|
Canadian Immigration Consultants |
|||||
 |
 |
 |
 |
 |
|
|
Home > Business > Articles |
|||||
|
Exit Strategies for Canadian Startup Business (Page 3)
DISCLAIMER - The information provided here is of a general nature and may not apply to any specific or particular situation. It is not to be considered as a legal advice nor presumed to be indefinitely up to date.
Expenses
Associated with a Public Offering
IPOs
are very expensive. A company may spend a significant amount of the
money raised on direct expenses, including underwriting discounts and
commissions, and other offering expenses, such as legal and accounting
fees, printing costs, transfer agent fees, stock exchange listing fees
and blue sky expenses. For example, legal fees can range from $150,000
to $450,000 depending on the size and complexity of the deal, accounting
fees can range from $100,000 to $250,000, printing costs for the various
registration documents can range from $75,000 to $175,000; and the
underwriters will typically receive a cash commission of five to ten
percent of the aggregate proceeds of the initial public offering. In an
initial public offering in the $10 million to $50 million range, the
total fees excluding the underwriter's commission range from $400,000 to
$1 million. The company also expends significant resources indirectly in
the form of management time dedicated to the offering and an overall
disruption of business. The company must be willing to incur the risk
that the offering will not be consummated, thereby requiring the company
to write-off preliminary expenses. Such expenses may be substantial,
depending on when the decision to terminate the offering is made.
Compliance
with OSC reporting requirements demands significant increases in
administrative costs to a company in the form of accounting system
upgrades, additional accounting staff, and increased fees for lawyers,
auditors and other outside advisors. Securities analysts and the
financial press will also make demands on management's time. In
addition, rather than devoting all its time to running the business of
the company, management will have to invest a considerable amount of
time in public relations and in informing analysts, investment bankers
and stockholders of recent developments.
Negative
Effects on Management Liability
is a special concern because management, directors and controlling
shareholders owe fiduciary duties to public shareholders. Public
shareholders may expect dividends, even though management believes it is
in the best interest of the company to reinvest earnings. Some argue
that the pressure of the marketplace may cause the company to adopt an
unsound business strategy, leading it to emphasize short-term profits to
maintain its shares price rather than focus on long-range planning and
investing that would lead to sustained growth. Also, in certain
instances, a company will no longer be able to act as quickly as it
could when it was a private company, because of the need to obtain
shareholders' approval and compliance with the proxy rules. Restrictions
on Management and Major Shareholders
Controlling
or major shareholders of a public company are restricted from selling
their shares freely. They may, however, sell their shares if they comply
with the volume, timing and manner-of-sale limitations as well as other
specifications under the Ontario Securities Act. Officers, directors and
10% stockholders will be subject to the short-swing profit provisions
which require certain insiders to return profits to the company from
certain purchases and sales of shares during any six-month period.
Insiders are also subject to civil and criminal liability if they trade
in company shares on the basis of material nonpublic information.
Finally, management must exercise extreme caution when communicating
with the investment community in order to ensure that no material
nonpublic information is disclosed. 4.
Logistics of IPO The
actual process of going public is complicated and time and money
consuming. Complete cooperation among the issuer, lawyers, underwriters,
and accountants is essential because the registration process demands
full disclosure of all material information. Ontario Securities Act
controls the registration process and divides the registration process
into three time periods: the pre-filing period, the waiting period, and
the post-effective period. Each has different rules concerning what can
and cannot be done during those periods. If any member of the team
violates the rules promulgated under Securities Act, the entire offering
process becomes jeopardized.
|
|||||
|
Home | Firm | Services | Representation | WorkVisas | ImmigrationVisas | Business | Employment | Govt | Sitemap | Archive | Contact | Disclaimer |
|||||