Reverse Takeovers
As the Reverse Takeover (RTO) transaction approaches completion, there still remains several steps that must be finalized, including submitting the listing application to the exchange, holding special general meetings (SGMs) for shareholder approval, and completing post-closing tasks. This section outlines the key steps needed to complete the RTO and ensures that both the listed issuer and target company comply with the necessary requirements.
Stock Exchange Listing Application
- Submission of the Listing Application
The listed issuer’s legal counsel must submit a letter of application to the exchange, providing the necessary documents for listing the resulting issuer. These include formal application forms, draft listing statements, and summary documentation depending on the transaction type.
Action Items:
- Submit the listing application to the exchange, including:
- Letter applying to qualify for listing (Form 1A).
- Listing application (Form 1B).
- Draft listing statement (or Information Circular with table of concordance, in lieu of Form 2A).
- Draft listing summary (Form 2B).
- Address Exchange Comments and Pay Fees
Any comments from the exchange must be addressed promptly. Additionally, the final listing application fee should be paid at this stage.
Action Items:
- Respond to any exchange comments.
- Pay the remainder of the listing application fee.
- Final Listing Submission
Once the shareholders of both the listed issuer and target company have approved the transaction, the final listing statement must be submitted to the exchange, signed by key company officers.
Action Items:
- Submit the final listing statement, signed by the CEO, CFO, promoter, and any other directors of each company.
Before the Special General Meeting (SGM)
- Board Resolutions and Approval of Documents
Resolutions from the boards of both the listed issuer and target company are required to approve the Information Circular and financial documents.
Action Items:
- Pass board resolutions approving the Information Circular and financials for both the listed issuer and target company.
- File Information and Obtain Consents
The Information Circular, proxy forms, and related documentation must be filed on SEDAR. Consents from auditors and other experts, as well as material contracts, should also be filed.
Action Items:
- File the Information Circular, proxy form, and notice of meeting on SEDAR.
- File consents of auditors and any other experts.
- File material contracts (including the Definitive Agreement, if not yet filed).
- Issue Press Releases
A press release announcing the RTO and its details must be circulated to the exchange and IIROC for review and then disseminated to the public.
Action Items:
- Circulate the press release to the exchange and IIROC for comments.
- The listed issuer to issue the press release and file it on SEDAR.
Listed Issuer Special General Meeting (SGM)
- Final Steps Before the SGM
The transfer agent should complete the affidavit of mailing for the shareholders, and the listed issuer’s Chairman’s agenda should be prepared for the meeting.
Action Items:
- The transfer agent to complete the affidavit of mailing.
- Prepare the listed issuer’s Chairman’s agenda.
- Holding the SGM
The listed issuer’s shareholders will vote on the RTO transaction and related resolutions. A majority of the minority must approve the transaction for it to proceed.
Action Items:
- Hold the listed issuer’s SGM and obtain the required majority vote for approval.
- Prepare the listed issuer’s Scrutineer’s Report and have the meeting minutes signed by the Chair and Secretary.
Target Company Special General Meeting (SGM)
- Final Steps Before the SGM
Similarly, the target company must prepare for its SGM, including an affidavit of mailing and a Chairman’s agenda.
Action Items:
- The transfer agent to complete the affidavit of mailing.
- Prepare the target company’s Chairman’s agenda.
- Holding the SGM
The target company’s shareholders must also approve the transaction with a majority vote, similar to the process for the listed issuer.
Action Items:
- Hold the target company’s SGM and obtain the required majority vote for approval.
- Prepare the target company’s Scrutineer’s Report and have the meeting minutes signed by the Chair and Secretary.
Post-SGM Actions (Completed by Legal Counsel & Transfer Agent)
- Final Corporate Changes
After the SGM, certain corporate actions must be taken, including filing the Articles of Amendment for share consolidation, name change, and new share classes with the Registrar of Companies. A new CUSIP number must also be obtained.
Action Items:
- File the listed issuer’s Articles of Amendment for share consolidation, name change, and new class of shares.
- Apply for a new CUSIP number from CDS.
- Share Certificates and Letters of Transmittal
New share certificates must be ordered and mailed to the shareholders along with Letters of Transmittal. Additionally, the transfer agent must be informed of these changes.
Action Items:
- Order new share certificates and send Letters of Transmittal.
- Inform the transfer agent of these changes.
- Conditional Listing Approval
Obtain conditional approval from the exchange for the listing of the resulting issuer.
Action Items:
- Obtain conditional listing approval from the exchange.
- Treasury order for RTO voting shares.
Closing Deliveries of Target Company
- Officer’s Bring-Down Certificate
A bring-down certificate from the target company’s officers certifies that all representations and warranties are true as of closing, and all conditions have been met.
Action Items:
- Deliver the bring-down certificate from target company’s officers.
- Share Transfers and Escrow Agreements
The shares of the target company should be registered in the name of the listed issuer, and signed Escrow Agreements for all incoming principals must be delivered.
Action Items:
- Deliver signed Escrow Agreements and transfer target company shares to the listed issuer.
Closing Deliveries of Listed Issuer
- Filing with the Exchange
Minutes from the listed issuer’s shareholders meeting must be filed with the exchange as evidence of shareholder approval for the RTO. A conditional approval letter should also be obtained from the exchange.
Action Items:
- File meeting minutes with the exchange.
- Obtain the conditional approval letter from the exchange.
- Final Share Transfers
Ensure that the shares of the listed issuer are registered in the name of shareholders as outlined in the Definitive Agreement.
Action Items:
- Register listed issuer shares in the name of the shareholders as outlined in the Definitive Agreement.
Post-Closing Items
- Trading on the Exchange
Once all closing items are completed, arrange for the resulting issuer’s shares to begin trading on the exchange under the new name and stock symbol.
Action Items:
- Arrange for trading to commence as the resulting issuer under a new name and stock symbol.
- Obtain the Exchange Bulletin confirming final approval and date the issuer will come back to trade.
- Final Reporting
The resulting issuer must complete a series of post-closing reports, including a Certificate of Incumbency, insider reports, and Form D filings. Additionally, consider Blue Sky filings if applicable.
Action Items:
- Prepare the Certificate of Incumbency for the transfer agent.
- File insider reports, Form D (for US subscribers), and any necessary Blue Sky filings.
Congratulations! You’ve Successfully Taken Your Company Public!
One key advantage of completing a reverse takeover (RTO) is that, in most cases, you do not need to seek approval from securities regulators, as would be required for an IPO or direct listing. This is one of the factors that makes the RTO process so compelling, often allowing companies to go public faster and with fewer regulatory hurdles than other methods.
We hope this comprehensive guide has provided valuable insights into completing an RTO and taking your company public. While the process may seem daunting at first, with experience and a clear understanding of each step, it becomes much more manageable. The more familiar you become with the components of a successful transaction, the better positioned you’ll be for a smooth and efficient public listing.
If you need further assistance, have questions about any part of this guide, or are looking for expert help to take your company public, please don’t hesitate to reach out. We’re here to support you every step of the way.