Effective March 30, 2004, Canadian securities laws that determine how soon after an IPO or a private placement shareholders may resell their securities will be relaxed.
Previously, shareholders who bought securities in a private company had to wait at least one year after the company’s initial public offering before selling their securities. This one-year "seasoning period" will be eliminated in some circumstances: pre-IPO shareholders will be permitted to sell their securities as soon as the company clears a final IPO prospectus if (i) the shareholder does not control the company, (ii) the shareholder has held the securities for at least four months, and (iii) other conditions are met. Contractual commitments with underwriters and/or escrow rules may change the effect of this rule.
The old distinction between a four-month hold period for "qualifying issuers" and a twelve-month hold period for other public companies will be eliminated. Private placees who do not control a reporting issuer will generally be permitted to resell their shares after they have held them for four months.
The new relaxed rules will also apply after March 30, 2004 to IPOs and to private placements that have been or are completed before March 30, 2004. For example, if an individual purchased a non-controlling block of securities of a private company on January 1, 2002 and the company clears a final IPO prospectus on March 1, 2004, the individual will be able to resell his or her securities on March 30, 2004 (i.e., as soon as the new rules take effect). The old rule would have required the individual to hold the securities until March 1, 2005.
A precondition to the resale of securities privately placed on or after March 30, 2004 is that the share certificates contain a prescribed legend. For uncertificated securities, the legend can appear on an ownership statement instead of a certificate. Certificates issued before March 30, 2004 that contain old legends need not be reissued to take advantage of the new shorter hold period.
The content of this article does not constitute legal advice and should not be relied on in that way. Specific advice should be sought about your specific circumstances.
To print this article, all you need is to be registered on Mondaq.com.
Click to Login as an existing user or Register so you can print this article.
Under the Income Tax Act, the Employment Insurance Act, and the Excise Tax Act, a director of a corporation is jointly and severally liable for a corporation's failure to deduct and remit source deductions or GST.
Under the Income Tax Act, the Employment Insurance Act, the Canada Pension Plan Act and the Excise Tax Act, a director of a corporation is jointly and severally liable for a corporation's failure to deduct and remit source deductions.
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).