company
to meet the continuous disclosure Redundant assets • Identifying the principal risks of the
requirements of being a public company Identify any non-core assets in your company’s business and ensuring the
(e.g., quarterly and annual financial
statements, press releases, and financial
company (e.g., idle facilities or equipment,
undeveloped real estate) and consider
implementation of appropriate systems
to manage these risks Contents
and non-financial information contained in alternatives, such as disposing of the assets • Succession planning, including
the MD&A and the AIF). or putting them into a separate company appointing, training, and monitoring
Information systems should be capable of owned by the current shareholders. senior management Introduction
producing both financial and operational
Generally, it is preferable to remove • Adopting a communication policy for
information. They should also have
non-core assets from the company the company, specifically addressing
the flexibility to accommodate new Deciding whether
when going public to help ensure that a social media strategy and the
developments in accounting standards
the appropriate valuation is applied to inherent risks, such as threats to to go public
and regulatory pronouncements.
core assets. confidential or competitive information,
Compensation plans intellectual property, reputational Preparing to go public
Review the appropriateness of A properly supported infrastructure
risk and the potential for regulatory
compensation and employment that is adequate for your needs should
infractions.
arrangements for principals (owner- provide management with the flexibility Executing your IPO
to focus their attention on growing • Developing the company’s internal
managers) and other key employees.
control and management information
In a closely held company, your the company and creating shareholder Continuing as a
value, instead of their spending time systems
compensation arrangements may
on the routine administrative and
public company
have been primarily tax-driven. These • To the extent feasible, becoming
arrangements will likely no longer be financial reporting matters required of satisfied with the integrity of the
appropriate as your company goes public. a public company. CEO and other executive officers Further information
Consider base compensation, incentives and ensuring they create a culture
Governance of integrity throughout the company. Appendices
such as bonus and option plans, employment
contracts and conditional arrangements. Board of Directors Directors recruited from outside the
Assess the strength and capabilities of
The current policy requires issuers company can bring experience, excellent
your board and recruit new members
to disclose all direct and indirect business contacts, specialized expertise
if you need to enhance its strength or
compensation provided to certain and an independent perspective to your
address any weaknesses.
executive officers and directors for board. In particular, directors having
services they have provided to the In a public company, your board assumes previous experience with IPOs can be a
company. This information for the NEO an enhanced stewardship role and should valuable resource. Where possible, the
should include compensation paid, made assume oversight responsibility for the board of directors should be in place
payable, awarded, granted, given or following matters: before closing. Any changes made to
otherwise provided for the financial year the board’s composition after going
• Determining the company’s approach public require shareholder approval.
and the decision making process related to corporate governance, including
to compensation. developing a set of corporate A CSA policy provides that a company
Being a public company can give you governance principles and guidelines should maintain a majority of independent
greater flexibility to introduce a stock- that are specifically applicable to directors on the board.
based compensation strategy for attracting the company
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Recent Canadian Securities rules adopted require issuers to provide disclosure on

term limits or other mechanisms for renewal. The rules also require disclosure, on an
annual basis, of an issuers policy for identification and nomination of women directors,
measures taken to implement the policy and progress in achieving the policy objectives.
As a public company, you are required to establish an audit committee in accordance
with specific guidelines provided by the securities regulators. You may also need to
establish other committees, such as nomination and compensation. The roles of the
board and the audit committee are discussed in more detail on pages 36 and 37.
Contracts
Contents
With the assistance of your legal counsel, analyze the appropriateness of contractual
obligations by performing a review of significant contracts, including shareholder
agreements, employment and compensation contracts, debt and lease agreements, Introduction
shareholder or management loans, management agreements and major supply contracts.
Arrangements with shareholders and officers who served your company well when Deciding whether
it was private may not be appropriate as your company goes public. For example,
agreements between a limited number of shareholders in a private company regarding
to go public
matters such as rights of first refusal or buyouts, may become inoperable in the public
world of numerous shareholders and minority rights. Preparing to go public
Under certain regulatory requirements, the company will have to file copies of material
contracts on SEDAR. Such contracts are required to be disclosed, even if they contain Executing your IPO
information that is of interest to your competitors.
Litigation Continuing as a
Review outstanding litigation involving your company. Outstanding litigation can create public company
uncertainty in potential investors’ eyes. If possible, resolve it before going public.
Audited financial statements Further information

Have your annual financial statements audited. Your prospectus document must
generally include audited financial statements for up to three years immediately prior to Appendices
the date of your prospectus. For venture issuers only two years will be required. These
financial statements must conform to IFRS. Reviewing your existing accounting policies
now may reduce questions from securities regulators later.
Particularly with larger multi-provincial or cross-border offerings, many underwriters and
investors are more comfortable with the offering if the financial statements have been
audited by a national firm of public accountants. If you conclude that a change in auditors
is appropriate, doing it early may simplify the offering process.
Taxation
Review the tax impact of being a public company.
Some advantages of going public include the ability to have shares of your company
more easily qualify for deferred income plans, such as RRSPs. In contrast, shares
of private corporations generally qualify only in limited circumstances. Further,
publicly-held shares can be donated to registered charities without the donor having
to realize a capital gain.
Going public also carries some tax disadvantages. Examples include the loss of the
small business deduction, reduced ITCs and loss of the “capital dividend account”
used to pay tax-free dividends to shareholders. The loss of the small business deduction,
when the company goes public, is somewhat equalized by the enhanced dividend tax
credit that applies to dividends paid out of income not subject to preferential tax rates
enjoyed by CCPCs. Refer to the chapter “Tax Considerations” for more information.
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2 Deciding on the corporate and management structure 3 Assembling the team:

Corporate structure internal and external members
Analyze the company’s existing corporate and capital structure with your legal and Going public is a monumental decision.
tax advisers. Structures created to facilitate tax and estate planning arrangements The process involved not only is extremely
as a non-public company may not be appropriate for a public company. Investigate demanding, but also requires specialized
opportunities to simplify the existing structure. skills and experience. A talented team,
Contents
consisting of members of your board,
Consider making the appropriate changes to incorporating documents to remove any
company management and external
private-company clauses and pre-emptive rights, eliminating conflicts of interests,
advisers (e.g., underwriters, lawyers,
reviewing the existing ownership and share structure, and making any required auditors) is a key element of a successful
corporate reorganizations. offering.
A public company offers limited liability protection to its investors and is governed This section examines the roles of the
Introduction
by the Canada Business Corporations Act or a provincial corporations act. These acts following team members:
outline the major rights of corporations and the obligations of the company toward
• Chief Executive Officer Deciding whether
shareholders.
• Chief Financial Officer to go public
Structuring transactions and assessing their impact on the company should be ongoing
• Board of Directors
considerations. Actions such as purchasing shares versus assets or purchasing interest
• Management team Preparing to go public
in a limited partnership versus a corporation, can have differing implications from tax,
cash-flow and accounting perspectives. Structuring considerations can therefore be • Financial Advisers
critical and should be done at the right time, in consultation with your advisers. • Underwriters Executing your IPO
• Lawyers
Management structure Continuing as a
• Auditors
The company should also decide on the management structure it will adopt going
• Tax Advisers public company
forward. Management roles, responsibilities, authorities and the reporting structure for
• Valuation Specialists and Appraisers
all levels of management should be clearly defined and laid out in a formal document.
The structure should be flexible enough to adapt to the changing needs of the company • Investor Relations firm Further information
over time. Establish performance benchmarks that are realistic and achievable, yet • Financial printer
challenging. Management should be assessed against those benchmarks. • Share Registrar and Transfer Agent. Appendices
Accept that
the process is
complex and that
it is important to
have sufficient
resources and advisers
to undertake the
exercise effectively and
efficiently.
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Chief Executive Officer The CFO should be strategic, skilled in Board of Directors
The CEO is the team leader. Although building relationships, with a drive to The board of directors participates as part
the CEO will likely delegate significant focus on risks across the company to of the company’s team. It will conduct its
portions of the project to the management ensure that they are being measured own due diligence through the process.
group and external advisers, he or and managed. The CFO serves as a The board can be an invaluable source
she should remain in the driver’s seat. bridge between the business units, of experience, advice and counsel
The actual role can vary based on the management, board and shareholders. throughout the process – especially if
Contents
circumstances, but the CEO typically: During the IPO process, the CFO will a director has previously participated in
assume a key role in executing the taking a company public.
• Drives the strategic decision to
go public process. Typically, the CFO: The audit committee is appointed by the
• Serves as the key representative of board of directors to assist it in fulfilling
• Evaluates the company’s readiness
the company in matters relating to the its oversight responsibilities.
• Works with the underwriters to assess Introduction
financial information content of the
market acceptance Management team
prospectus, and as a liaison between
The company’s executives play a central Deciding whether
• Recruits the team the external advisers, regulatory
role in taking the company public and in
authorities and underwriters
its ongoing success as a public company.
to go public
• Monitors progress, including
achievement of key milestones • Assists the CEO in project managing
During the planning phase, management
the IPO process – from setting and
is typically involved in:
• Participates in key decisions throughout monitoring timelines, to marketing and
the process closing the transaction. • Implementing changes to prepare the
company to be public Executing your IPO
• Is actively involved in the marketing The CFO has overall responsibility for the
of the company to the investment financial reporting process that includes • Helping to select professional advisers
community as the company goes public, negotiating Continuing as a
both internal and external reporting.
• Ensures that the company is in a Internal reporting involves reporting to the advisers’ fees and ensuring delivery public company
the CEO and the board on budgets, of service
position to follow through with the
offering and make an effective transition forecasts and other areas as needed. • Helping to manage the prospectus Further information
into a public company. External reporting includes preparing process, closing, sale of the securities
and filing the annual and interim financial and aftermarket activities.
Performing this role will be demanding, Appendices
statements, the MD&A, annual reports,
exhausting and exhilarating. The CEO The management team works with the
the AIF, management circulars and
must be prepared to be flexible in financial advisers, underwriters, auditors and
subsequent prospectus offerings. As part
responding to market changes as the lawyers to schedule the offering process,
of his or her external reporting, the CFO is
offering is developed and priced. The CEO prepare materials related to the offering
required to make regulatory certifications
should also have the vision and the ability (e.g., the prospectus, marketing materials),
on such areas as the effectiveness of
to be prepared to step back periodically, respond to regulators’ comments and
internal control. As a result, various
as the deal evolves, and ensure that going finalize documents related to the offering.
subcommittees that are set up internally
public continues to make sense from a After the public offering, the management
to perform these functions also report
business perspective. team is involved in investor relations
directly to the CFO.
activities and regulatory filings that are
Chief Financial Officer Additionally, the CFO holds responsibility
part of life as a public company.
Over time, the role of the CFO has for financing decisions, including managing
become more prominent in the eyes of the debt-to-equity leverage, managing the In short, significant demands will be made
the regulators. For the most part, CFOs cash flow including preparing forecasts on management’s time before, during and
are under more intense scrutiny and have and budgets and arranging for appropriate after the public offering. Management must
greater responsibilities than ever before, financing through issuance of debt, equity be prepared for these responsibilities and
shoulder-to-shoulder with the CEO. or other securities. be capable of executing them.
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Financial Advisers Various firms actively underwrite IPOs. Auditors

Financial advisers experienced in the These firms range from major national The auditing firm can play a significant
process can help the company prepare investment bankers to smaller regional and varied role in the complex process of
for the offering by: brokerage firms. Many of the smaller helping you go public. Consequently, your
firms specialize in specific industries. auditing firm should be experienced and
• Coordinating the preparation of a Refer to the section “Appendices”, in
well qualified to provide both the audit and
corporate profile that incorporates all particular, Appendix 2 to gain additional
specialized services required for your IPO.
the necessary prospectus requirements information on how to select the right
(this profile can help to facilitate the
preparation of the prospectus later on)
underwriters and the steps involved in
working with the underwriters.
Most companies select a firm that is
experienced in securities offerings and Contents
in dealing with securities commissions,
• Providing assistance in determining
Lawyers and that is well known in the investment
the information required for the
Lawyers play a critical role in helping you community. The right firm will also provide
audited historical and interim financial
prepare and execute your public offering. continuing counsel and assistance in Introduction
statements for inclusion in the
Their primary responsibilities are to dealing with the many financial reporting
prospectus
ensure that you comply with all applicable and other obligations of a public company. Deciding whether
• Coordinating the presentation of any securities laws and regulations, and to To audit public companies, the auditing to go public
forecasts and related disclosures advise you of any exemptions for which firm has to be registered with the
you may be eligible. Canadian Public Accountability Board.
• Developing a model to assist in
The audit files related to your accounts
identifying the valuation parameters for Because of the highly-technical and
the company, funds to be raised, equity complex-nature of securities law, look may be subject to that Board’s inspection.
stake to be sold to the company and for a legal team with broad experience Your auditors must be independent. For Executing your IPO
number of shares to be issued in securities law and in handling IPOs. public companies, the assessment of
If your external counsel does not have the independence requires the consideration
• Providing strategic direction and Continuing as a
necessary securities law expertise, they of specific factors. Review these
assisting in the selection of the may recommend a firm that does. The requirements to ensure that any potential public company
underwriters, including attending all the auditors or underwriters can also provide independence issues are addressed early.
meetings, discussions and negotiations recommendations. The auditors of many private companies Further information
that management considers appropriate
The lawyers can assist with the pre-public have worked closely with the company over
throughout the offering process.
planning stages. They can: the years on a wide variety of issues, and Appendices
Often, the lead underwriter plays the role will continue to do so in the future. Their
• Review your existing contractual
of primary financial adviser and works involvement in the going-public process is
arrangements and suggest any
closely with the other advisers. part of their ongoing association with the
necessary changes and revisions
success and growth of your company.
Underwriters • Help you amend your articles of
incorporation and bylaws, as Your auditors can assist by:
The experience of underwriters in the
company’s industry and in IPOs can necessary • Advising on what financial statements
make a significant contribution toward • Recommend and help implement are required in your prospectus
the goal of a successful public offering. any changes to your capital structure • Auditing the required financial statements
Underwriters are the vehicle through that may be required to facilitate the • Reviewing any required interim financial
which your company’s securities will be public offering statements
sold to the public. • Assist in structuring stock options • Advising you on appropriate frameworks
and other stock compensation plans. and accounting policies
“Never
Your lawyers will often assume a • Responding to questions raised by the
underestimate coordinating role in preparing your securities regulators
the workload and prospectus and stock exchange listing • Supporting the underwriters in their due
do not rely solely on application(s), working closely with diligence activities, including issuing a
management – make your management team and your other comfort letter to the underwriters.
professional advisers. They will review the
sure you have the right complement The resources and experience of your
entire prospectus and listing application(s)
of advisers. Share the burden early and advise you on which information auditors should help you better manage
before the complexity makes this is legally relevant. They will also advise the risks associated with becoming and
difficult.” on the form of presentation and being a public company.
the procedures necessary to verify
its accuracy.
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Tax Advisers When the investing public is buying or selling

“If you manage shares, the share registrar and transfer agent
The tax advisers should be an integral
the process handle the paperwork involved, as directed
part of the team to help you assess
the potential implications on the new properly, you create in the various corporations acts. Particularly
corporate structure and to help minimize a win-win situation – if you intend to offer shares in more than
any adverse tax consequences of going everyone knows what one province, select a transfer agent with
appropriate national representation.
public since certain tax provisions are to expect, you limit the number and
Contents
applicable only to private enterprises. You impact of surprises, you can control The share registrar also maintains an
should consult with your tax advisers on accurate list of shareholders for the
the costs, and deliver on your
any pre-IPO reorganization or planning on prompt distribution of dividends, as well
a tax-efficient basis. promises. “
as notices of shareholders’ meetings,
Involving Tax Advisers from the initial annual reports and other corporate
stages is critical. Financial printer communications that are important to Introduction
Selection of a financial printer for the maintaining the company’s corporate
Valuation Specialists and Appraisers prospectus is a seemingly mundane issue. image in the investment marketplace. Deciding whether
During the IPO process, the services of However, due to the highly specialized
to go public
valuation specialists or appraisers can be nature of prospectus preparation, 4 Develop a timeline and
useful by providing an independent opinion an experienced financial printer can
on the value of your company or the contribute significantly to the timeliness framework for project Preparing to go public
assets being acquired or divested by your and efficiency of the public-offering management
company. On an ongoing basis valuation process. Furthermore, significant time
Now that you have performed a thorough Executing your IPO
specialists can assist you in valuing ongoing demands are placed on the printer in the
review of the company and assembled
acquisitions, long-term compensation final stages of the prospectus preparation
plans or convertible securities offered by process. Revised drafts are often required
a strong team, it is time to develop the Continuing as a
road map for going public. This entails
your company. These professionals can within 24 hours or less and the final public company
developing a timeline and a framework for
also help you determine the fair values of prospectus is often printed only the night
managing the process. Now it is time to
certain items required to be reported on a before it is to be filed. Further information
chart the details you will need to address.
fair value basis on the financial statements, Your financial printer should have an up-
under IFRS. All team members should be actively
to-date knowledge of the requirements Appendices
involved in the process. Seek input
with respect to paper size, format, size of
Investor Relations firm from team members with previous IPO
type and related technical matters, as well
experience. Ask for their insights into the
Engaging investor relations professionals as the specialized facilities to deal with
process, the time and effort required at
is becoming an increasingly popular the accuracy, timing and security needs
each stage, and potential roadblocks that
means of acquiring certain skills and of a public offering. The printer should
could be encountered; then, build these
expertise that can help to better market also be able to prepare materials in a
factors into your timeline.
your company – both during the process form appropriate for electronic filing (e.g.,
of going public and afterward to help SEDAR) as required by the CSA. If you The execution phase, from preparing the
increase ongoing investor interest. are filing your prospectus in the US, you preliminary prospectus to finalizing the
Smaller public companies that want the must file electronically with the SEC for documents, is an intensive period of about
benefits of a professional investor relations inclusion in the EDGAR database. three months. Many parallel activities
program, but cannot justify the cost of occur, involving advisers, management
employing investor relations professionals, Share Registrar and Transfer Agent and regulators. The CEO should maintain
may find that outsourcing some or all of An important aspect of the going-public control throughout this process. An
their needs can be an effective alternative. process involves preparing for future experienced CFO on the team can help
Larger public companies often augment relations with the investing public and manage and coordinate these activities.
their internal resources with the skills and the new shareholders. The task of Develop the timeline with specific
market awareness of such individuals. coordinating the distribution of corporate benchmarks. Identify and assign specific
The investor relations approach should communications to this important responsibilities, and put in place a process
address a social media strategy and audience generally rests with the transfer to monitor progress against the specific
plan to mitigate related risks during agent, acting on behalf of the company. timeline.
the IPO process.
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5 Developing the offering that the offering price be within a In short, pricing your stock is more of an
range typical for the industry in which art than a science and your underwriters’
Developing the offering builds on the you operate. experience qualifies them to advise
research done when assessing market you in estimating an appropriate price.
acceptance, and involves making The number of shares offered and the
Although establishing as high as possible
preliminary decisions about: offering price are directly related; the
may hold considerable appeal particularly
offering price can therefore be moved into
• The type of securities to be issued if a secondary offering of existing
the range by splitting or consolidating your
shareholders’ stock is included avoid
• The number of securities to be issued
• The price at which they will be issued
company’s shares.
overpricing. Contents
Price of securities Underwriters typically advise a company
• Where the securities will be traded Determining an appropriate offering price to set a price that will encourage an
for your securities is perhaps one of the active aftermarket in the shares. By
• Marketing plans.
most difficult and subjective decisions that pricing to allow for a modest price rise Introduction
you and your underwriters must make. in the immediate aftermarket, investor
Type of securities
The lead underwriters typically determine
Most IPOs consist of common stock, interest can be quickly stimulated. A new Deciding whether
a price range for the securities being issue will occasionally realize substantial
although an IPO could consist of units that
offered at the beginning of the road show. price increases in the early weeks of
to go public
include both common stock and warrants
Refer to the information on developing the aftermarket, leading some people to
to purchase additional shares of common
stock. Other possibilities are available.
marketing materials for details on the road conclude that the offering price had been Preparing to go public
show on page 31. seriously understated. In most cases,
Some companies issue debt, preferred
stock, multiple voting shares or units that The final pricing decision is not made until however, it reflects public optimism Executing your IPO
include common stock and convertible just before the underwriting agreement is more than underwriting error, and within
debentures. A company cannot, however, signed – generally, the day before or early a relatively short time the stock price
generally returns to the more realistic Continuing as a
issue only convertible securities in the on the day the final prospectus is filed. But
absence of an established public market the background research, comparisons, levels anticipated by the underwriters. public company
for the common stock that would be analysis and discussions begin well
Markets where securities will be traded
obtained on conversion. before that date.
Realistically, the process of going public
Further information
In determining the types of security to Offering prices are often referred to and involves two components: becoming a
be issued, consider such factors as the compared on the basis of price-earnings public company by obtaining regulatory Appendices
cash-flow consequences of interest ratios. One of the most important approval from the securities commissions
and dividend requirements for debt considerations is comparing a proposed and finding a market or exchange for your
and preferred stock, your resulting price to other current public offerings or company’s shares to trade. Although these
debt-to-equity ratio, the potential dilution existing public companies in your industry. two processes are distinct, they often occur
introduced by stock warrants and Various other factors are also considered. simultaneously so that a company is in a
income tax implications. Many factors can affect the price that position for its shares to trade as soon as
your shares can command, including possible after it receives regulatory approval.
Number of securities
the projected impact on your company’s The equity markets comprise numerous
You must decide how many shares will be
earnings resulting from the proposed use stock exchanges. These exchanges
offered. Underwriters follow general rules
of the new funds, your past and projected vary in nature based on their prestige
on the number of shares necessary to
rate of growth, the quality of past earnings and reputation; their liquidity – the
support active trading in the aftermarket.
(e.g., whether they include extraordinary volume and dollar amount of trading
These rules relate to
or non-recurring gains or losses), balance activity; their breadth (regional, national
• The minimum shares necessary for a sheet strength and tangible asset backing, or international); their listing and
sufficiently broad distribution. Many potential dilution (e.g., through outstanding maintenance requirements; the nature of
companies are therefore advised to split warrants), vulnerability to competition, the companies that are attracted or listed
their stock to establish an appropriate relative management strength, planned (e.g., size, industry, nature); and the fees
number of shares for the offering acquisitions, size of the offering and being they charge.
in a glamour or hot industry.
• The appropriate price range for the
shares. Many underwriters prefer
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Some of the more popular by junior issuers. Such OTC markets • Reporting and corporate conduct
may appeal to junior companies because rules are imposed by the major
stock exchanges include the fees and costs of compliance are exchanges. Note, however, that many
much lower. of the exchange rules represent good
CANADA
corporate practice equally advisable for
Toronto Stock Exchange – www.tmx.com Whether in anticipation of an immediate
unlisted companies.
listing or simply to consider the available
TSX Venture Exchange – www.tmx.com
options, all new public companies Marketing plans
UK
Main Market of London Stock Exchange –
should consider the following relative
advantages of an exchange listing:
Your pre-prospectus marketing efforts
should be well planned and should
Contents
www.londonstockexchange.com • Marketability and collateral value are begin as soon as you decide to go public.
generally considered to be enhanced Increasing or building the investing public’s
US by a stock exchange listing because awareness of your company will not Introduction
New York Stock Exchange – www.nyse.com market values are readily determinable happen overnight. All other factors being
National Securities Dealers Automated and transactions can be consummated equal, pre-prospectus positioning can
Quotation System – www.nasdaq.com more quickly make your offering easier to sell. Deciding whether
• Prestige and respectability are typically Note that no sales may be made and to go public
You must consider many factors in making associated with companies listed on no offers to buy may be accepted before
your listing decision. Each exchange or a securities exchange. The extent to you obtain a receipt from the securities Preparing to go public
market has differing characteristics that may which these perceptions influence regulators for your final prospectus.
influence your decision. If your company decisions by investors, analysts,
does not meet the listing requirements for creditors and others is debatable
Your marketing activity during the Executing your IPO
certain exchanges, it would be precluded pre-prospectus period will likely include:
• Published security prices in major
from these markets until it meets their
newspapers and exchange and
• Defining your target market and Continuing as a
listing requirements. Your underwriters are
other finance-related websites
developing your strategy. In other public company
well positioned to advise you on the relative words, identifying the potential buyers
merits of each exchange. focus principally on listed companies.
of your stock and their characteristics
Together with published comments
(e.g., institutional or retail, speculator or Further information
Since obtaining a listing on a particular in the financial press concerning the
stock exchange may be a precondition of long-term investor, regional or national)
company’s annual report and future
the investment dealer’s underwriting your earnings prospects, this provides a • Identifying and selecting an investor Appendices
offering, it is important to ensure that your vehicle to bring the company’s name relations firm to help develop and
company meets the listing requirements to the attention of the investing public implement marketing plans
of your preferred exchange.
• Some institutional investors are • Beginning to meet with the investment
Over-the-counter markets restricted to investing only in listed community and the financial media to
Two markets in the above table are securities and others may be more develop contacts and communicate
over-the-counter markets, created as attracted to a listed security. Moreover, company activities
alternatives to listing on an exchange – to the extent that a stock exchange • Develop and or update website that will
Canadian Securities Exchange (CSE) and listing increases the marketability of meet the needs of your investors once
the National Securities Dealers Automated large blocks of shares, institutional you go public.
Quotation System or NASDAQ. They investors may be more likely to invest
were set up to facilitate capital formation in listed securities
kpmg.ca/ipo
Contents
Introduction
Deciding whether
to go public
Executing your IPO
Continuing as a
public company
Further information
Appendices
EXECUTING
your IPO
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24 A Guide to Going Public Executing your IPO
KEY CONSIDERATIONS
Contents
1 Prepare your preliminary prospectus
Your team accumulates business, financial and other information that provides potential
investors with full, true and plain disclosure of all material facts related to the securities Introduction
to be issued and it also presents this information in a prospectus document.
Deciding whether
2 Underwriters’ due diligence to go public
Your underwriters will conduct a thorough review of your company and its operations to
ensure that your prospectus provides full, true and plain disclosure. This in-depth process Preparing to go public
includes discussions with senior management, inspections of significant operating
facilities, and reviews of the company itself, financial information and material agreements. Executing your IPO
3 Apply for a stock exchange listing Continuing as a

You will need to complete the appropriate documentation and provide the information public company
required by the stock exchange to apply for a listing. Generally, this process runs parallel
with the preparation of the preliminary prospectus and the underwriters’ due diligence.
Further information
4 Regulatory review Appendices
Your preliminary prospectus is filed with securities regulators in the jurisdictions in which
you wish to sell securities. The securities commissions will coordinate the review of your
prospectus and provide you with a letter describing any deficiencies noted in their review
(referred to as a comment letter). Once the securities regulators receive satisfactory
responses to these concerns, you will be in a position to file your final prospectus.
5 Marketing
Your prospectus is, in part, a marketing document, but it is important to augment it with
other marketing tools. Once the preliminary prospectus is filed, securities legislation
permits the company to commence limited selling efforts. During this period, your
underwriting syndicate distributes marketing materials to potential investors and
solicits expressions of interest. This process typically involves developing a road-show
presentation and working with your underwriters to develop a green sheet (a summary
of the proposed offering containing prospectus and other information). On the road show,
you sell your story to potential investors.
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25 A Guide to Going Public Executing your IPO
KEY CONSIDERATIONS
Contents
6 Pricing
Since pricing reflects the market’s valuation of your company, monitor market conditions,
comparable companies and your offering’s potential pricing throughout the process Introduction
of going public. This activity will culminate in a round of final negotiations with your
underwriters in the day or two prior to filing your final prospectus. At this point, you are Deciding whether
reasonably certain you can complete your public offering.
to go public
7 Finalize documents Preparing to go public

With the final terms of the offering now complete, you update your prospectus to reflect
the pricing information and address changes required to satisfy regulatory bodies. When Executing your IPO
your team is satisfied with the final prospectus, you file it, along with certain other
information, with the relevant securities commissions. Once you obtain receipts from Continuing as a
these commissions, your underwriters are able to sell your securities.
public company
8 The closing Further information
The closing meeting signifies the successful completion of your offering. You receive
the proceeds of your offering in exchange for shares of your company. The closing also
Appendices
concludes the going public process. You begin your life as a public company and assume
the increased accountabilities that exist in the public domain.
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Having made this decision, you have prepared your company for the transition to 1 Preparing your prospectus
public life and have developed a good game plan for the next phase – the execution.
A prospectus is a legal document
The execution phase of going public is an intense part of the process. So much will containing:
happen in a fairly short period and many different people will be involved.
• Information about your company’s
The following diagram provides an overview of the major activities of the business
execution phase. The timing in the diagram is illustrative. The entire execution • A description of the securities to
phase typically takes two to three months to complete. be issued
• Information about the principal purpose Contents
for which the proceeds from the sale
Execution phase: Overview
of the securities are intended.
The prospectus is a public offering
document intended to ensure that
Introduction
Prepare Preliminary Prospectus Draft
potential investors receive “full, true
Underwriters’ Due Diligence Update and plain disclosure of all material Deciding whether
Regulatory Review facts relating to the securities issued” to go public
[Ontario Securities Act, Sec 56 (1)].
Developing Marketing Materials Prepare
Accordingly, your prospectus should
Marketing Efforts contain a balanced view of both the
positive and negative factors affecting your
Pricing Monitor Market Conditions Final Pricing
company and the securities being offered. Executing your IPO
Finalize Documents Update Prospectus
To facilitate the acceptance of a prospectus
in more than one province and to provide Continuing as a
DAYS 0 5 10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 85 90 95 100 for uniformity of administration, provincial public company
regulators have developed procedures for
File File Closing
the underwriters or a company to follow
Preliminary Final
in order to qualify a prospectus in more
Further information
Prospectus Prospectus
than one province. For offerings that will
Appendices
kpmg.ca/ipo
Execution phase: Prepare preliminary prospectus team to review your strategic goals and
vision for future direction so they are
appropriately reflected in the prospectus.
Draft Typically, the lawyers play a coordinating
role in this team effort and deadlines are
agreed upon for providing the required
DAYS 0 5 10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 85 90 95 100
information and drafts to the lawyers.
File Often, for reference, this group looks
Preliminary
Prospectus
at prospectuses of similar companies
previously filed on SEDAR website.
Contents
• Initial working group meeting of team Once the components of the preliminary
• Collect and assemble material for inclusion in preliminary prospectus prospectus have been drafted, they
• Prepare first draft of the preliminary prospectus are brought together in a first draft and Introduction
circulated to team members for their
• Circulate draft to team
• Make revisions and prepare additional drafts (will likely involve team in several
review. Your preliminary prospectus Deciding whether
usually undergoes several revisions
drafting sessions)
before all team members are satisfied
to go public
• Finalize preliminary prospectus with the final document.
• File with securities commission Preparing to go public
Filing the preliminary prospectus
• Receive receipt from securities commission.
When all outstanding issues have been
resolved, the preliminary prospectus is
Executing your IPO
ready for filing. As required by securities
be made in more than one province, a Preliminary prospectus legislation, the company must prepare a Continuing as a
company must qualify its prospectus in One of the main purposes of the
certificate and file it with the preliminary public company
each province. prospectus. The company’s certificate
preliminary prospectus is to enable the
would be in substantially the following form:
In most provinces, the prospectus is underwriters to assess the extent of public Further information
interest in the securities being offered. In The foregoing constitutes full, true and
prepared in two stages: a preliminary
certain instances, you may need to file an plain disclosure of all material facts
prospectus and a final prospectus. The
relating to the securities offered by this
Appendices
principal difference between these two amended prospectus, for example, when
there is a material change in the facts prospectus as required by the securities
stages of the prospectus is the exclusion
included in the preliminary prospectus. If legislation of [applicable jurisdictions].
in the preliminary prospectus of certain
information not yet available. The excluded the prospectus is being filed in Québec, The certificate must be signed by the
information typically includes the final make arrangements to ensure that all the CEO, CFO, two directors on behalf of the
offering price of the securities (or interest contents of the prospectus, including the board and all promoters of the company.
rate or dividend rate in the case of debt financial statements, are being translated
Similarly, the underwriters must include a
securities or preferred shares); the into French on a timely basis to avoid
signed certificate in the following form:
underwriting discount or commission; delays or problems in meeting the filing
any other information dependent upon dates set out in the timetable. To the best of our knowledge, information,
or relating to the price and underwriting and belief, this prospectus constitutes
discount; and the signed auditors’ report Preparing your preliminary prospectus full, true and plain disclosure of all
on the financial statements. All other Preparing the preliminary prospectus is a material facts relating to the securities
information contained in the preliminary detailed and time-consuming process. The offered by this prospectus as required by
prospectus must, however, comply first step is generally the initial working the securities legislation of [applicable
with the requirements of the relevant group meeting – your company executives jurisdictions].
acts, regulations and policy statements meet with your lawyers, auditors, At this stage, the prospectus is essentially
respecting the form and content of a underwriters and your underwriters’ complete, except for certain information
prospectus. The preliminary prospectus lawyers. At this meeting, responsibility that will not be finalized until the day or two
should be viewed by the team as the final is assigned for gathering information and before the date the final prospectus is filed
offering document other than the excluded preparing various parts of the prospectus. and qualified. The final prospectus includes
information discussed above. This meeting is a good time for your
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the price at which the securities will be may not be sold until a receipt for the • The related regulations under the
offered, the underwriters’ commission, prospectus is obtained from the securities securities act
the net proceeds and any required final regulatory authority(ies).
• National policies developed jointly
revisions to the preliminary prospectus.
If a material adverse change occurs by the provinces to facilitate the
Further, any auditors’ communications during either the period after the filing of acceptance of a prospectus in more
included in the prospectus would typically the preliminary prospectus and before than one province, and to provide
not be signed until the final prospectus the final prospectus, or after a receipt for uniformity of administration of
is issued. At the time the preliminary
prospectus is filed with the unsigned
is obtained for the final prospectus but
before distribution under the prospectus
interprovincial offerings
• The CPA Canada Handbook, which
Contents
auditors’ communications, securities is completed, an amendment must be
prescribes GAAP for purposes of
regulators generally require a letter from filed as soon as possible, but at least
financial statements included in a
the auditors providing a status report on within 10 days.
prospectus or other filing. Introduction
the auditors’ work to that date.
Preparing and filing an amended
These requirements are highly-technical and
The preliminary prospectus is then filed prospectus require you to follow
ever-changing. Consequently, companies
with the securities commissions and a procedures similar to those for other Deciding whether
work closely with their auditors and lawyers
receipt is obtained. filings, and include costs such as those
for support in interpreting and applying the to go public
related to the underwriters’ updating due
Copies of the preliminary prospectus, also requirements.
diligence procedures, and reprinting and
known as a “red herring,” are concurrently
Although prospectuses may be referred
redistribution.
provided to the underwriting syndicate
to by form numbers, they are in fact
for distribution to prospective investors.
prepared in a narrative and reasonably Executing your IPO
The preliminary prospectus is known as Content of a prospectus flexible format. The form specifies certain
a red herring because it must include the
Securities legislation provides guidance minimum disclosures, and a standardized
following statement printed in red ink on Continuing as a
on the information content, sequence sequence and style has evolved over
the front cover:
and form of a prospectus. Information time. Nevertheless, a significant degree public company
A copy of this preliminary prospectus has requirements vary depending on of subjectivity and judgment is required
been filed with the securities regulatory several factors, including the nature of in drafting these disclosures. Refer to Further information
authority(ies) in [each of/certain of the the securities to be offered, the type the section “Appendices”, in particular
province/provinces and territories of and size of the company issuing the Appendix 1 which summarizes the specific
Appendices
Canada] but has not yet become final securities, and the industry in which content requirements.
for the purpose of the sale of securities. the company operates.
Information contained in this preliminary
Various forms of prospectus are specified
2 Underwriters’ due diligence
prospectus may not be complete and
or allowed in different circumstances. For Your underwriters and their legal counsel
may have to be amended. The securities
example, certain forms of prospectus are will thoroughly review your company and
prescribed specifically for companies in its operations. This in-depth due diligence
The prospectus specialized industries, such as finance, process should include conducting
natural resources or mutual funds. discussions with senior management,
rules and
inspecting significant operating facilities,
information In preparing your prospectus, note that
conducting background checks on board
the required content may come from
requirements in the and senior management members, and
various sources, including:
document are extensive, but fighting reviewing material agreements as well as
them only delays the process and • The related securities act business and financial information.
increases costs. For anyone going • National Instrument 41-101, General
Why do underwriters perform due
through the process, the advice is: Prospectus Requirements, including
diligence procedures?
follow the results, work with your Form 41-101F1, which specifies
Underwriters perform due diligence
the contents of a prospectus (this
team, consult with your advisers form harmonizes the prospectus
procedures to improve their understanding
and, most important of all, don’t take requirements across all provinces and
of your company to facilitate marketing
shortcuts – sooner or later, they your securities to potential investors.
provides for uniformity of administration
catch you off guard. of interprovincial offerings)
kpmg.ca/ipo
Execution phase: Underwriters’ due diligence Finally, due diligence meetings are
generally held shortly before the dates
of the preliminary and final prospectuses.
Update These meetings bring together your lead
underwriters, CEO, financial executives,
company lawyers, auditors and the
DAYS 0 5 10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 85 90 95 100
underwriters’ lawyers. The meeting is
File File held primarily to allow the underwriters to
Preliminary
Prospectus
Final
Prospectus
raise any questions about the offering and
your company. It also allows others to ask
Contents
• Review drafts of preliminary prospectus any remaining questions to establish their
• Site visits individual due diligence defences.
• Read contracts, minutes, other documents Introduction
• Underwriters’ discussions with management 3 Applying for a stock
• Due diligence meetings with management, company’s legal counsel, auditors exchange listing Deciding whether
• Due diligence meetings to update due diligence procedures Most companies apply for a conditional to go public
listing on one or more stock exchanges
even before their shares are sold to the Preparing to go public
public; others may allow their shares
Underwriters also need to mitigate their potential liability under securities legislation for
to trade initially on the unlisted or
misrepresentations in prospectuses. Securities legislation outlines civil liability provisions
OTC market.
Executing your IPO
for underwriters with respect to misrepresentations in prospectuses. Underwriters
can mitigate this potential liability by performing a “reasonable investigation as to Companies intending to list on a stock
provide reasonable grounds for a belief that there had been no misrepresentation.” This exchange must complete the appropriate
Continuing as a
reasonable investigation is commonly referred to as due diligence. listing application and provide any public company
additional information as required by the
What is involved in underwriters’ due diligence? exchange, such as information to support Further information
Expect that this process will be demanding and require the company to devote the future viability of the company.
considerable resources preparing for, and participating in, due diligence. You can expect Companies listed on an exchange are
your lawyers (on behalf of the board and the company) and your underwriters’ lawyers Appendices
subject to the provisions of their listing
to probe deeply into your company and its affairs. Their procedures will likely involve agreement as well as the exchange
conducting in-depth discussions with senior management, inspecting the company’s requirements and policies that deal with
more significant operating facilities and other assets, and reviewing material agreements such matters as timely disclosure, insider
as well as business and financial information. Your company’s officers and directors trading and founder stock.
should be prepared to answer candidly numerous questions on:
Once the listing is granted, any condition
• All aspects of the company of the listing must be fulfilled and the
• Statements made in the prospectus about the company and the offering security posted for trading within 90 days
of receiving the listing approval. Listing
• Management’s experience, compensation arrangements and contracts or
fees differ significantly depending on the
transactions with the company.
exchange, but they generally include an
In carrying out their due diligence procedures, your underwriters may request a initial application fee, an original listing
comfort letter from your auditors. This letter outlines the procedures specified by the fee payable when the listing application
underwriters and carried out by your auditors for certain information contained in the is approved and an annual sustaining
prospectus and sets out your auditors’ findings. Generally, the letter is dated as of the fee. These fees depend on the number
date of the final prospectus. A draft of the letter is typically provided to the underwriters of shares issued or, on some exchanges,
at an early stage to ensure that all parties agree with the specified procedures to be the market value of the shares.
conducted by the auditors.
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Execution phase: Regulatory review
DAYS 0 5 10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 85 90 95 100
• File preliminary prospectus in all jurisdictions, including the French version

in Québec Contents
• Receipt issued for preliminary prospectus
• First comment letter (primary jurisdiction)
• Second comment letter (other jurisdictions)
Introduction
• Written responses to comment letter
Deciding whether
to go public
4 Regulatory review Preparing to go public
Each province and territory has a separate securities act. Provincial securities
administrators and their staff review all prospectuses for adequacy of disclosure
in accordance with their regulations and other pronouncements. While levels of
Executing your IPO
review intensity vary, IPOs receive thorough reviews by an accountant, a lawyer
and sometimes a specialist for an offering in a specialized industry, such as Continuing as a
natural resources. public company
After the preliminary prospectus is filed, the principal regulator and, possibly, a
non-principal regulator review it. You can expect a non-principal regulator to use its Further information
best efforts to advise the principal regulator of any significant concerns within five
working days of the filing. The principal regulator should then use its best efforts to
send a first comment letter within 10 working days of the filing, outlining all required
Appendices
revisions, additional information or questions. The principal regulator may provide further
comments at a later date, for example, as a result of the issuer’s response letter.
The securities administrators may require that certain disclosures of adverse business
conditions or other weaknesses in the offering be given increased prominence by
cross-referencing to the cover page, supplying more information or simply moving the
relevant disclosures to the front sections of the prospectus. They may ask you to support
certain claims or statements made in the prospectus or to remove them if they consider
the support inadequate. They may also take issue with a particular choice of accounting
policy or request additional disclosures in the financial statements.
Few first-time prospectuses complete the review process without any comments.
The experience of your professional advisers in identifying those sensitive areas and
anticipating potential problems can help reduce the number of comments received.
Depending on the nature of the deficiencies noted, your IPO team can assist in
addressing and rectifying them.
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Execution phase: Developing marketing materials
Prepare
DAYS 0 5 10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 85 90 95 100
Contents
• Prepare “green-sheet” and road-show materials (e.g., slides)
• Rehearse road-show presentation
• Make logistical arrangements for road show
Introduction
Developing marketing materials Deciding whether
Your prospectus is a public offering document and contains a large amount of information
to go public
about your company, its directors and its officers. Typically your preliminary prospectus is
supported by two other sources of information about the company: a green sheet and a
road show. The prospectus is typically developed first and provides the content for these Preparing to go public
other communications.
Under your direction, your underwriters prepare the green sheet, summarizing certain Executing your IPO
key information extracted from the prospectus, together with other information such as
data on comparable stocks. Continuing as a
The road show is a series of presentations, typically 60 to 90 minutes in length, with the public company
company’s prepared presentation lasting approximately 30 minutes. These presentations
are generally made over a five-to-10-day period to institutional investors and investment
Further information
dealers. Because the road-show presentations feature key members of the management
team, they provide the investment community with an opportunity to meet and assess
these executives. Appendices
The road show typically will cover your company’s:
• Vision and strategy
• Competitive position in the industry
• Relationships with its customers, suppliers and other key parties
• Financial results and performance.
This presentation is normally followed by a question-and-answer period. During
the road show, your company will be judged on not only content but also style and
presentation. Your goal is to make an excellent impression in a relatively short period
of time. Consequently, your road show should be well-rehearsed and well-orchestrated,
without being perceived as too slick. In many respects, the key members of the
management team are being judged on the perception they create about their integrity,
ability to lead and vision of the company’s future.
Many companies engage an investor relations firm to help develop the message,
prepare the presentation that delivers it and coach the presenters. This firm can
also handle the logistical arrangements for the presentation.
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Execution phase: Marketing 6 Pricing

In developing the offering, you made
Marketing and selling efforts preliminary decisions about the number
of shares you are intending to sell and
the desired price range for those shares.
DAYS 0 5 10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 85 90 95 100 However, market conditions change and,
accordingly, the final pricing typically does
• Obtain receipt for preliminary prospectus
• Conduct road show
not occur until a day or two before the
final prospectus is filed.
Contents
• Underwriters obtain expressions of interest from potential investors Pricing is affected by changes in general
• Obtain receipt for final prospectus market conditions (e.g., stock market
• Orders from potential investors confirmed levels and interest rates). Staying attuned Introduction
to market conditions can reduce the
surprise factor when making the final
pricing decision.
Deciding whether
to go public
5 Marketing The level of interest in your company and
its offering also affects the final pricing.
After the company receives the regulators’ receipt for the preliminary prospectus, the The interest expressed during road Preparing to go public
underwriters begin their selling efforts. shows and the limited selling efforts of
The road show, as previously discussed, provides an opportunity for registered underwriters during the period between Executing your IPO
salespersons, institutional investors and industry analysts to meet your company’s filing your preliminary prospectus and
management team and ask questions about your offering and your company. The tour filing the final prospectus may be higher
or lower than anticipated when the
Continuing as a
may cover several cities, particularly those where the major underwriters are located and
where investor interest is expected to be high. The team must ensure that selling efforts offering was developed. Accordingly, the public company
deal only with information already made public through the prospectus. underwriters may indicate that the market
A copy of the preliminary prospectus is provided to each prospective investor, who may
will not support the planned price or size Further information
and may recommend revising the terms
then express interest in your shares based on the expected price range. No sales may of your offering. Alternatively, conditions
be made, however, and no offers to buy may be accepted before may suggest that a higher price or
Appendices
the company receives the receipt for the final prospectus from the securities regulators. larger offering may be possible.
Pricing is subjective and based on input
Execution phase: Pricing from various sources and parties. The
players in this process all have differing
Monitor Market Conditions interests. Recognize, therefore, that there
Final Pricing
is always room for negotiation – and be
prepared for it. There is a fine line between
DAYS 0 5 10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 85 90 95 100 overpricing your offering and leaving too
much on the table. Proper pricing can help
• Monitor general market conditions to encourage an active aftermarket for
• Assess interest in offering as a result of road show and limited selling effort your company’s stock, thereby building
• Incorporate pricing information in final prospectus confidence in your company.
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Execution phase: Finalize documents that must be executed in conjunction with

your offering. These can include:
• Amalgamation of entities
Update Prospectus
• Secondary offerings
• Share redemptions
DAYS 0 5 10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 85 90 95 100
• Redemption of debt
File Closing • Revision of banking agreements
Final
Prospectus • Asset sales Contents
• Option arrangements
• Respond to regulatory comments
• Employment contracts
• Update prospectus for pricing, etc.
• Employee incentive programs.
• File final prospectus Introduction
Although it is preferable to deal with many
• Obtain receipt for final prospectus
of these matters as you prepare to go
Deciding whether
public, it is not always possible. The need
for these agreements and other documents to go public
may arise from the unique characteristics
7 Finalize documents developments have occurred since the
preliminary prospectus was originally and structuring of your offering. Preparing to go public
When all the securities commission filed. Once the company receives a
comments have been cleared, the receipt from the appropriate securities 8 The closing Executing your IPO
company negotiates the number of commissions, the sale and distribution of The final settlement, or closing, generally
securities to be offered and the price securities may begin. Investors that have occurs one to three weeks after the signing Continuing as a
with the underwriters and signs the expressed an interest in your offering of the underwriting agreement. The closing
underwriting agreement. You are now during the marketing stage must receive meeting is generally attended by all parties
public company
in a position to revise and finalize your a copy of the final prospectus before they involved in the process. At this meeting, the
prospectus. can purchase shares. net proceeds of the offering are provided Further information
The final prospectus is filed when all The complexity of your offering and other to the company, the securities sold are
regulatory deficiencies have been dealt events that occur in the period around your provided to the underwriters and various
Appendices
with, and your company and advisers closing will determine the nature and extent documents are signed and exchanged as
are satisfied that no material undisclosed of legal agreements and other documents necessary to the legal process.
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Contents
Introduction
Deciding whether
to go public
Executing your IPO
Continuing as a
public company
Further information
Appendices
CONTINUING
as a public company
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35 A Guide to Going Public Continuing as a public company
KEY CONSIDERATIONS
Contents
1 Transition
As you go through the IPO process, the experience of your board, management team and
professional advisers, as well as your readiness to operate as a public company, will be the Introduction
major factors in determining how smoothly you will make the transition to operating as a
public company. Deciding whether
to go public
2 Implement strategic operating plans
Going public was a strategic decision. Funds were raised to help accomplish those Preparing to go public
strategic plans. Now that you have the money, you are expected to follow through.
Executing your IPO
3 Regulatory matters
As a public company, you are required to comply with securities legislation and the Continuing as a
rules of applicable stock exchanges. Regulators do focus on the governance of public public company
companies and their expectations of boards of directors as well as board committees
continue to evolve. Public companies must meet extensive continuous disclosure
Further information
requirements, including filing annual and quarterly financial statements, MD&A, the AIF,
quarterly and annual CEO and CFO certifications, and the information circular.
Appendices
4 Investor relations
With your offering completed, your new shareholders, potential shareholders and the
investment community at large all have an ongoing interest in the affairs and results of
your company. Developing a proactive and ongoing investor relations strategy is a critical
component in sustaining an active aftermarket interest in your company.
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1 Transition 2 Implement strategic operating plans

The closing of the offering marks the One of your fundamental reasons for going public was that you had identified a strategic
beginning of your life as a public company. need for capital. You developed and sold your business case to the market and investors
The first challenge involves making a have now rewarded you by providing this capital. In assessing your business case and
successful transition. You change the way in making their purchase decision, investors evaluated, among other things, the planned
you do things: the process of making use of proceeds. Now that they have provided you with the required capital, your
decisions, assessing the impact of those investors clearly expect you to implement the plan.
decisions on the much wider base of
stakeholders and on the stock price,
Obviously, the timing of the achievement of these objectives will vary. Using proceeds to Contents
retire debt or pay for a recent acquisition can be easier to accomplish in a relatively short
ensuring regulatory compliance and time. On the other hand, using proceeds for extracting and processing a proven mineral
so on. reserve will occur over a longer period.
The transition period may trigger Introduction
a change in attitude on the part of 3 Regulatory matters
senior management, as they become
accustomed to operating under constant The securities commissions publish rules, policies and notices that are updated from Deciding whether
direct and indirect scrutiny. This shift can time to time. As a public company, you are required to stay current on changes to the to go public
require considerable time and effort. legislation and to comply with securities legislation and the rules of the applicable stock
exchanges. Certain corporate activities pertaining to shareholder meetings, insider
The team that was developed during the Preparing to go public
planning stages of the initial offering will trading and the sale of shares will also be governed by legislation and regulation.
play a key role in helping the company Regulatory issues affecting your company can broadly be categorized as:
adjust to its new life.
Executing your IPO
• Governance
You can expect to spend time and • Continuous disclosure requirements
resources to maintain and grow your
Continuing as a
• Other issues.
market position and investor interest. public company
This change will involve putting in place
an effective investor relations program Governance Further information
and ensuring that you get support from Board of Directors
your underwriters to maintain good The board of directors is elected by the shareholders. Its primary role is to assume
distribution and support of your stock,
Appendices
overall responsibility for the stewardship of the company, overseeing the activities of
and stimulate continuing interest from management in order to ensure that the company and the investors’ long-term interests
the analyst community. are being served. In recent years, the role of the board has become more visible and the
board has more accountability to investors and regulators.
To help the board fulfill its mandate, the CSA has issued Corporate Governance
Transition is Guidelines. Companies are encouraged to consider the guidelines while developing their
immediate. own policies and practices. The guidelines seek to achieve a balance between providing
Following the protection to investors and fostering fair and efficient capital markets and confidence in
IPO, be prepared those markets. These guidelines take into account the impact of corporate governance
to comply with all developments in the US and around the world. The CSA recognizes that corporate
governance is under constant evolution.
the financial and
non-financial reporting The current policy recommends that a majority of the directors, including the chair or a
lead director, should be independent. In general, a person is considered independent if
requirements and
he or she has no direct or indirect material relationship with the company.
meeting the expectations
The current policy also requires issuers to adopt a policy related to identification and
of a public company board.
nomination of women directors. Issuers who have not adopted such a policy are
required to disclose the reason for not having a policy. Issuers are required to disclose
whether, and if so, how the nominating committee considers the level of representation
of women on the board in considering candidates for nomination. The number and
proportion (in percentage terms) of women directors on the board, including those
of subsidiary entities is also required to be disclosed.
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The board should adopt a written • Pre-approve the types of non-audit Compensation committee
mandate in which it acknowledges its services that an external auditor can There continues to be strong public
responsibilities for stewardship of the and cannot provide and shareholder focus on executive
company. Such a mandate should include compensation for executives of public
• Be directly responsible for overseeing
things such as clear position descriptions companies.
the internal audit processes
for the chair of the board, CEO and
The board should consider appointing
subcommittees. The board should also • Oversee the company’s compliance
a compensation committee composed
adopt a written code of business conduct with applicable legal and regulatory
and ethics designed to promote integrity
and deter wrong-doing.
requirements affecting financial reporting
entirely of independent directors.
Contents
• Provide an avenue for effective The committee should consider options
communication among the audit and establish a properly risk-managed
Board Committees committee, external auditors, compensation package that rewards
To fulfill their responsibility to provide management, internal auditors and innovation and appropriate risk taking, Introduction
risk oversight, most boards appoint the board of directors. balancing incentive generation with
committees to oversee the common risks risk-bearing costs.
Canadian securities legislation requires Deciding whether
faced by the company. Risks can be wide The compensation committee reviews
ranging and include, for example, financial
every public company to have an audit to go public
committee composed of a minimum of CEO compensation in the context of
reporting, reputation, litigation, ethics, relevant corporate goals and objectives,
three independent members of the board
technology, or health, safety, and the evaluates the CEO’s performance in light of Preparing to go public
of directors. The audit committee members
environment. those goals and objectives, and determines
must also be financially literate. The
Board committees should have written external auditors must report directly to an appropriate level of compensation for Executing your IPO
mandates establishing their purpose, the audit committee. Required disclosures the CEO based on this evaluation.
responsibilities, member qualifications, regarding the audit committee must also The committee should also make Continuing as a
member appointment and removal, be included in the company’s AIF. recommendations to the board on non-CEO
structure and operations, and manner public company
The audit committee rules are sensitive officer and director compensation, incentive
of reporting to the board. compensation plans and equity-based
to the unique characteristics of Canada’s
The securities legislation requires plans, and should review disclosures Further information
capital markets. Smaller companies,
every public company to have an audit including those listed on the TSX-V are related to executive compensation before
committee and also recommends exempt for certain requirements, including the information is made public. Appendices
that a company consider appointing a audit committee composition and
nominating committee and a compensation reporting obligation requirements. Continuous disclosure
committee. The role of these committees
is discussed below. Nominating committee
requirements
The board should consider appointing a Canadian securities legislation includes
Audit committee nominating committee composed entirely a policy regarding disclosure of corporate
All public companies are required to have of independent directors. governance practices. All entities must
an audit committee to focus, on behalf include the required disclosures in their
of the board, on oversight of the financial The nominating committee identifies
AIF or, in some cases, in the management
reporting process. individuals qualified to become new board
information circular.
members and recommends to the board
The audit committee’s primary duties and the new nominees for the next annual The policy is fairly detailed and requires
responsibilities are to: meeting of shareholders. In making its disclosure of many aspects of the
• Identify and monitor the management decisions, the committee should consider board, including the identity of all
of the principal risks that could affect the competencies and skills that the board directors, both independent and non-
the reliability of financial reporting considers to be necessary for it to possess independent; a description of the board
as a whole, the appropriate size of the board, mandate; measures taken for orientation,
• Oversee the integrity of the company’s
as well as the skills and competencies of continuing education and ethical business
financial reporting process, the system
the current board members, and the skills conduct; the process for nomination and
of internal control over financial
and competencies each new member will compensation of directors and officers,
reporting and accounting compliance
bring into the boardroom. Before making and the process used for assessing
• Be directly responsible for overseeing recommendations, the board should ensure the effectiveness and contributions of
the work of the external auditors, that each new nominee will be able to the board and its members. Entities
including monitoring the independence devote sufficient time and resources to his are advised to consult with their legal
and performance of the external auditors or her board duties. counsel when developing the disclosures.
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The long arm of securities legislation For venture issuers, certain concessions are • Disclosure of external auditor service
extends far beyond the initial offering of available. For instance, venture issuers will fees by category, specifically under
a security. One of the regulators’ primary have the option to provide disclosures in the captions of Audit, Audit-Related, Tax and
objectives is to ensure that disclosure form of quarterly highlights, rather than a full All Other Fees.
similar to that contained in the prospectus interim MD&A. Essentially, venture issuers • Legal proceedings and regulatory actions
is available to securities markets at are companies with unlisted securities or • Additional information.
all times. with securities listed or quoted only on the
TSXV, CSE or AIM. They do not have any of Financial statements
These requirements include:
• Annual Information Form
their securities listed or quoted on any of
the TSX, a US marketplace or a marketplace
Annual financial statements must be Contents
prepared by the company and audited by
• Financial statements outside Canada and the US, other than AIM. its auditors. These financial statements
• Management’s discussion and analysis must be prepared in accordance with
Annual Information Form
• Information circular IFRS, accompanied by an auditors’ report, Introduction
An AIF must be filed annually within
and filed with the relevant securities
• Disclosure of material changes 90 days of the end of the financial
regulators within 90 days after the end
• Business acquisition report year. Companies listed on the TSXV are Deciding whether
of the company’s fiscal year (for venture
• Certifications.
exempt from this requirement. The AIF
issuers, within 120 days).
to go public
is a disclosure document intended to
These areas are discussed in more provide material information essential In addition, the company must file
to a proper understanding of the nature interim financial statements each
detail below.
of the company, its operations and quarter, within 45 days after the end
Typically, the annual audited financial
prospects for the future. of the respective quarter (for venture Executing your IPO
statements, MD&A and much of the
issuers within 60 days). These interim
information contained in the AIF are The AIF contains many disclosures
financial statements do not require an
included in an annual report sent to the typically required in a long-form Continuing as a
audit or review. For most companies,
shareholders. In addition, companies are prospectus, including:
the auditors perform a review of these public company
required to file with regulators copies of • Incorporation financial statements in order to assist
material documents, such as bylaws and
• General development of the business the audit committee to discharge its Further information
material contracts.
• Narrative description of the business responsibilities for these statements.
The securities commissions perform If the auditors have not performed a
• Description of the capital structure Appendices
regular reviews of continuous disclosure review of the interim financial statements,
• Market for securities the statements must be accompanied
document filings. They provide individual
comments to companies and also publish • Directors and officers by a notice indicating that the financial
public comments. • Information on interest of experts and statements have not been reviewed
auditor independence by an auditor.
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Management’s discussion and analysis • Information to help make an informed income and the level of the company’s
The financial statements must be judgment about the matters being voted investment in the acquired company.
accompanied by MD&A. on at the meeting
A business acquisition report should also
• A statement of executive compensation include information on the profile of the
MD&A is supplemental analysis and
explanation that accompanies but does • Information on the indebtedness of company, a description of the company
not form part of the financial statements. directors and officers being acquired and the consideration
MD&A provides management with the exchanged, nature and description of
• Information on the interests of insiders
opportunity to explain in narrative form
its current financial situation and future
in material transactions
any related parties involved, and details
on whether the acquisition will cause Contents
• Details of management contracts. material changes to the business affairs
prospects. It is intended to enable
investors to look at the company through of the company.
Disclosure of material changes
the eyes of management by providing Financial statements required to be
both a historical and prospective analysis
One of the objectives of the securities Introduction
legislation is to ensure that all investors, included or incorporated by reference in
of the company’s business. Securities this report include comparative annual
not just insiders, receive important
regulators provide guidance on the
information regarding changes in a financial statements of the acquired Deciding whether
specific content of the MD&A, and have
company’s affairs on a timely basis. company for its most recently completed to go public
focused on MD&A filings as part of their financial year ended before the acquisition
Accordingly, you must file a press release
continuous disclosure review program. date. The current year financial statements
forthwith when a material change occurs Preparing to go public
The securities legislation requirements in your company’s affairs. Within 10 days are required to be audited, but the
for the information to be reported in the of the change in affairs, you must also comparative information is not. Interim
annual and interim MD&A are extensive. file a material change report with the financial statements of the acquired Executing your IPO
They require detailed comparative securities regulator, which describes, company are also required for its most
information and discussion on the in detail, the material change and its recently completed interim period ended Continuing as a
operations of the company, as well impact on your company. after the date of the audited balance sheet
and before the acquisition date. Pro forma
public company
as discussion on risk areas, material
A material change is a change in the
contracts, compliance with covenants, financial statements are also required for
future capital projects and anticipated
business, operations or capital of the
non-venture issuers. Further information
company that would reasonably be
changes in accounting policies and their
expected to have a significant effect on the Certifications
implications. Consequently, management
market price or value of any of the securities Appendices
will need to devote a considerable amount Certification requirements differ significantly
of the company. It is prudent to seek legal for venture and non-venture issuers.
of time and effort to comply with these
advice if you are unsure whether a change
requirements. Non-venture issuers
in the business is a material change.
The annual and interim financial Securities legislation requires CEOs
statements and MD&A must be approved Business acquisition report and CFOs to certify in their annual
by the board of directors before filing. If the company completes a significant certificates that they are responsible for
The board may delegate approval of the acquisition, it must file a business establishing and maintaining disclosure
interim financial statements and the acquisition report within 75 days after the controls and procedures and internal
related MD&A to the audit committee. date of acquisition. If the most recently control over financial reporting. They also
completed financial year of the acquired have to certify that they have designed
Information circular company ended 45 days or less before ICFR to provide reasonable assurance
Generally, an information circular is the date of the acquisition, the company regarding the reliability of financial
sent to all holders of voting securities will have 90 days after the acquisition to reporting and preparation of financial
when management gives notice of a file this report (120 days in the case of statements in accordance with GAAP.
shareholders’ meeting. The information companies listed on the TSXV). The certifying officers should disclose the
circular is also filed with the applicable control framework used to design these
To assess whether an acquisition
securities regulators. controls and procedures. Further, they
is considered significant, consider
must disclose their conclusion about the
The information circular is intended to quantitative criteria that must be met, in
effectiveness of disclosure controls and
provide each security holder with: terms of the size of the assets, level of
procedures and the operating effectiveness
of ICFR in their annual MD&A.
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The CEO and CFO should also certify that the company has disclosed in its MD&A any Other issues
changes in ICFR that occurred during the most recent interim period that either have, or
are likely to have, a material effect on the company’s ICFR. Annual meetings and proxy solicitations
The certificates should also provide information about any material weakness in the design As a public company, your annual
or operating effectiveness of ICFR, including remediation plans or reasons for not planning to meetings become a major event at
remediate the weakness. which you report on the progress of
your company over the past year to your
In the quarter in which an issuer becomes public, however, the CEO and CFO are not shareholders and others, such as analysts
required to certify on the design and operating effectiveness of controls related to
disclosure controls and procedures, nor on the design and operating effectiveness, if
and members of the media. Contents
applicable, of controls related to ICFR. In preparation, you need to give your
shareholders notice of the meeting and
Venture issuers send out appropriate materials, as outlined
Venture issuers are not required to certify on the design and operating effectiveness of in the earlier section on the information
Introduction
controls related to disclosure controls and procedures, nor on the design and operating circular. Since your shareholders may be
effectiveness of controls related to ICFR. Venture issuers must, however, review the annual widely dispersed and may be unable to Deciding whether
filing and, based on the certifying officer’s knowledge after having exercised reasonable attend the shareholders’ meeting, you to go public
diligence, issue a basic certificate. must send them a form of proxy, allowing
them to appoint a person or company as
Use of non-GAAP financial measures in disclosure filings their nominee to act on their behalf at Preparing to go public
Non-GAAP measures are frequently used by companies in their disclosure documents in the meeting.
order to provide a supplemental explanation of financial and operating results. However, Shareholders may elect to receive the Executing your IPO
as non-GAAP measures do not have any standardized definitions, they have the potential proxy material online, and choose to vote
of not being comparable and could be presented in a misleading fashion. When a online. They may also choose whether Continuing as a
company chooses to include non-GAAP measures in its public filings (prospectuses or not they want to receive the annual
and continuous disclosure filings), it must adhere to the specific rules concerning the
public company
general meeting materials distributed
disclosures of non-GAAP measures, such as including a clear definition, reconciling to them. This option is limited only to
it to the most appropriate GAAP measure and clearly explaining reconciling items. general meetings – for special meetings, Further information
Examples of non-GAAP measures include return on assets; earnings before interest, taxes, you are required to mail the material to
depreciation, and amortization (EBITDA); net operating income; and distributable cash. shareholders. Appendices
Proxy advisory firms
Continuous disclosure filings
Proxy advisory firms play a role in the
All continuous disclosure filings for public companies can be found on SEDAR and are
proxy voting process by providing services
therefore accessible to the public through the SEDAR website.
that facilitate investor participation in
SEDAR is an initiative of the CSA to facilitate electronic filing and public dissemination of the voting process such as analyzing
certain disclosure documents required to be filed under Canadian securities legislation. proxy materials and providing vote
Documents on SEDAR include most of the documents that are legally required to be recommendations. Some proxy advisory
filed with the CSA and many documents that may be filed with the Canadian exchanges. firms also provide other types of services
Prospectuses and other continuous disclosure documents (including AIF, financial to issuers, including consulting services
statements, proxy materials, press releases, and material change reports) must be filed on corporate governance matters. The
electronically. CSA recently adopted a Policy that sets
out recommended practices for proxy
Filings can be made in one of two ways: you can become a SEDAR subscriber and make advisory firms in relation to the services
your own filings, or filings can be made on your behalf by filing agents that are SEDAR they provide to their clients and their
subscribers (e.g., law firms, financial printers and others that normally assist in the activities. This Policy provides guidance
preparation of filings). to proxy advisory firms and is designed
The SEDAR website also contains profiles of all public companies with basic information, to promote transparency in the processes
such as company addresses, contact information and stock exchange listings. leading to a vote recommendation and the
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development of proxy voting guidelines, Consequently, public companies should The changes to the act differentiate
and foster understanding among market take appropriate measures to ensure between core and non-core documents.
participants about the activities of proxy that controls are in place to protect A core document includes a prospectus,
advisory firms. The guidance addresses the confidentiality of such sensitive takeover bid circular, issuer bid circular,
conflicts of interest, the determination information. director’s circular, rights offering circular,
of vote recommendations, the MD&A, AIF, an information circular, annual
Anyone who must become privy to such
development of proxy voting guidelines and interim financial statements and
information needs to be made aware
and communications with clients, material change reports. Core documents
market participants, other stakeholders,
the media and the public.
of the proscription against trading on
or tipping such information. For this
are the continuous and timely disclosure
documents a company is required to file
Contents
reason, it may also be advisable for
with securities regulatory authorities.
Sale of shares one individual to coordinate all press
statements and contacts with analysts, All other documents are considered to
While your company’s shares can Introduction
reporters and others. be non-core documents. The distinction
now be traded publicly, there may be
between core and non-core documents is
restrictions or limitations imposed The System for Electronic Disclosure
by the securities commissions, stock by Insiders or SEDI was established by
important. Whether a misrepresentation Deciding whether
is made in a core or a non-core document
exchanges or underwriters. These the securities regulators to facilitate the
affects the burden of proof that a plaintiff
to go public
restrictions or limitations generally relate filing and dissemination of insider reports
bears to support a claim, as well as the
to shareholders that own large portions of in electronic format via the Internet.
the outstanding shares of the company.
nature of the defence that a company, Preparing to go public
director or officer must establish to
These restrictions or limitations may Civil liability for secondary market
prevent these shareholders from selling disclosure mitigate his or her exposure to liability. Executing your IPO
their shares for a certain period of time or Section 138 of the Ontario Securities The act provides many defences to the
may impose certain conditions on the sale Act establishes a secondary market civil company and its directors and officers Continuing as a
of these shares. liability regime. This legislation outlines once a misrepresentation has been
demonstrated to exist in a document.
public company
legal liability of companies, their directors,
After the closing of the IPO, the board
officers and experts such as lawyers for However, two primary defences are
should develop a policy addressing
these regulatory requirements and
any misrepresentations in continuous expected to be used. Further information
disclosure documents and public oral
should ensure that this policy is enforced Reasonable investigation performed
throughout the company.
statements. The amendments also
(due diligence) defence Appendices
address failure to disclose information
If a director, officer or company can prove
Insider trading on a timely basis.
that, prior to the release of the document
Any shareholder controlling 10 percent or The legislation provides a right of action containing the misrepresentation, he or
more of the voting rights in the company’s for damages to a person or company she (or his or her company) conducted
securities, as well as all directors and who acquires or sells securities of the a reasonable investigation and, at the
senior officers, are required to report their responsible company between the time time of the release of the document,
holdings and all changes in those holdings when a misrepresentation is made in had no reasonable grounds to believe
to the securities regulator on a timely basis. a released document or in a public oral that the document contained the
It is illegal for anyone to trade in a statement and the time it is publicly misrepresentation, then he or she is not
company’s securities on the basis of corrected. considered to be liable in relation to the
insider information. This law applies misrepresentation.
A second right of action is provided to a
equally to those directly privy to the person or company that acquires or sells Reliance on an expert defence
insider information (e.g., directors, officers securities of the responsible company A person or a company can also use the
and employees) and anyone to whom between the time a material change was defence of relying on an expert such as
they tip such information before it is made required to have been disclosed and a lawyer or actuary. To use this defence,
public. Both the insider (whether or not the time the disclosure is subsequently the document must include, summarize or
personally benefiting) and the person who made. Collectively, these rights provide quote from a report, statement or opinion
receives a tip may be subject to liability for a secondary market civil liability regime made by the expert. The person or company
damages to everyone who traded in the over companies, directors, officers must also have obtained the written consent
security during the period of such illegal and experts. to the use of his or her report.
insider trading.
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Prompt Offering Prospectus system Social media continues to be a popular

Companies that have been subject to the periodic reporting requirements of the Ontario medium of disseminating information to
Securities Act (or the applicable securities laws in other jurisdictions in some cases) are and communicating with shareholders,
in some cases eligible to use the POP system. This system allows the filing of a short- potential investors and the financial
form prospectus and incorporation by reference of previously filed continuous disclosure community. It is being used for engaging
filings, such as the AIF and interim reports. It significantly streamlines the time, effort, customers in real time to adding
and expense involved in a public offering by existing public companies. The eligibility sales channels and enhancing market
research. But for all its advantages,
Contents
criteria for using the POP system are detailed and, consequently, companies are advised
to seek the help of their legal counsel in assessing their eligibility. Most TSX–listed social media also brings inherent risk.
companies should be eligible to use the POP system. This can include threats to confidential
or competitive information, intellectual
property, reputational risk and potential
4 Investor relations for regulatory infractions. Sometimes, a Introduction
To maintain market interest in your securities, your efforts should be directed not only to single public failure can have far greater
existing investors in your company–the shareholders–and also to potential investors. Various ramifications on the reputation than
media can be used to reach this financial community. The volume of information required multiple successes achieved through use Deciding whether
by the investment community, and the speed at which it wants it, is increasing. To respond of social media. It is therefore imperative to go public
to this phenomenon and deal with regulatory and corporate governance issues, many that Boards and management teams
companies are developing information disclosure strategies and policies. implement a clear cut governance strategy Preparing to go public
as part of their social media investment.
Securities analysts play a significant role in the financial community. They are often
They should be aware of, understand,
part of the research departments of brokerage houses and investment dealers. Their
and manage the risks and create a culture Executing your IPO
assessments of your company will therefore influence the investment advice provided
where everyone in the organization
to their investor clients. Securities analysts will not only analyze your annual reports
and other available information, but also often conduct interviews with your company’s
understands the risks and how to Continuing as a
mitigate them.
management to gain further insight into your operations, plans and prospects. Your public company
company’s management should welcome such interviews and even initiate them when All continuous disclosure documents
filed in Canada are made available to
possible. Management should also seek opportunities to appear before local investment Further information
societies or groups of securities analysts who meet regularly to hear presentations by the general public through the SEDAR
senior management of public companies. website. Such documents cannot be
posted only on your company’s Web site. Appendices
Many companies maintain an up-to-date investor relations package for securities
analyst presentations and general corporate publicity. This package may include a The public potentially has access
description of the company and its products or services, a brief history of the company, to information about your company
information on its management team, selected financial data and any other information through many other websites. Securities
considered relevant. commission databases, exchange
websites, financial news organizations,
investment dealers, investment research
organizations, blogs, discussion boards
and many other sites will contain
information about your company that
the public may access in researching and
analyzing your company. Your investor
relations strategy may include monitoring
the nature of information about your
company on the Internet.
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Contents
Introduction
Deciding whether
to go public
Executing your IPO
Continuing as a
public company
Further information
• Tax considerations
• Markets and forms

of going public
• Acronyms defined
• Glossary
Appendices
FURTHER
Information
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TAX CONSIDERATIONS
While certain tax advantages will be lost by private corporations. For example, than non-CCPCs. CCPCs are also entitled
Contents
when the company becomes public, when an individual realizes a capital gain to cash refunds on a portion of their
other opportunities can be created. of $100, the individual pays income tax expenditures if they are not able to use
It is therefore important to conduct on half of the capital gain; the other half the ITCs to offset federal income taxes
a complete review of corporate and is not taxed. When a private corporation payable. Certain provinces offer ITCs that
personal tax arrangements during the realizes the same capital gain, the private may vary, depending on whether or not
planning stages before a public offering. corporation is taxed on half of the gain and the corporation is a CCPC. Introduction
Proper tax planning can enable the the other half is added to the corporation’s
Corporate restructuring
company and its shareholders to enhance CDA. The CDA can be distributed as a
tax benefits prior to going public. It can tax-free dividend to the corporation’s
Corporate restructuring prior to a public Deciding whether
also help ensure that the company, once Canadian resident shareholders. When
offering may be advantageous for tax to go public
planning or other reasons. It may be
public, is structured advantageously the company goes public, it can no longer
necessary to reorganize share capital
for tax purposes. pay out a tax-free dividend from its CDA.
or combine various subsidiaries of a
There are differences between the Consequently, if your company has a corporate group or to remove certain
taxation of public companies and private balance in its CDA, consider paying a real estate or other assets prior to the Executing your IPO
ones. Consult with your tax advisers tax-free dividend out of that account offering. In some cases, companies
and carefully and thoroughly explore the before going public. have merged with one or more other
various tax implications associated with a
Continuing as a
companies with complementary
decision to go public. The following pages Refundable dividend tax on hand
operations in order to form a larger, public company
provide only a brief overview of some Dividends paid by CCPCs (and certain
more complete organization that will
other private companies) may trigger a
of the more significant aspects of tax
tax refund to the company in the year
have stronger investor appeal. Further information
planning that you should consider.
the dividends are paid. The tax refund is A variety of tax-effective methods are
Like most business decisions, the decision • Tax considerations
calculated by reference to the amount available to accomplish the restructuring
to go public involves tax implications and of the dividend and the balance in the of corporations or partnerships or to • Markets and forms
considerations, for both your company and company’s notional RDTOH account. The transfer assets with no immediate tax of going public
its shareholders. RDTOH account tracks “refundable taxes.” consequences. These methods include
For example, the RDTOH is increased amalgamations, windups, certain asset • Acronyms defined
Corporate tax issues by a portion of the federal tax paid on sales and share-for-share exchanges.
• Glossary
Small business deduction certain types of investment income and Exercise care when planning corporate
Privately-held corporations that are certain dividends received by private restructurings as there are often very
controlled by Canadian residents corporations. In order not to lose the tax complex. Adverse tax consequences may Appendices
(referred to as Canadian-controlled private refund, dividends should be paid prior to result or opportunities may be missed.
corporations or CCPCs) are entitled to a the company’s going public.
Commodity taxes
reduced corporate tax rate on a portion
Investment tax credits The implications of taxes other than
of their active business income. When a
Investment tax credits are earned by income taxes are often overlooked in
corporation becomes publicly held, the
doing qualified research and development connection with corporate restructurings
reduced rate is no longer available.
in Canada. Federal ITCs are available prior to going public. Various commodity
Capital dividend account to offset federal income taxes payable. taxes, such as goods and services tax,
The capital dividend account is a concept The rate of ITCs available for qualified excise tax, retail sales tax and land
used to complete the integration of R&D expenditures depends on the type transfer tax, may have a substantial
corporate and personal income tax on of corporation. CCPCs are entitled to a impact on any transaction in which
capital gains (and other receipts) realized higher ITC rate for R&D expenditures ownership of goods is involved.
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As with planning for income taxes, it If a non-CCPC or public company grants Estate planning
is important that the commodity tax options, tax is generally payable by the If tax or estate planning arrangements
implications of a proposed transaction employee when the stock option is currently in place are unique to your
be thoroughly analyzed, taking care that exercised. The taxable employment benefit company, you may need to make
the proposed transaction does not give is reduced by one-half provided the shares changes to bring them in line with what
rise to an unwarranted sales tax liability. are considered to have the characteristics is acceptable for public corporations.
of common shares, the employee deals
Other tax implications If you have no such estate planning
at arm’s length with the company, and
Other tax implications for a private
corporation going public include:
the exercise price is not less than the fair
market value of the shares at the time the
arrangements in place, it is often
convenient to implement them when Contents
your company is going public and you
• Acquisition-of-control rules – There may option was granted.
expect growth in the value of the public
be an acquisition of control if a new
If options are granted by a CCPC, tax is company. Estate freezing, a commonly-
person or group of persons controls the
payable by the employee only when the used technique in estate planning, involves Introduction
corporation after it becomes public. This
employee subsequently sells the shares. issuing shares to other family members
change results in tax consequences,
including a deemed taxation year-end,
The half deduction is also available if the so that subsequent growth in the value Deciding whether
shares are held for at least two years. If of the public company accrues to the
an automatic write-down of accrued
the two-year holding period is not met,
to go public
other family members – usually children
losses on various types of assets
the deduction could still be available if the or grandchildren. For example, a holding
and restrictions on the availability of Preparing to go public
conditions above for non-CCPCs are met. company could be set up and the existing
losses incurred before the acquisition
owners of shares of the company going
of control Enhanced dividend tax credit
• Reassessment period – The federal Although CCPCs are entitled to a reduced
public could transfer those shares to the Executing your IPO
new holding company for fixed-value
and provincial reassessment period corporate tax rate on a portion of their
preferred shares. Other family members
is extended by a year for a public active business income and are entitled to
could subscribe for common shares of the Continuing as a
“refundable taxes” on certain investment
corporation holding company that would appreciate in public company
income, a higher tax rate is applicable to
• Deadline for payment of taxes – Final value as the shares of the public company
dividends paid to individual shareholders.
payment of taxes payable for “small” does, with all future appreciation of those Further information
CCPCs is due three months after the A higher dividend tax credit rate applies shares accruing to them.
end of a taxation year, rather than two to dividends (eligible dividends) paid to • Tax considerations
Increasing tax cost
months after the end of a taxation year Canadian individual residents by public
It is possible to increase the tax cost of • Markets and forms
for a public corporation. companies and by CCPCs out of income
shares of a corporation by the amount of of going public
taxed at the federal general corporate rate.
previously-taxed retained earnings of the
Shareholder tax issues CCPCs cannot pay eligible dividends from
corporation through a carefully planned • Acronyms defined
income that has benefited from the small
Stock options series of transactions. It may be beneficial
business deductions or investment income • Glossary
Stock options can be an effective tool to crystallize such retained earnings
that is subject to refundable tax treatment.
to enhance employee motivation and into the tax cost of the shares prior to
loyalty, and can provide employees Capital gains deferral implementing the IPO. Appendices
with significant tax advantages. Stock Individuals are able to defer the
options are generally more attractive for
Capital gains exemption
recognition of some or all of their capital
It may be advantageous for individual
employees of public companies as the gains arising on the disposition of eligible
shareholders to file an election to deem
shares acquired have a ready market. CCPC shares (referred to as small
to have the shares of the private company
From a tax perspective, employees must business investments), to the extent the
disposed of prior to the company’s
report any benefits derived from the proceeds received are used to make other
becoming public. This filing would allow
exercise of the options as an employment small business investments and provided
the individual to crystallize accrued
benefit. The tax treatment of stock options that certain other conditions are met. This
capital gains by triggering a capital gain
issued by private and public companies rollover is not available on shares of public
and utilizing any available capital gains
differs in some respects. corporations.
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exemption. Consideration should be given shares, they do not need to include any • Accounting or auditing fees in
to the amount of any unrealized capital amount of the taxable benefit in their connection with the preparation of
gains on other qualifying properties held employment income. This exemption reports on financial statements and
by the individual and the anticipated date applies if certain requirements are met. review of statistical data for inclusion
of disposition of those assets. in the prospectus
Deductibility of IPO-related costs
Deferred income plans • Cost of printing the prospectus and
A corporation undertaking an IPO may
One advantage of owning shares of a share certificates
likely incur IPO-related expenses. The
public company is that the shares qualify
more easily as investments for deferred
deductibility of the full amount of the
expense will depend on whether it can be
• Filing fees required by any public
regulatory body with which the
Contents
income plans (such as RRSPs), compared argued that it was incurred prospectus must be filed for
with privately held shares that qualify only on account of income or capital. Certain acceptance.
in limited circumstances. expenses related to going public may
Certain expenses may be deductible on Introduction
Charitable donations generally be deductible over five years.
a current basis, while still others may
From a tax perspective, an advantage in Some examples of these expenses qualify as “eligible capital expenditures.”
owning shares of a public company relates
Deciding whether
include: Seventy-five percent of eligible capital
to charitable donations. To encourage expenditures are deductible on a declining to go public
• Commissions or fees paid to securities
donations of publicly listed shares to balance basis at a rate of seven percent
dealers
charities, the donor will be exempt per year. Finally, certain expenses may not Preparing to go public
from any capital gains tax. Similarly, if • Legal fees in connection with be deductible for tax purposes. A careful
employees of publicly-held companies the preparation and approval review of all expenses incurred should
exercise a stock option and donate the of a prospectus be conducted.
Executing your IPO
Continuing as a
public company
Further information
• Markets and forms

of going public
• Glossary
Appendices
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MARKETS AND FORMS

OF GOING PUBLIC
Contents
This chapter provides a brief overview included in an IPO prospectus from three a company should carefully evaluate all
of alternatives available to Canadian to two years. Other concessions have factors and assess its readiness before
companies – listing on Canadian been permitted related to interim MD&A, deciding to go public in the US. Introduction
exchanges, listing on certain exchanges business history and significance tests on
In 2012, the JOBS Act was signed into
outside Canada (US and UK), or taking business acquisitions.
the route of a capital pool company
law. One of the main objectives of this Deciding whether
legislation was to increase the number of to go public
structure for listing in Canada.
Going public in the companies electing to complete an IPO
The information in this chapter on US and to provide those companies a transition
and UK exchanges highlights only the
United States period, or, “on-ramp,” to the public market. Preparing to go public
significant differences between listing on The market size, investor interest and the The IPO on-ramp provisions, which are
those exchanges and listing on the TSX. visibility of the US securities marketplace contained in the act, reduce a number of Executing your IPO
Consult your advisers before making the has made it one of the most attractive and disclosure, corporate governance and other
decision to list on other markets or when popular sources of capital in the world. regulatory requirements for a new category
considering other forms of going public. of issuer, referred to as an “emerging
Continuing as a
Market growth company”. public company
As in Canada, the US securities
Going public in Canada marketplace comprises exchanges and The on-ramp provisions of the JOBS Act offer
Further information
OTC markets. and is mainly regulated EGCs a number of incentives during and
Most Canadian companies choose to
by the SEC. Each state may have its own after the process of going public, including:
establish a listing on a Canadian exchange. • Tax considerations
The TSX, the senior equity market, has securities laws, although many states • Confidential submission and review
established certain basic requirements for have adopted the Uniform Securities of the IPO registration statements – • Markets and forms
its listings. The TSXV provides emerging Act to ease the process of filing in thereby allowing EGCs to explore of going public
companies with access to public equity multiple states. the possibility of an IPO without
capital. Its minimum listing requirements The largest stock exchanges in the US are exposing any confidential information
are tailored to a company’s industry the NYSE, NASDAQ and NYSE MKT LLC, to competitors or the market generally • Glossary
sector, stage of development, financial but other regional stock exchanges exist until 21 days before it beings to the
performance and operational resources. conduct it’s road show and without
across the country.
risking the humiliation related to pulling
Appendices
Detailed information on these two
Process the IPO should the EGC feel necessary
exchanges is readily available on the
The process for going public in the US • Reduced financial statement audit and
TSX website. We therefore encourage
is generally similar to the process in disclosure requirements – EGCs will be
you to visit that site for the most current
Canada. The benefits of having access to required to disclose only two years of
information.
a much larger and diverse investor base audited financial statements (including
The TSX Venture Exchange also offers a should be weighed against the additional those of acquired businesses) rather
special listing vehicle, the capital pool costs to be incurred for compliance with that the original three year requirement,
company program, described at the end of more extensive and complex accounting, two years (rather than five years) of
this chapter. auditing and reporting standards for selected financial information for the
Recent amendments to prospectus listed companies in the US. The costs years including and after the earliest
requirements provide additional relief to of non-compliance to the company in audited period presented and two years
venture issuers by reducing the number of terms of damage to reputation and risk of MD&A for the periods covered by the
years of audited financial statements to be of litigation can be extensive. Therefore, audited financial statements
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• Reduced executive compensation can use its tradable common stock as Public company compliance
disclosure requirements – the act has full or partial consideration for future requirements
streamlined and simplified disclosures, transactions. Annual and quarterly reports
which are required of smaller reporting
Disadvantages of listing in US markets Public companies in the US must file
companies. An EGCs registration
annual reports. The annual reports include
statement does not need to include a The costs of an IPO in the US and the
audited financial statements prepared in
detailed compensation discussion and ongoing costs of continuing as a public
accordance with – or for foreign private
analysis section or certain tables of company can be high compared with
executive compensation a Canadian TSX listing. The following
considerations give rise to such
issuers, reconciled to – US GAAP. They
also include MD&A and risk factors. The Contents
• The option to participate in oral annual report must be filed within 90 days
additional costs.
or written “test-the-waters” after the year-end.
communication with certain More complex and extensive
Companies must also file quarterly reports Introduction
institutional or highly-sophisticated standards and securities regulations
within 45 days after the end of the interim
prospective investors to gauge The core management team and external
period. These quarterly reports include the
interest before or after filing; and advisers, such as lawyers and auditors,
unaudited interim financial statements Deciding whether
need to be skilled and experienced in
• Exemptions from the attestation of a
dealing with the extensive securities
and contain less information than the to go public
public accounting firm as related to the annual reports.
legislation requirements and more
issuers internal controls required by
complex US accounting and auditing The deadlines for filing the annual and Preparing to go public
section 404(b) of the Sarbanes-Oxley quarterly reports are shorter if the
standards. US disclosure requirements
Act, as well as reduced disclosure
company meets the definitions of an
(financial and compensation) for future
are onerous, and compliance costs Executing your IPO
can be high. “accelerated filer” or a “large accelerated
periodic reports and other reports filed
filer” under the US securities legislation.
with the SEC. Tax considerations Continuing as a
The tax regime in the US differs from its Current reports must be filed within four
Advantages of listing in US markets business days of the occurrence of certain public company
Canadian counterpart. Take care in order
Access to capital markets in the US to ensure that the company and the events and occurrences deemed material
The US market offers a company access offering are structured optimally from a to investors. Further information
to additional capital because of its volume US tax perspective. A Canadian company Certifications • Tax considerations
of trading, the appetite of the marketplace listing in the US should be aware of The certification requirements for CEOs
and the sophistication of the investors. the tax rules surrounding cross-border • Markets and forms
and CFOs are conceptually similar to those
These elements may not be available in transactions and trades, and should also of going public
in Canada, but with some differences in
the Canadian marketplace. The additional consider its responsibilities and obligations
form and content. The main difference
liquidity for securities listed in the US with respect to any withholding tax • Acronyms defined
is that companies have to certify on the
may also enhance shareholder value and requirements.
operating effectiveness of ICFR and this • Glossary
decrease the company’s cost of capital.
Litigation risks and cost of litigation certification must also be accompanied
Increased exposure and liquidity Relative to the Canadian environment, by an auditors’ report something that is
not required under current legislation in
Appendices
Listing in the US can help a company gain the US has a higher risk of litigation.
increased exposure and build reputation Contributing factors include the extensive Canada. However, this is a requirement
in the marketplace. This profile may make and onerous securities rules and reporting of companies listed in the US under the
the company more attractive for mergers requirements for which compliance may requirements of the Sarbanes-Oxley
with other US companies. It can also give be more difficult; the higher number Act (SOX) of 2002, which meet certain
a company the opportunity to acquire US of awards in corporate cases, relative requirements primarily based on market
currency for undertaking US transactions to Canada; and, in general, stronger capitalization. Also on EGC is exempt. In
and can enable it to increase its customer corporate and public attitudes toward the year of going public, the requirement
base. Additionally, a public company corporate litigation. to certify on the operating effectiveness
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of ICFR is waived for management. Canadian companies must file the that any company wishing to list with AIM
Also in the US, you get one year off for applicable Canadian prospectus with the must adhere to the Exchange’s AIM Rules.
management auditor. Furthermore, no SEC and provide additional information
The first step join AIM is to identify
auditors report on ICFR is required. required by the MJDS registration form.
and appoint a Nominated Adviser
The registration form requires companies
(Nomad) who will help the company
Listing and reporting options for to reconcile their financial statements to
come to market. Nomads have a
Canadian companies US GAAP, unless the reporting framework
deep understanding of the needs and
is IFRS. The SEC will generally not review
Contents
Foreign private issuer aspirations of companies seeking
A company that is listed on a US exchange the prospectus, as it relies on the review
admission to AIM and are highly
but is incorporated outside the US (other by Canadian regulators.
experienced in guiding them through
than a foreign government) is considered A similar process is available to US the process of going public. Refer to the
to be a “foreign private issuer,” unless companies filing in Canada. LSE for a full listing of approved Nomads.
more than 50 percent of its outstanding Introduction
voting securities are held, directly or The issuer must also select other advisers
indirectly, by US residents and any one Going public in the United who will be integral in supporting a company
Deciding whether
through the admission process. These
of the following statements is true: Kingdom advisers usually include an underwriter, to go public
• The business is principally administered The London Stock Exchange (“LSE”), being law firms, public accountants and investor
in the US one of the old exchanges and one of the relations firms. After selecting its advisers, Preparing to go public
• A majority of its executive directors or world’s most prominent capital markets. the company will need to prepare an
The LSE comprises of four main markets: admission document that includes details
officers are US citizens or residents. Executing your IPO
about its directors, financial position,
• More than 50 percent of its assets are Main Market business activities and strategy. This
located in the US. The Main Market enables companies to is prepared in close consultation with Continuing as a
Only in conjunction with your legal counsel access capital and gain the key benefits the Nomad. public company
should you make the decision whether of higher profile and liquidity. The Main
Market is regulated by the UK Listing Professional Securities Market (PSM)
a company meets the definition of a
Authority and requires companies to The Professional Securities Market is
Further information
foreign private issuer. If a company meets
meet its high standards of disclosure, a specialized market designed to suit • Tax considerations
the definition, it may be able to avoid or
governance and regulation. It classifies the specific needs of raising of capital
lessen certain onerous requirements for
listing companies as either in the Premium through the issue of specialist debt • Markets and forms
domestic registrants, including quarterly
segment or the Standard segment, securities or depositary receipts (DRs) of going public
reporting and US proxy rules.
these classifications help determine the to professional investors.
The US/Canada Multi-jurisdictional standards and regulations, which will apply
Issuers of debt or DRs are not required
Disclosure System to the listed entity. • Glossary
to report historical financial information
The MJDS is a joint initiative of the CSA using IFRS or an equivalent standard,
and the SEC to ease the process for Alternative Investment Market
AIM, launched in 1995, is a market
either in listing documents or as a Appendices
Canadian companies listing in the US as continuing obligation. Instead, issuers can
well as US companies listing in Canada. regulated by the London Stock Exchange.
use their domestic accounting standards.
It allows qualified Canadian companies It was specifically designed for growing
to issue securities in the US and meet markets and targets smaller, growing Specialist Fund Market (SFM)
their reporting obligations on the basis of companies. An AIM listing provides
The SFM is the London Stock Exchange’s
disclosure documents prepared in Canada companies with access to markets in
regulated market for highly-specialized
and reviewed by Canadian regulators, and London and Europe.
investment entities that wish to target
vice versa. In order to qualify, companies AIM has been designed with for the institutional, highly knowledgeable
should have a public float of at least needs of emerging companies and is an investors or professionally advised
US$75 million. exchange regulated market, which means investors only.
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The SFM targets specialist investment for quarterly filings and 90 days for Through the IPO, the CPC must raise a
managers seeking a flexible and adaptable annual filings). minimum of $200,000 and a maximum
route to accessing permanent capital from of $4,750,000. The maximum amount
a highly-sophisticated global investor base.
Disadvantages of the CPC program that a CPC can raise before completing
Generally speaking, investment managers • There is less liquidity and recognition a qualifying transaction is $5,000,000.
handling large hedge funds, private equity due to lower prominence and coverage
of the TSXV among the analyst CPCs also have to comply with policies
funds and certain emerging market and
community that dictate the type of business they
Contents
specialist property funds are the key
can conduct, the payments prohibited
players within the SFM. • Investors generally invest in a CPC at
to be made to non-arm’s-length parties
a low price and therefore tend to sell
and how the proceeds obtained from the
quickly once they are able to recognize
Capital pool company a profit on the sale.
initial IPO are permitted to be used. For
The capital pool company program is example, the only business permitted Introduction
operated by the TSXV. The program serves Process to be undertaken by a CPC is identifying
as a corporate finance vehicle, providing Going public through the CPC involves and evaluating assets or companies
with a view to completing a qualifying Deciding whether
companies with an opportunity to obtain two main stages. The first stage includes
financing earlier in their development incorporating the CPC, initial financing transaction and, unless the qualifying to go public
compared with what might be possible by the founders, completing the IPO and transaction is completed, a CPC must
through a normal IPO. The program listing on the TSXV. The second stage not carry on any business. Similarly, Preparing to go public
permits a newly created CPC that has completes the qualifying transaction, in no form of remuneration can be paid
which the CPC acquires significant assets to a non-arm’s-length party until the
no assets other than cash and has not Executing your IPO
and lists the company on the TSXV as a qualifying transaction is completed; the
commenced commercial operations,
Tier 1 or Tier 2 company. only permitted payments are reasonable
to conduct an IPO and achieve a listing
expenses for office rent and related Continuing as a
on the TSXV. The CPC then uses these Specific requirements govern the minimum
funds to identify and evaluate assets and number of shares to be issued and utilities, certain equipment leases, office public company
companies for acquisition. shareholders for the formation of a CPC. supplies, certain legal expenses and
Similarly, minimum market distribution certain expenses incurred in identifying Further information
Advantages of the CPC program requirements determine whether you qualify assets or companies for completing the
• The owners start out with an existing as a Tier 1 or Tier 2 company. Additionally, qualifying transaction. • Tax considerations
shareholder base that can help address each stage has specific requirements for
Making the decision • Markets and forms
any future liquidity issues filing an information circular, prospectus,
of going public
certain financial statements and consents Policy 2.4 of the TSX Venture Exchange
• The owners are able to obtain a listing
from your auditors. Corporate Finance Manual provides • Acronyms defined
more quickly
To form a CPC, the principals will a detailed description of these
• The owners will deal mainly with requirements. If you are thinking of going
• Glossary
contribute an amount between $100,000
the stock exchange rather than the public through the CPC program, consult
and $500,000 through the purchase of
securities commissions with your legal and accounting advisers. Appendices
seed shares of a company incorporated
• The reporting requirements on the in a Canadian jurisdiction. The minimum Before making any decisions, ensure you
TSXV are less onerous, and the price for the sale of seed shares is $0.05 are fully aware of all the requirements
filing deadlines are longer (60 days or 50 percent of the price at which shares and have a good understanding of
for quarterly filings and 120 days for are sold to the public on the IPO. The CPC the process and how it will affect you
annual filings) than the TSX (45 days will then proceed with the IPO process. and your existing business.
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ACRONYMS DEFINED
AIF Annual Information Form ICFR Internal Control over POP Prompt Offering Prospectus
Contents
Financial Reporting
AIM Alternative Investment R&D Research and Development
Market IFRS International Financial
RDTOH Refundable Dividend Tax
Reporting Standards
CCPC Canadian Controlled Private on Hand
Corporation IPO Initial Public Offering
RRSP Registered Retirement
CDA Capital Dividend Account ITC Investment Tax Credit Savings Plan Introduction
CPA Chartered Professional LSE London Stock Exchange SEC Securities and Exchange
Accountants of Canada Commission Deciding whether
MD&A Management’s Discussion &
CSA Canadian Securities Analysis SEDAR System for Electronic
to go public
Administrators Document Analysis and
MJDS Multijurisdictional Disclosure
CEO Chief Executive Officer System
Retrieval Preparing to go public
SEDI System for Electronic
CFO Chief Financial Officer NASDAQ National Securities Dealers
Automated Quotation
Disclosure by Insiders Executing your IPO
CSE Canadian Securities
System TSX Toronto Stock Exchange
Exchange
NEO Named Executive Officer TSXV Toronto Stock Exchange –
Continuing as a
CPC Capital Pool Company
Venture public company
Nomad Nominated Adviser
EDGAR Electronic Data Gathering
UK United Kingdom
Analysis and Retrieval NYSE New York Stock Exchange Further information
US United States
FOFI Future-Oriented Financial OSC Ontario Securities
Information Commission
GAAP Generally Accepted OTC Over-the-counter • Markets and forms
Accounting Principles of going public
• Glossary
Appendices
kpmg.ca/ipo
GLOSSARY
Aftermarket: The public market for a Consent letter: A letter provided by Founder stock: Shares issued to selected
Contents
company’s securities after the IPO. the company’s independent auditors to persons (e.g., company insiders and
Also known as the secondary market. the company consenting to the use of its promoters) prior to a public offering at a
report in the prospectus. price less than the public offering price.
Analyst: A person, often employed by a
firm of investment dealers, who follows Core operations: See value chain. Green-shoe option: See over-allotment
certain companies and analyzes their option.
financial statements for the purpose of
Dilution: The effect on the prospective Introduction
purchasers’ equity interest caused by a Green sheet: A sheet prepared by the
providing investment advice.
disparity between the public offering price underwriters, summarizing information
Annual general meeting: A meeting that per share and net tangible book value contained in the prospectus and
Deciding whether
is held by companies on an annual basis, per share of the company immediately information on comparable companies, to go public
allowing management to report on the preceding the offering. to assist registered securities dealers in
progress of the company over the past year
Disclosure controls and procedures:
understanding the key elements of an Preparing to go public
to the shareholders and others who may offering.
Controls and other procedures designed
attend the meeting, such as analysts and
members of the media. It also provides
to provide reasonable assurance that Insider trading: Trading in a company’s Executing your IPO
information required to be disclosed by a securities by company insiders or others
an opportunity for the shareholders to
company under the applicable securities with access to non-public information
interact with management and to vote on
legislation is recorded, processed, about the company.
Continuing as a
significant issues facing the company. public company
summarized and reported on a timely basis.
Investment bankers or dealers: Financial
Best-efforts underwriting: An agency
Due diligence: The responsibility of those institutions that specialize in advising
agreement in which the underwriters
preparing and signing the prospectus to companies on available sources of Further information
agree to use only their best efforts to sell
conduct a reasonable investigation so financing and on the optimum time for
the shares on the company’s behalf. The • Tax considerations
underwriters do not commit to purchase as to provide a reasonable basis for the a public offering of securities; often also
any unsold shares (See, in contrast, belief that the statements made in the act as underwriters for a public offering. • Markets and forms
firm-commitment underwriting). prospectus are true and do not omit any of going public
Internal control over financial reporting:
material facts.
Black-Scholes model: A mathematical The process (including all policies • Acronyms defined
model developed by Fischer Black and Escrow agreement: An agreement and procedures) designed to provide
Myron Scholes used to calculate the generally imposed by a securities reasonable assurance regarding the • Glossary
value of options and other underlying commission that specified securities reliability of financial reporting and the
(usually common shares) will be held by preparation of financial statements for
derivatives. Appendices
a trustee for the account of a shareholder external purposes, in accordance with
Capitalization or capital structure: and that they may not be sold, assigned, generally accepted accounting principles.
The company’s debt and equity structure. released from escrow or transferred
Lead underwriters: Also known as
Closing meeting: The final meeting for within escrow without the express
principal underwriters, they organize
the purpose of exchanging company consent of the securities commission.
the underwriting syndicate and are the
securities for the proceeds of the offering. Exercise price: The fixed price at which an primary contact with the company.
Comfort letter: A letter provided by option holder can purchase the underlying
Letter of intent: A preliminary,
a company’s independent auditors securities of the company. Also known as
non-binding agreement between the
detailing procedures performed at the strike price.
underwriters and a company specifying
request of the underwriters. This letter
Firm-commitment underwriting: A the terms that will be contained in
supplements the underwriters’ due
type of underwriting agreement in which the actual underwriting agreement.
diligence review.
the underwriters agree to purchase all This letter precludes a company from
Comment letter: A letter from the staff the shares in the offering and then resell hiring another underwriter and often
of a securities commission describing them to the public. Any shares not sold authorizes the underwriters to incur
deficiencies noted in its review to the public are paid for and held by the expenses in connection with the
of a preliminary prospectus. underwriters for their own account. proposed offering.
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Market makers: The lead underwriters securities (See, in contrast, secondary Secondary market: See aftermarket.
and some or all of the co-underwriters who offering).
Secondary market civil liability regime:
offer to buy or sell shares from the public,
Principal jurisdiction: The securities A regime that provides a right of action
helping to sustain financial community
commission of the province or territory for damages to a person or a company
interest and provide aftermarket support
selected by the company to coordinate the that acquires or sells securities of the
for a company’s shares.
review of a prospectus filed in more than responsible company based on either
National policies: Policies developed one province or territory. a misrepresentation made in a public
jointly by the provincial securities
commissions to facilitate the acceptance
Private placement: Sales of securities
not involving a public offering and exempt
document or an oral statement or a failure
to provide required timely disclosures. These Contents
of a prospectus in more than one statutory rights potentially apply against the
from prospectus requirements pursuant to
province and to provide for uniformity of responsible company, its directors, officers,
certain specific exemptions.
administration of interprovincial offerings. influential persons, and experts.
Promoter: Those who took the initiative Introduction
Non-GAAP financial measure: A Secondary offering: A public offering of
in founding the company and those who
numerical measure of a company’s shares owned by existing shareholders
historical or future financial performance,
received in connection with its founding
(See, in contrast, primary offering). Deciding whether
and in consideration of services or
financial position or cash flow that is
property contributed 10 percent or more Securities and Exchange Commission
to go public
not required by GAAP, which (1) either (SEC): The US agency responsible for the
of the shares of either the company or
excludes amounts that are included in administration of US federal securities laws. Preparing to go public
proceeds from the sale of the shares of
the most directly comparable measure
the company. Strike price: See exercise price.
calculated and presented in accordance
with GAAP; or (2) includes amounts Prospectus: A legal document that Transfer agent: See registrar and transfer
Executing your IPO
that are excluded from the most directly discloses information about the company agent.
comparable measure calculated and and the offering and is distributed by the
Underwriters: The lead underwriter
Continuing as a
presented in accordance with GAAP. underwriters to prospective investors. Its
and the other investment dealers that public company
content is specified by securities acts and
Over-allotment option: An option form the underwriting syndicate. Their
regulations. Also referred to as the offering
allowing the underwriters to purchase
document. primary function is to sell securities to Further information
up to a specified number of additional the investing public (See also investment
shares from the company in the event Proxy: A shareholder’s written bankers or dealers). • Tax considerations
they sell more shares than agreed in the authorization for some other person to
represent that shareholder and vote the Underwriting agreement: An agreement • Markets and forms
underwriting agreement (also known as a
respective shares at a shareholders’ containing the details of the company’s of going public
green-shoe option).
meeting. arrangements with the underwriters,
Over-the-counter market: The market for including the type of underwriting (i.e., • Acronyms defined
securities not listed on a stock exchange. Red herring: The preliminary prospectus best efforts or firm commitment), the
that is distributed to the underwriters • Glossary
Pre-emptive rights: The right of a underwriters’ remuneration, the offering
for further distribution to prospective price and the number of shares.
shareholder to maintain his or her
proportionate share of ownership in a
investors. It includes a narrative in red
Underwriting syndicate: The group
Appendices
ink on the cover (a red herring) stating
company by subscribing to a proportionate of underwriters or investment dealers
that the prospectus is not yet final (See
share of new securities being issued by assembled by the lead underwriters to
preliminary prospectus).
the company. sell securities.
Registrar and transfer agent: An agent
Preliminary prospectus: The preliminary Value chain: The sequence of direct
for the company that issues the securities
prospectus is filed with the securities activities that add value to the customer. In a
sold to investors, maintains current
commissions and provided by the manufacturing company, these may include
records of all shareholders and their
underwriters to prospective investors. design, purchasing, fabrication/assembly,
addresses, and maintains the records
It does not disclose the offering price, distribution, marketing and sales functions.
for subsequent transfers of securities
underwriters’ commission or net
upon resale. Vesting: The act of becoming fully entitled
proceeds. Also known as a red herring.
to the stock option grant.
Road show: A series of meetings in
Price-earnings ratio: The price of a
different locations allowing members of Working group: The parties involved
share of common stock divided by
the underwriting syndicate and certain in preparing the prospectus, including
earnings per share.
prospective investors to ask company’s company management, the company’s
Primary offering: An offering by management questions relating to the lawyers, auditors, underwriters and the
a company of previously unissued company and the offering. underwriters’ lawyers.
kpmg.ca/ipo
Contents
Introduction
Deciding whether
to go public
Executing your IPO
Continuing as a
public company
Further information
Appendices
• Appendix 1: Contents of
a prospectus
• Appendix 2: Selecting
and working with the
underwriters
• Appendix 3 : Stock
APPENDICES
compensation plans
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APPENDIX 1: CONTENTS
OF A PROSPECTUS
Contents
This appendix provides a brief description • The securities to be distributed, • Nature and result of any material
of the main contents of a prospectus. including the offering price and reorganization of the company
National Instrument 41-101, General
expected net proceeds
• Any patents, trademarks, licenses,
Introduction
Prospectus Requirements, includes • Use of proceeds franchises and concessions held
Form 41-101F1, which specifies the • Risk factors • Any significant dependence on a Deciding whether
contents of a prospectus filed at the • Summary of financial information product or service to go public
time of an initial public offering. (This particular requirement cannot be • Changes in the business during the
satisfied by a cross-reference to another
Cover page current financial year. Preparing to go public
section of the prospectus).
Shows key facts about the offering, Refer to paragraph 5.3 to 5.5 of 41-101F1
including the name of the company; the Corporate Structure for specific requirements when the issuer Executing your IPO
title, amount and a brief discussion of has asset-backed securities outstanding,
Provides the full corporate name, location
the securities offered; a table showing mineral projects, and oil and gas
the offering price, underwriting discounts
of its principal or lead and registered
operations.
Continuing as a
offices, details of its incorporation and
and commissions and proceeds to the
a description of the inter-corporate
public company
company; over-allotment options and the Use of proceeds
relationships among the company and its
date of the prospectus. Discloses the estimated net proceeds
subsidiaries. Further information
to be realized from the offering and the
Risk factors and the market for the
Describe the business business objectives the issues expects to
company’s securities (e.g., conditional Appendices
accomplish using the net proceeds as well
approval for stock exchange listing) or the Provides investors with insight into the
as significant events that must occur for
fact that no market exists, are disclosed. company’s business operations. Items • Appendix 1: Contents of
the business objectives to be achieved in
The names of the underwriters involved addressed in this section generally a prospectus
the specified time period defined. If any
with the offering is also disclosed. include:
provisions or arrangements are made for • Appendix 2: Selecting
Table of contents • The business carried on and intended to a portion of the net proceeds to be held and working with the
be carried on by the company in trust or to be subject to the fulfillment underwriters
Usually included in the inside cover page
of the document. • General development of the company of any conditions, the details of these
and the business during the last three circumstances are disclosed. Particular • Appendix 3 : Stock
Summary of Prospectus years; for venture issuers two years will disclosures are required if more than compensation plans
Provides an overview of the information be required 10 percent of the net proceeds are to be
contained in the prospectus, both used to acquire assets, or to reduce or
• Principal products or services and their retire indebtedness incurred within the
favourable and adverse, that in the opinion
markets two preceding years.
of the company is most likely to influence
an investor’s decision to purchase the • All material acquisitions and dispositions
security. The summary should include a by the company during the past three Dividends or distributions
description of: years and the impact of these on the Discloses the cash dividends or
operating results and financial position distributions declared for each class of
• The principal business of the company
of the company; for venture issuers two securities for the current and for each
and its subsidiaries
years will be required of the three most recently completed
financial years. A company is also required
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to disclose any restrictions that could implications and often is accompanied Escrowed securities and securities
prevent it from paying dividends or by the auditors’ commentary or lawyers’ subject to contractual restriction
distributions, as well as its dividend opinion with respect to the tax implications. on transfer
or distribution policy and any intended When shares are offered, the description
Outlines the type and number of each
change in such policy. of the security, dividend and voting rights,
class of voting securities of the company
and liquidation and conversion rights are
MD&A held in escrow under an escrow
disclosed. The terms of any warrants or
MD&A is supplemental analysis and agreement or that are subject to a
rights offered are also described. When
explanation that accompanies, but does
not form part of the financial statements.
debt is offered, the interest rate, maturity,
security, redemption, sinking fund and
contractual restriction on transfer and the
percentage that number represents of Contents
MD&A provides management with the the outstanding securities of that class.
conversion rights are described.
opportunity to explain in narrative form The company should also disclose the
the company’s current financial situation Consolidated capitalization name of the depository, if applicable.
When conditions governing the release Introduction
and future prospects. MD&A is intended Discloses the company loan and share
to allow investors to look at the company of the shares from escrow exist, the
capital structure, both before and after
through the eyes of management by the offering since the date of the issuers
conditions are detailed. Deciding whether
providing both a historical and prospective financial statements for its most recently Principal shareholders and selling to go public
analysis of the business of the company. completed financial period included in the security holders
prospectus. The pro forma capital structure
The securities legislation requirements Discloses the identity of the holder, Preparing to go public
for the information to be reported in the after the offering is adjusted to reflect the number of securities held, and the
annual and interim MD&A are extensive. the securities issued and the intended percentages of each class of securities
use of the proceeds (e.g., to reduce for each principal and selling shareholder,
Executing your IPO
Management will need to devote a
considerable amount of time and effort long-term debt). if any. A principal shareholder is a person
to comply with the requirements, as the or company that is the direct or indirect Continuing as a
Options to purchase securities
MD&A may not have been prepared by beneficial owner of or exercises control public company
the company prior to going public. Describes the type and number of or direction over more than 10 percent of
securities, the purchase price and, any class or series of voting securities of
Earnings coverage ratios when ascertainable, the market value of the company.
Further information
Discloses earnings coverage ratios for options to purchase securities from the
distributions of preferred shares and for company or any of its subsidiaries. The Directors and executive officers Appendices
distributions of debt securities having a prospectus should also provide detail Lists the names and municipality of
term to maturity in excess of one year. on by whom the securities are held residence of each director and executive • Appendix 1: Contents of
Cash flow coverage disclosure may be or proposed to be held and which are officer, and indicates their respective a prospectus
used only as a supplement to earnings outstanding as of a date within 30 days positions and offices with the company
prior to the date of the preliminary and their principal occupations within • Appendix 2: Selecting
coverage, and only if the method of
prospectus. the five preceding years. This section and working with the
calculation is fully disclosed. Disclose
also requires a disclosure of existing or underwriters
the dollar amount of the numerator
required to achieve a ratio of one-to-one, Prior sales potential conflicts of interest between
if the earnings coverage ratio is less that If you have issued securities of the same the company or a subsidiary, and a
compensation plans
one-to-one. class within the last 12 months, the director or officer of the company or
prospectus should disclose details about a subsidiary. Board committees are
Details of the offering these issues, including the number, price disclosed and the members of each
Describes the securities being offered, range, volumes traded, etc. committee are identified.
including a description of any income tax
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Executive compensation Plan of distribution Promoters

Includes a Statement of Executive Describes the underwriting and plan of Discloses the names and ownership
Compensation that contains significant distribution for the securities offered, interests; the nature, ownership and amount
disclosures regarding compensation, including the names of the underwriters in of tangible assets (e.g., real property) or
including aggregate remuneration paid the group, the nature of the underwriters’ intangible relationships (e.g., contract for
or payable with respect to office or obligation (e.g., firm commitment or service) of promoters within the last two
employment, pension benefits and the best efforts) and the date by which the years immediately preceding the date of
Contents
aggregate of other forms of remuneration. underwriters will purchase the securities. the prospectus. Additional disclosures are
The prospectus must describe any When the distribution is a best-efforts required if the promoter has been a director,
intention to make material changes to offering, disclosure is also made of chief executive officer or chief financial
that compensation. any minimum amount required to be officer in the previous 10 years of the
raised, the maximum amount that can prospectus date.
Indebtedness of directors and executive be expected to be raised, and the date Introduction
officers until which the offering will remain open. Legal proceedings and regulatory
Provides extensive disclosure of the types, Additional disclosures may be required actions
amounts and terms of indebtedness of in certain circumstances when the Describes any material legal proceedings,
Deciding whether
each individual who at any time during distribution is to fund a new business. whether pending or contemplated as well to go public
the most recently completed financial as other than ordinary routine litigation
year was a director or executive officer Risk factors incidental to the company. Disclosure is Preparing to go public
of the company. There are some exceptions Highlights factors material to the also required of any penalties or sanctions
available for “routine” indebtedness. company that a reasonable investor imposed by a court relating to securities
would consider relevant to an investment legislation or by a securities regulatory
Executing your IPO
Audit committees and corporate
in the securities distributed, such as authority and any settlement agreements
governance
cash flow and liquidity problems, if entered into with such court or regulatory Continuing as a
Discloses information about the any; experience of management; the
company’s audit committee and its
authority. public company
general risks inherent in the business;
corporate governance practices. environmental and health risks; Interest of management and others in
Regarding the audit committee, a reliance on key personnel; the arbitrary material transactions Further information
company is required to disclose establishment of the offering price; Describes and states the approximate
the audit committee’s charter and
composition, fees paid to external
regulatory constraints; economic or amount of any material interest of the Appendices
political conditions; absence of operating directors, executive officers, principal
auditors, pre-approval policies history or operating profit; and any other • Appendix 1: Contents of
shareholders, and their associates or
and applicable oversight disclosures matter that in the opinion of the company a prospectus
affiliates in any transaction within the
among other things. or selling security holder would be likely preceding three years, or any proposed
Regarding corporate governance, the to influence the investor’s decision to transaction that has materially affected
company is required to disclose the purchase the securities. The risks should
or will materially affect the company or
identity of both independent and non- be disclosed in order of their seriousness.
underwriters
any subsidiary.
independent directors, the mandate of the Information is also provided in situations • Appendix 3 : Stock
board, position descriptions, process for in which the purchaser of the offered Auditors, transfer agents, and registrars
compensation plans
determining compensation and nomination securities may become liable to make Provides the names and addresses of the
of directors, other committees, and additional payments beyond the price company’s auditors, transfer agents and
assessment process among other things. of the security. registrars.
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Material contracts some fashion. Such information may Unaudited interim financial
Describes briefly the nature, parties, include, but is not limited to: statements
dates, and consideration of all material Includes unaudited interim financial
• Previously audited financial statements
contracts entered into within two years statements for the most recently
and financial statements to be, or in the
of the date of the prospectus. These completed interim period ended more
process of being, audited
contracts must also be made available than 45 days before the date of the
• Unaudited interim financial statements prospectus (60 days for issuers listed
for public inspection.
• Audited annual and unaudited on the venture exchange). An interim
Experts interim financial statements for
an acquired company
period is defined as a completed three,
six, nine-month period that commenced
Contents
Disclose each person or company who
is named as having prepared or certified • Pro forma financial statements. immediately following the end of the most
a report, valuation, statement or opinion recently completed financial year.
Previously audited financial
in the offering document, in addition
statements Financial statements of an acquired Introduction
state the profession or business which company
Audited financial statements complete with
gives authority to the report, valuation,
their notes which comply with IFRS, for a If the company is proposing to make a Deciding whether
statement or opinion. significant probable acquisition or has
prescribed number of years are typically to go public
required in a long-form prospectus. made a significant acquisition during the
Other material facts current or any of the past three completed
Discloses any other material facts relating Preparation of these financial statements
fiscal years, the company may need to Preparing to go public
to the offered securities, not disclosed often leads to certain compilation,
include prescribed financial statements
elsewhere, that are necessary in order accounting, and auditing issues, such as:
of the acquired company. Executing your IPO
for the prospectus to contain full, true • The need to adjust financial statements
and plain disclosure. Pro forma financial statements
to comply with standards for
public companies (e.g., segmented
To assist investors in understanding the Continuing as a
Rights of withdrawal and rescission nature and effect of proposed transactions public company
information, tax-rate reconciliation,
Discloses the statutory rights of contemplated in the prospectus, pro forma
earnings per share)
withdrawal exercisable within two financial statements may be required or
• The treatment of changes in accounting desirable. In such cases, actual historical Further information
business days after receipt or deemed
policies and corrections of prior-period cost financial statements are adjusted
receipt of a prospectus and the applicable
errors that arose during the period
statutory remedies for rescission or to reflect the proposed transactions. Pro Appendices
covered by the statements and that forma financial information may be used
damages in the event the prospectus
have retroactive impact to reflect significant business acquisitions • Appendix 1: Contents of
contains a misrepresentation.
• The treatment of operations and dispositions, reorganizations, unusual a prospectus
List of Exemptions from Instrument discontinued during the period covered asset exchanges and debt restructurings.
by the financial statements • Appendix 2: Selecting
List all exemption from the provisions Future-oriented financial information and working with the
of the Instrument (NI-41-101) and the • The preparation of notes to the Future-oriented financial information is not underwriters
related forms, granted to the issuer financial statements, requiring careful required to be included in a prospectus
applicable to the distribution or the consideration of previous disclosures or offering document. The OSC will allow • Appendix 3 : Stock
prospectus. and events subsequent to the previous forecasts or, in some cases, projections compensation plans
reporting dates to be included provided they meet the
Financial statements • The need to evaluate accounting stringent requirements as set out by
Securities legislation prescribes an policies previously followed to the securities regulators. If you intend
array of financial information to be determine if any will result in difficulties to include FOFI in your prospectus,
disclosed in a prospectus on which the in obtaining clearance from the various consult your legal counsel to gain an
auditors may be required to report in securities commissions. understanding of the requirements.
kpmg.ca/ipo
APPENDIX 2: SELECTING AND

WORKING WITH THE UNDERWRITERS
Contents
Selecting the underwriters is completed (except for any expense may not be required, your underwriters
reimbursement that a company may have should have experience in the industry as
Be prepared agreed to), they will clearly not want to a basis for pricing your stock, selecting Introduction
Selecting the lead underwriters best commit significant time and resources if an appropriate underwriting syndicate
suited to your situation should begin with they are not reasonably confident that the and providing credibility in the eyes of
Deciding whether
an evaluation of your company and its offering will be successfully completed. investors and industry analysts.
future plans. Consider the current and
to go public
Before approaching underwriters, it is Distribution capability
potential market for your product. If your
advisable to develop a formal business Depending on the size of your offering, the
geographic coverage is national, you may
plan that describes your company, its number of geographic markets in which
wish to retain a national firm – one with
products, past performance and future you wish to offer the securities and the
strong representation across Canada – to
plans. This plan will serve as both a brief type of investor you hope to reach (retail Executing your IPO
capitalize on and enhance your corporate
introduction to your company and a sales and/or institutional), the lead underwriters
image. However, if your product sales
tool when approaching the underwriters. may need to establish an underwriting Continuing as a
market and desired share distribution are
The quality of your business plan will play syndicate consisting of a number of other
regional, a local firm – one that is strong in
an important role in the underwriters’ underwriting firms to accomplish your
public company
your particular market area – may be able
initial assessment of your company and its objectives.
to better serve your needs.
prospects. Further information
A broad distribution will not only provide
If your industry is specialized, you may
Evaluating the underwriters a larger market for your shares but also
want to seek underwriters that focus
help to avoid concentration of major Appendices
on your industry. If you plan to diversify, The next step is to develop a list of
through acquisition or internally, consider blocks of shares in the hands of one or
underwriters that appear to meet the • Appendix 1: Contents of
using an investment dealer that also has a few persons. Your underwriters should
criteria that has been set (e.g., national a prospectus
experience in that new industry. You can have appropriate experience, a broad
or regional, industry specialization).
avoid repeating the selection process by client base and a retail or institutional • Appendix 2: Selecting
The financial advisers, auditors,
choosing underwriters that can fill both investor orientation that is consistent and working with the
lawyers and bankers can assist you in
your current and anticipated needs, in the with your needs. underwriters
identifying appropriate underwriters and
hope of building a long-term professional in performing a preliminary evaluation Aftermarket performance
relationship. • Appendix 3 : Stock
of them based on the following: An important part of the underwriters’ compensation plans
In many respects, selection is a two-way service is to provide aftermarket
Reputation
process. Not all underwriters may be support for your shares. This support is
The reputation of the lead underwriters is a
interested in your offering. Some do accomplished by the lead underwriters
significant factor considered by prospective
not handle IPOs or are interested only and some or all of the underwriting
investors. A well-respected underwriting
in offerings above certain minimum syndicate acting as market makers in your
firm can also form a strong underwriting
amounts. Others may decline on the shares – offering to buy or sell shares from
syndicate to sell your securities.
basis of their assessment of your the public or in the inter- dealer market,
company’s or industry’s future prospects. Experience and generally sustaining the financial
The underwriters’ reputation depends The underwriters should have experience community’s interest in your shares
largely on the success of the offerings in underwriting IPOs and in the type of through continuing timely dissemination
they underwrite. Because underwriters securities you intend to offer. Although of information about your company’s
are compensated only if the offering specialization in your particular industry progress.
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Research department • How well have the underwriters of your company and the offering. If the
A critical component of aftermarket maintained an interest in your company offering is attractive, underwriters will
interest is the underwriters’ continuing after the initial distribution? investigate your company and sell their
analysis and distribution of information • What happened to your share price services to you.
about your company and your industry. in the aftermarket? Also consider whether to retain more
Your underwriters’ research department than one lead underwriter. The use of
• How were the price movements related
should have the resources necessary co-leading underwriters, particularly for
to the appropriateness of the initial
to produce that information. It should
also have a reputation that commands
offering price? The level of aftermarket
support from the underwriters? And
larger offerings, can be advantageous with
respect to initial market coverage, research Contents
the respect of investors, particularly capabilities and aftermarket support.
other factors?
institutional investors and the financial
community in general. • How do the lead underwriters continue While holding discussions with these
to promote your company through underwriters and in selecting your lead Introduction
Continuing investment dealer regular research reports? underwriters from among those willing
services to handle your offering, remember that
The lead underwriters should have the
• Do the lead underwriters provide other
you will be working closely with the Deciding whether
financial advice?
resources to continue to provide your individuals assigned to your account. to go public
company with investment dealer services. • Would you use them to underwrite You must therefore also feel comfortable
These services include assistance in another offering? with them on a personal level.
obtaining additional capital as the need
• Should I know anything else about this
arises (whether from private or public
sources), advising on proposed mergers
underwriting firm? Working with your Executing your IPO
or acquisitions, and generally providing a
• Would you recommend the
underwriters?
underwriters
full range of investment dealer services.
You will work closely with your lead Continuing as a
The selection process underwriters in the preparatory stages public company
Do your homework
Once you have, formally or informally, of your offering, through the completion
Some underwriters may also be prepared
evaluated several underwriters based of the offering and often long into the
to help you contact principal shareholders
on these criteria, you can develop a future on subsequent public offerings,
Further information
in several of the companies they have
short list of underwriters to approach acquisitions, or mergers.
recently underwritten for an expression of
directly. Opinions vary as to how many
Underwriters examine a company and
Appendices
satisfaction with the underwriters’ service.
underwriters you should approach. Some
You may wish to ask such shareholders its prospects similar to the way that • Appendix 1: Contents of
advisers warn against shopping for
the following questions: an investor would, but much more a prospectus
underwriters and suggest approaching
intensively. Their examination begins with
• How satisfied were you with the only one firm at a time. Others advise
the business plan. The plan can spark their • Appendix 2: Selecting
underwriters in providing all the that some shopping – and the resulting
interest or lead to immediate rejection. and working with the
services they promised? competition – are to your advantage.
Accordingly, the plan should be well underwriters
• How well did the underwriters display The number of underwriters approached prepared and present your company in
an interest in and knowledge of your depends partly on the attractiveness of its best light. But here, and in all future • Appendix 3 : Stock
your offering. If the offering is larger and dealings with the underwriters, you must compensation plans
industry and company?
likely to be attractive to the larger firms, scrupulously avoid any misrepresentation.
• Were there any last-minute surprises or
you may decide to approach three or four If the underwriters find they have been
demands from the underwriters?
underwriters. It is important, however, to misled, they will abort the offering –
• How satisfied are you with the breadth inform all prospective underwriters that leaving you with delays, lost time and
of the underwriting syndicate and you are approaching other underwriters a tarnished reputation that few other
placement of your shares? and to provide details about all aspects underwriters will accept.
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Company assessments The following common factors should be shares that must be sold for the offering
If the underwriters decide to investigate considered in negotiating terms with your to be completed.
further, they will examine various aspects underwriters.
Offering size and price
of your company. Depending on your Letter of intent Underwriters generally will not, and
company, they will conduct some of the The final underwriting agreement is cannot, guarantee an offering price and
following assessments: usually not signed until the morning of the total proceeds in advance. The offering
• Interview key executives to assess your day the final prospectus is filed and the price is finalized only very shortly before
management strength distribution begins. Many underwriters
will prepare a letter of intent, which is
the final prospectus is filed, as it must
respond to current market conditions.
Contents
• Review your financial statements
signed by the lead underwriters and
in depth, challenge your accounting If the underwriters are unwilling to predict
company management. The letter of
policies and consider your financial an offering price, as many underwriters
intent often outlines the agreed-upon
projections
underwriters’ commission, estimated
are, they will generally estimate a range Introduction
for the offering price based on existing
• Evaluate your company and products offering price, and other negotiated
market conditions at the time of their
in relation to your industry terms. It does not generally create legal
estimate. While such estimates are Deciding whether
obligation for either your company or the
• Contact your suppliers and customers in no way binding and will change in to go public
underwriters to proceed with the offering.
response to changing market conditions
• Assess your market share, technological The letter may, however, create a binding
up to the date that distribution of the Preparing to go public
advantages or disadvantages, and obligation for the company to pay certain
offering begins, they reduce the chance
market growth potential, as well as expenses incurred even if the offering is
of misunderstandings and last-minute
consider the intended use of the not completed. Executing your IPO
surprises.
proceeds of the offering
Type of underwriting
• Ask your auditors to apply specified Distribution
There are two common types of
The size of your offering, the number of
Continuing as a
procedures to selected items of a
financial nature in your prospectus.
underwriting agreements: firm
geographic markets in which you wish public company
commitment and best efforts.
to offer your securities and the type of
In short, they will perform a thorough
evaluation of your company to decide
In a firm-commitment underwriting investor you hope to reach (individual Further information
agreement, the underwriters agree to and/or institutional) all determine the ideal
whether to handle your offering and, if purchase all the shares in the offering and size and composition of your underwriting
they are then selected, to help price and then resell them to the public. Any shares syndicate. Appendices
promote it. that are not sold to the public are paid for
Aftermarket support • Appendix 1: Contents of
and held by the underwriters for their own
Negotiating terms An important aspect of the underwriter’s a prospectus
account. This agreement provides you
After agreeing in principle to proceed service is to provide aftermarket support
with the most assurance of raising the • Appendix 2: Selecting
with the offering, you will discuss and for your shares to keep the market active,
required funds. and working with the
negotiate in more detail the terms and to add price stability and to encourage
In a best-efforts underwriting agreement, underwriters
characteristics of your offering. While cost share-price appreciation. Strong
is not the most important consideration the underwriters simply agree to use performance by your underwriters in this • Appendix 3 : Stock
in selecting your lead underwriters, their best efforts to sell the shares on regard will contribute to easier future compensation plans
the underwriters’ compensation is behalf of your company. Some best-efforts access to the capital markets. Reach an
a significant amount. Compensation arrangements are “all or nothing,” in which understanding with your underwriters
arrangements should be clearly agreed case the offering is withdrawn if all shares as to the nature and extent of post-IPO
upon prior to commencing with the cannot be sold within a specified period. support that they will provide.
offering. Others set a lower minimum number of
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Underwriting commission to purchase up to a specified number of Right of first refusal

The underwriting commission, or discount, additional shares from the company in the Some underwriters will request a right of
is generally the single largest expense event the underwriters sell more shares first refusal on any future underwritings
in a public offering. Typically, for IPOs, than are agreed to in the underwriting by your company. While such a request
the rate of commission ranges from six agreement. The prospectus must disclose may seem innocuous, it can have adverse
to 10 percent of the size of the offering. existence of an over-allotment option (also consequences with respect to future
Debt offerings generally result in lower known as a green-shoe option, named offerings. Other underwriters will be
rates of commission than do common after the Green Shoe Manufacturing
Contents
reluctant to invest the time and resources
stock offerings. In determining the rate of Company, which introduced this necessary to evaluate a proposed offering
commission, underwriters consider factors technique). if they are aware that they may be pre-
such as size of the offering, competitive empted by another underwriter’s right of
rates for offerings of similar size, the type Reimbursement of underwriters’ first refusal. If a right of first refusal cannot
of underwriting (e.g., firm commitment or expenses be avoided, consider negotiating either a Introduction
best efforts) and the market for the shares. It is not uncommon, particularly for time limit, after which the right expires or
All of these factors determine how much smaller offerings, for the lead underwriters a provision that the right expires any time
effort the underwriters must invest to sell to request reimbursement for some Deciding whether
it is available but not exercised.
your shares. There may also be a trade-off of their expenses incurred for your to go public
between the rate of commission and other offering. For example, often the company Termination clause
forms of compensation, particularly for reimburses legal fees incurred by the The underwriting agreement typically Preparing to go public
smaller offerings. underwriters. Legal fees will increase includes a termination clause, whereby
with the number of provinces in which each underwriter has the option to
Underwriters’ warrants
you offer your shares, as a result of terminate the agreement without any
Executing your IPO
Some underwriters will negotiate for stock
each province’s filing requirements. liability on the part of that underwriter.
warrants in addition to their commission.
Such warrants are more common when
You may therefore wish to discuss the Certain conditions under which Continuing as a
dealing with smaller underwriters and
area of geographic distribution in the the agreements can be terminated public company
negotiation stage, before the underwriting include adverse changes in market
smaller offerings.
syndicate is established by your lead conditions, material changes to the
Over-allotment option underwriters. You may also be able to business of the company and changes
Further information
Often the underwriters are also given an negotiate limits to the reimbursement to laws and regulations of significant
over-allotment option, which allows them of underwriters’ expenses. consequence. Appendices
a prospectus
underwriters
compensation plans
kpmg.ca/ipo
APPENDIX 3: STOCK
COMPENSATION PLANS
Contents
Stock option plans Share purchase plans
This plan gives employees the right, but Under this plan, the employee sets aside after-tax funds in order to purchase stock of Introduction
not the obligation, to purchase shares the company. The employer may or may not match the contribution, thereby enabling
at a pre-determined (exercise or strike) employees to obtain the stock at a discount and making the plan more attractive to
price. The employee does not have to employees. However, the upfront money required to be contributed by the employee Deciding whether
pay money up front; the employee has in order to purchase the shares may make the plan less attractive. to go public
to pay only when the option is exercised.
Any discount provided to employees (either through employer contributions or
The option can be designed to include
otherwise) must be reported as a taxable benefit to the employee at the time the Preparing to go public
vesting requirements to assist in retaining
shares are purchased. Employers can claim a deduction for contributions provided.
employees. However, stock options
Any employer contributions should be reported as compensation expense by the
provide limited risk to the employees as Executing your IPO
company in the year the shares are purchased.
they participate only in the upside and not
in the downside. If the share price falls Continuing as a
below the exercise price, the value of this Phantom stock plans public company
plan as a motivational tool may be limited. Phantom stock plans are plans in which employees receive shares of a company that,
For a public company, this plan generally while not being actual shares, mirror the movements of the actual share price of the
results in a taxable benefit to employees company. Any resulting profits are then paid out to the employees under pre-determined
Further information
upon exercise. In general, the taxable terms and conditions. The payout may be in the form of cash.
benefit is equal to the value of the The use of this plan avoids the dilution of ownership interest, as actual shares are
Appendices
shares in excess of the exercise price. generally not issued under this plan. The employees must report as a taxable benefit any
If certain conditions are met, the benefit • Appendix 1: Contents of
amount received through such a plan in the year of receipt, and the employer may claim a prospectus
is reduced by 50 percent. Under limited the same as a deduction.
circumstances, the benefit can be
The accounting for phantom shares will vary depending upon the specific provisions of • Appendix 2: Selecting
deferred to the date of sale up to an
the plan. Generally, the company is required to record the obligation as a liability and
amount of $100,000. Any loss realized on underwriters
a subsequent disposition of the shares mark the liability to market until cancelled, forfeited, or exercised.
is typically a capital loss that cannot be • Appendix 3 : Stock
used to offset the employment income Stock appreciation rights compensation plans
reported upon exercise. The employer
generally cannot claim a deduction for the Stock appreciation rights are a modified form of phantom stock in which employees are
benefit that is reported by the employees. provided a cash payout in the amount of the appreciation of the price of the underlying
However, if the employee has the stock. The payout may also be given in the form of shares as opposed to actual cash.
option to receive cash in lieu of shares, This plan requires no initial cash outlay by the employee, and the employer can avoid any
the employer could generally obtain a dilution of ownership by paying out cash (actual shares need not be issued under such a
deduction. plan). As no shares are issued, the employee cannot vote or otherwise participate in the
decision making of the company.
The fair value of the options, determined
using an option pricing model such as The amount received by the employee is treated as an employment benefit to be
the Black-Scholes model, should be reported as income in the year the cash or shares are received. The employer may claim
recognized as compensation expense by a deduction for the amount paid to the employee, but not if shares are issued. The value
the company over the vesting period of of the vested stock appreciation rights must be recognized as compensation expense by
the option. the company in the year of vesting.
kpmg.ca/ipo
Restricted stock plan

A restricted stock plan is a plan in which stock is granted to
employees at a discount or at a nominal or no-charge amount, but
is subject to restrictions such as meeting certain performance
goals or vesting conditions. These restrictions can be structured
in various ways to align the company’s objectives with those of
the employees (e.g., creating long-term goals that would help
retain employees). From a shareholder’s perspective, this plan
can result in a dilution of ownership interests, as actual shares
Contents
are issued. The uncertainty surrounding the restriction may
also make it less attractive to employees. Therefore, careful
consideration should be given to the design and nature of the
Introduction
restriction, to ensure it is aligned with matters in which the
employee has control.
The employee must include in employment income any benefit
Deciding whether
received under this plan. In general, the benefit is equal to to go public
the value of the shares in excess of any amount paid by the
employee. Preparing to go public
Executing your IPO
Continuing as a
public company
Further information
Appendices
a prospectus
underwriters
compensation plans
kpmg.ca/ipo
Contents
Introduction
Deciding whether
to go public
Executing your IPO
Continuing as a
public company
Further information
Appendices
KPMG’S IPO SERVICES PRACTICE

For more information on the matters discussed in this publication, please contact your KPMG contact or
Salma Salman, National IPO Practice Leader. We welcome the opportunity to meet with you to discuss
in further detail any aspect of the IPO process as it relates to your organization.
Salma Salman
National IPO Practice Leader
416-777-8285
ssalman@kpmg.ca
kpmg.ca/ipo
The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we
endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will
continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the
particular situation.
© 2015 KPMG LLP, a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG
International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. 9670
The KPMG name, logo and “cutting through complexity” are registered trademarks or trademarks of KPMG International.
kpmg.ca/ipo

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A Guide to

Executing your IPO

T aking your company public is an the beginning of a new life in the

L ike any other initiative that brings high long-term

That’s where KPMG comes in – we work with our

We have developed this publication to help you gain

We hope you find this book to be a useful source of

Executing your IPO

4 Assess the impact on your company and make the decision

1 Why go public? What are the advantages

Increased employee motivation and

“I think very few people truly appreciate how demanding

2 Is your company ready? 3 Are the markets ready

The key is to control the costs without sacrificing the

Keep in mind that this process and

Executing your IPO

2 Decide on the corporate and management structure Preparing to go public

4 Develop a timeline and framework for project management

5 Develop the offering

Infrastructure and retaining key employees. Refer to • Adopting a strategic-planning process

Recent Canadian Securities rules adopted require issuers to provide disclosure on

Audited financial statements Further information

2 Deciding on the corporate and management structure 3 Assembling the team:

Financial Advisers Various firms actively underwrite IPOs. Auditors

Tax Advisers When the investing public is buying or selling

Executing your IPO

3 Apply for a stock exchange listing Continuing as a

7 Finalize documents Preparing to go public

Execution phase: Regulatory review

• File preliminary prospectus in all jurisdictions, including the French version

Execution phase: Developing marketing materials

Execution phase: Marketing 6 Pricing

Execution phase: Finalize documents that must be executed in conjunction with

Executing your IPO

1 Transition 2 Implement strategic operating plans

Prompt Offering Prospectus system Social media continues to be a popular

Executing your IPO

• Markets and forms

• Markets and forms

MARKETS AND FORMS

Executing your IPO

Executive compensation Plan of distribution Promoters

APPENDIX 2: SELECTING AND

Underwriting commission to purchase up to a specified number of Right of first refusal

Restricted stock plan

Executing your IPO

Executing your IPO

KPMG’S IPO SERVICES PRACTICE

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