C HAPTER 3: A NGEL T RANSACTIONS : I N S EARCH O F T HE I DEAL S TRUCTURE
In Canada, limited partnerships are regulated under provincial legislation.
According to the Ontario Limited Partnerships Act:
13. (1) Limited partner in control of business. – A limited partner is not liable as a general partner unless, in addition to exercising rights and powers as a limited partner, the limited partner takes part in the control of the business. (Source: Consolidated Ontario Business Corporations Act, Related Statutes and Regulations, 25 th Ed., 2002) A key issue is determining when a limited partner’s activities amount to participation in the management or operations of the company. This issue is further complicated if the limited partner is itself a corporation. If a limited partnership is to be used, qualified legal advice should be obtained. WHY ANGELS SHOULD CARE Limited partnerships offer angels several advantages. They allow angels to syndicate on bigger deals than they might otherwise have access to. They distribute the transaction costs, which in turn facilitates comprehensive due diligence and the negotiation of more favourable investment terms. The liability of the limited partner is limited to the size of its investment. And limited partnerships can be structured to allow for investments in single or multiple targets over time. For example, the limited partnership could make calls for additional funds from limited partners for subsequent investments. There are also disadvantages with limited partnerships, however, and angels should be aware of them. In particular, limited partners cannot be active in the management or operations of the limited partnership or the target company. This will be a negative feature for many angels who like to be actively involved in the businesses in which they invest. As well, establishing the limited partnership can add complication and expense. CAPITAL POOL COMPANY TM (CPC TM ) PROGRAM The Capital Pool Company (CPC) is a product of TSX Venture Exchange and originated with the Junior Capital Pool (JCP) program on the Alberta Stock Exchange in the 1980s. The CPC is an alternative route to the traditional initial public offering (IPO) or reverse take-over (RTO) for taking a company public. The CPC program is currently available to residents of British Columbia, Alberta, Saskatchewan, Manitoba, Ontario, and Quebec. This means that residents of these jurisdictions can participate in the initial public offering of the CPC. HOW THE CPC PROGRAM WORKS The CPC program introduces investors with financial market experience to entrepreneurs with development-stage companies requiring capital and public company management expertise. Unlike a traditional IPO, the CPC program enables seasoned directors to form a Capital Pool Company with
Capital Pool Company and CPC are trademarks of TSX Inc. and are under license by TSX Venture Exchange.
22
Powered by FlippingBook