Creating a CPC and Listing it on an Exchange
A CPC Company (a non-operating/shell company) is incorporated for the purpose of raising seed capital with the intention to list on the TSX Ventures (TSX.V) as a CPC only.
A "CPC" is what we will refer to the shell company as in this article.
For the company to be accepted into the program, the CPC has many requirements covering number of founders, who the founders are, the founders background and experience, capital requirements, etc.
This stage also involves the filing and clearing of the prospectus, the completion of the IPO and listing of the CPC’s common shares on the TSX.V. The CPC will need to follow the typical steps of a traditional IPO to be listed on the exchange.
The Qualifying Transaction
Once the CPC has completed its IPO and becomes listed on the Exchange it will seek out Private Companies to merge with.
The CPC and the chosen private corporation will enter into a Letter of Intent (LOI) outlining the potential Qualifying Transaction; events that need to happen before the transaction can go through, usually covering capital needing to be raised, a stock split for the private company, etc. The Qualifying Transaction may be structured as any one or more of the following:
Amalgamation: The private company amalgamates (merges) with the CPC to form one corporation,
Share for share exchange: In a “three-cornered” amalgamation the CPC acquires all outstanding shares of the Private Company and upon the amalgamation, the shares of the NewCo are issued to all shareholders. Investors from the private company may receive shares at a 1:1 basis for shares in the newly amalgamated company, or any other basis based on the agreement outlined,
Plan of arrangement: Used for more complex structures of the private company, typically involves court and shareholder approval,
Asset purchase: The CPC purchases assets from a third party in exchange for cash or securities of the CPC, or a combination of the two.
The CPC must complete the Qualifying Transaction within 24 months after its date of listing, failure of which will result in its delisting.
Typically, a private placement financing is completed concurrently with the closing of the Qualifying Transaction. If the transaction is completed, the operating company will access the capital, shareholders, and expertise of the CPC and become a publicly traded company on the TSX.V.