Canada: Going Public

Last Updated: April 24 2012
Article by Faralee Chanin

Many businessmen think that going public will solve all of their financial problems and will produce an unlimited source of funds. What they may not realize is that once the decision is made to sell shares to the public, there will be implications for most of the company's operations. The following is a discussion of the advantages and disadvantages of going public, followed by a list of some of the factors which may be considered by underwriters in assessing whether a company is suitable for an initial public offering, an IPO.

Possible Advantages of Going Public

  1. Raising Capital: The main reason a company would consider going public is the ability to raise funds for working capital or for a particular acquisition or project. Once the company has completed an IPO, there will be other opportunities to raise funds in the public market.
  2. Providing Liquidity for Shareholders: Once the shares of the company are trading on a public market, the shareholders will hold shares that they can more readily sell or use as collateral for loans (subject to any hold periods or escrow requirements imposed by securities legislation or the stock exchange on which the company is listed).
  3. Ascertaining Value of Company: Once a company is public it is easier to ascertain the value of the company or its assets.
  4. Using Shares instead of Cash or Debt: Shares can be used by public companies as payment for acquisitions of other businesses. This can improve the debt/ equity ratio of the company.
  5. Providing Incentives to Employees: Share incentives offered to employees have more value as the shares are more liquid and can be valued more easily.
  6. Improving Prestige and Value of Company: As a result of press releases and public disclosure of financial statements and the trading of the shares, the company will become known by the investors, the press and the general public.

Possible Disadvantages of Going Public

  1. Continuous Disclosure Obligations: Once a company has sold shares to members of the public there is a loss of privacy. There are many disclosure requirements with respect to financial statements, issuances of shares, stock options, declaration of dividends and certain other information about what key individuals are paid. In addition, if there are certain material changes in the company, these must also be disclosed.
  2. Pressure for Short Term Performance: The short term performance of the company will become more important to the shareholders and the financial community, while management of the company would prefer to focus on long term results. Alternatively, the market may even be indifferent to the performance of the company and not react at all to significant changes in the operations of the company.
  3. Costs of Going Public: The costs of going public are significant and include fees paid to brokers, lawyers, accountants, transfer agents and the stock exchange. In addition there will be on-going requirements for continuous disclosure, as the company will need on-going legal, accounting and transfer agent services.
  4. Limitations on Officers: Management of the company must obtain the approval of the board of directors where there are certain major decisions to be made or where there is a conflict of interest. In addition, as required by corporate law or the stock exchange, certain matters must be decided by the shareholders.
  5. Potential Loss of Control: Overtime, the entrepreneur who started the company may lose control of the company as more investors buy shares of the company or as shares of the company are issued to others where an acquisition occurs.
  6. Increased Fiduciary Duties: Directors and officers of public companies are subject to increased fiduciary duties and responsibilities.

Assessing Chances of Success of IFO

The pros and cons listed above must be carefully considered before deciding to go public. Once the decision has been made to go public, it is necessary to find a broker or underwriter who will be prepared to sell the offering. As brokers are paid primarily on a commission, they are only compensated if the offering is a success. This means that they will only undertake issues where they are reasonably confident that the issue will sell. Management of the company should evaluate the above factors and the criteria set out below before making the very significant commitment of time and money to go public. The criteria set out below are only a partial list of items to be considered:

  1. History of Growth and Potential for Growth: A strong history of growth as well as potential for growth can be useful in a public offering. In particular, the potential for growth will be more important as in the prospectus, the company must set out the proposed use of the funds to be raised.
  2. Proprietary Advantages: Proprietary advantages such as patents, technology and trademarks can allow a corporation to protect the earning stream for a period of time.
  3. Strong Earnings: A past history of profits is beneficial in an initial public offering, however it is more important to have strong management and potential for future growth.
  4. Tangible Net Assets: It is helpful to have tangible assets. Other types of assets such as goodwill, deferred research and development costs will not be as valued by investors.
  5. Barriers to Entry: Often barriers to entry will be beneficial as competition is unable to enter markets with strong barriers to entry so a company may be able to maintain an existing level of profits.
  6. Management Team: The management team can be very important both to the initial public offering and to the ongoing success of the corporation. The board of directors of the corporation will also be required to have public company exposure.

There can be many other criteria that may be taken into account in determining the success of an initial public offering.


Field Atkinson Perraton has experience with several types of initial public offerings on different stock exchanges as well as assisting companies in fund raising through private placements in various provinces.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

In association with
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.