Canada: Special Purpose Acquisition Corporations

Last Updated: January 9 2009

Special Purpose Acquisition Corporations

The Toronto Stock Exchange (the "TSX") has adopted rules (the "SPAC Rules") permitting the listing of special purpose acquisition corporations ("SPACs") on the TSX. The SPAC Rules are contained in Part X of the TSX Company Manual.

This memorandum is intended to provide the reader with a brief overview of the SPAC Rules and is not intended to be a fulsome discussion thereof. For questions of a specific nature, please contact Fraser Milner Casgrain LLP as indicated below.

General Overview

The SPAC Rules provide a two-stage going public process wherein a publicly-traded shell company acquires an operating business. The process is comprised of an initial public offering ("IPO") of the SPAC's securities followed by the completion of a qualifying acquisition. In this regard, SPACs are similar to the TSX Venture Exchange's capital pool companies ("CPCs"). The SPAC Rules differ, though, from the CPC Rules and contain more stringent investor protections.

Although similar to reverse takeovers, SPACs generally offer a number of advantages to reverse takeovers, namely: (i) a clean public company shell; (ii) more experienced management teams; (iii) greater certainty of financing; and (iv) a readily available retail and institutional shareholder base.

The Initial Public Offering Stage

At the initial public offering stage, the SPAC Rules provide that a minimum of $30 million will need to be raised through the issuance of shares or units at a minimum price per security of $2. If units are issued, each unit may consist of one share and no more than two share purchase warrants.The $30 million threshold is intended to demonstrate market and management support and to provide sufficient funds for the SPAC to purchase an operating business that is likely to meet TSX listing requirements. Upon completion of the IPO, there must be at least one million freely trading securities held by a minimum of 300 public securityholders. Immediately upon listing on the TSX, the SPAC must place at least 90% of the IPO proceeds and 50% of the underwriters' commissions from the IPO in escrow with an escrow agent unrelated to the transaction, including trust companies, financial institutions and law firms.The portion of the underwriters' commission held in trust will only be released to the underwriters upon completion of a qualifying acquisition.

Prior to listing on the TSX, the founding securityholders must subscribe for units, shares or warrants of the SPAC. The TSX expects founding securityholders to hold an equity interest of between 10% and 20% in the SPAC post IPO. However, lower or higher levels may be acceptable depending on the financial and other contributions by the founders. The founders' securities may not be transferred prior to the completion of the SPAC's qualifying acquisition and subsequently may be subject to TSX escrow requirements. Additionally, the founders' securities cannot be voted on the qualifying acquisition and will not benefit from the conversion and liquidation distribution rights (each as described below).

Securities issued by SPACs must include conversion rights and a liquidation distribution feature. The conversion right is intended to permit securityholders (other than founders) who vote against a proposed qualifying acquisition to convert their securities into a pro rata portion of the IPO proceeds held in escrow in the event that the qualifying acquisition is completed. Upon exercise of the conversion right, securityholders are entitled to receive, for each security held, an amount equal to the aggregate IPO proceeds and deferred underwriter's commissions then held in escrow (net of any applicable taxes and expenses relating to the exercise of the conversion right) divided by the aggregate number of the SPAC's securities then outstanding.

The liquidation distribution feature is designed to return a pro rata portion of the proceeds held in escrow to securityholders if a qualifying acquisition is not completed within the prescribed time frame of 3 years following the IPO. Upon a liquidation distribution, all securityholders (other than founders) will receive, for each security held, an amount at least equal to the aggregate IPO proceeds and deferred underwriter's commissions then held in escrow (net of any applicable taxes and expenses relating to the liquidation distribution) divided by the aggregate number of the SPAC's securities then outstanding, less any securities held by the founders.

To provide additional protection to securityholders, the SPAC Rules prohibit a SPAC from obtaining any form of debt financing until the time of, or after completion of, its qualifying acquisition.

The Qualifying Acquisition Stage

A SPAC's qualifying acquisition must (i) occur within three years following the SPAC's IPO, (ii) be approved by a majority of the SPAC's securityholders (excluding founders), (iii) be approved by a majority of directors unrelated to the qualifying acquisition, and (iv) represent at least 80% of the value of the IPO proceeds.

In connection with the meeting at which securityholders vote on a qualifying acquisition, SPACs are required to prepare and distribute to securityholders an information circular containing prospectus level disclosure. In addition to the information circular, SPACs are required to prepare, file and obtain a receipt from securities regulators for a prospectus containing disclosure regarding the SPAC and the proposed acquisition. While the prospectus and information circular will be separate documents, they will contain substantially similar disclosure.
The issuer resulting from the qualifying acquisition must meet the TSX's listing requirements as set out in the TSX Company Manual. Finally, failure to obtain TSX approval of the listing of the SPAC prior to the completion of the qualifying acquisition will result in the delisting of the SPAC.

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.

Events from this Firm
16 Oct 2018, Other, Calgary, Canada

Dentons and SheEO are coming together for a morning of #radicalgenerosity on October 16, 2018. Meet Vicki Saunders, Founder of SheEO, and learn about how SheEO is changing the landscape for female entrepreneurs.

17 Oct 2018, Webinar, Toronto, Canada

Dentons and SheEO are coming together for an evening of #radicalgenerosity on October 17, 2018. Meet Vicki Saunders, Founder of SheEO, and learn about how SheEO is changing the landscape for female entrepreneurs.

17 Oct 2018, Webinar, Toronto, Canada

With the continued focus on Bill 148’s significant changes to the Employment Standards Act, Dentons’ Toronto Employment and Labour group is pleased to launch a new webinar series focusing on Bill 148.

In association with
Related Topics
Related Articles
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
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

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 or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq 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 of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions