C HAPTER 3: A NGEL T RANSACTIONS : I N S EARCH O F T HE I DEAL S TRUCTURE
no commercial operations and no assets other than cash, and then list it on the TSX Venture Exchange and raise a pool of capital through the CPC prospectus. The CPC management team then uses the funds to seek out an investment opportunity in a growing business. Once the CPC has completed its “qualifying transaction” and acquired an operating company which meets Exchange listing requirements, its shares continue trading as a regular listing on the Exchange.
There are two phases in establishing a Capital Pool Company.
Phase I: The Capital Pool Company
Creating the CPC • Three to six individuals with an appropriate combination of business and public company experience put up a total of between $100,000 and $500,000 in seed capital. • These founders incorporate a shell company – the CPC – and issue shares priced between $0.075 and $0.15 in exchange for seed capital. • The CPC and its advisors prepare a prospectus that outlines management’s intention to raise between $200,000 and $1,900,000 by selling CPC shares at up to prices between $0.15 and $0.30 and at least twice the issuance price of the seed shares, and to use the proceeds to identify and evaluate potential acquisitions. Selling the Shares • The CPC files the prospectus with the appropriate securities commission(s), and applies for listing on TSX Venture Exchange. • The sponsoring broker sells additional CPC shares to at least 200 arm’s length shareholders, each of whom buys at least 1000 shares. No one individual can purchase more than two per cent of the offering, and no one individual together with his or her associates or affiliates, can purchase more than four per cent of the offering. • Once the distribution has been completed and closed, the CPC is listed for trading on TSX Venture. Phase II: The Qualifying Transaction Announcing the Transaction • Within 18 months, the CPC identifies an appropriate business as its “qualifying transaction” and issues a news release to announce that it has entered an agreement in principle to acquire the business. • The CPC prepares a draft filing statement or for non-arm’s length transactions, an information circular providing prospectus level disclosure on the business that is to be acquired. • TSX Venture reviews the information and evaluates the business to ensure that it meets minimum listing requirements.
23
Powered by FlippingBook