2023 GUIDE TO LISTING 2023 GUIDE TO LISTING 14 15 CONSIDERATIONS FOR U.S. COMPANIES TSX and TSXV offer U.S. companies various options for completing a successful listing. Depending on legal, tax, and business considerations, companies can select the route that is best suited for their size, goals, and timelines. It is important to understand these factors, as well as trading for your U.S. investors (see the “Access to U.S. Investors” section). This section seeks to provide a general overview of complex legal and tax matters related to a Canadian listing but is not intended to provide legal or tax advice. No legal, tax, or business decision should be based solely on this content. Please consult a legal and tax professional for more information. STRUCTURING CONSIDERATIONS One of the primary considerations and benefits for a U.S. company to list on TSX or TSXV is the potential to consider whether SEC registration is appropriate for you at this time. While U.S.- incorporated companies may choose to list directly on TSX or TSXV without changing their jurisdiction of incorporation, many decide to re-domicile in Canada or another non-U.S. jurisdiction prior to going public. The redomiciled company may qualify as a “Foreign Private Issuer” under the Rule 405 of the U.S. Securities Act of 1933, which provides certain exemptions and accommodations from the stricter reporting and compliance requirements applicable to U.S. domestic companies. The method chosen to list on TSX or TSXV can provide the company with a Canadian listed public entity. A qualifying transaction with a CPC or reverse merger with a listed shell company can result in your company being wholly owned by a Canadian company in order to achieve these objectives. While there are additional costs to a restructuring, it is important to weigh the pros of being an early-stage public company, including access to public venture capital, acquisition currency, and avoiding the control of private venture capital, with these additional costs. FOREIGN PRIVATE ISSUER VS. U.S. DOMESTIC ISSUER While many U.S. companies list on TSX or TSXV and remain U.S. incorporated, a reverse takeover into a foreign jurisdiction and qualifying as a Foreign Private Issuer requires careful consideration and can result in: • favorable exemptions available to foreign issuers under U.S. securities laws • single jurisdiction financial reporting • streamlined access to the Canadian short form and base shelf prospectus system. For a company to qualify as a Foreign Private Issuer, it must be incorporated outside the U.S. and have 50% or more of its voting stock held by non-U.S. residents. Even if a majority of a company’s voting stock is held by U.S. residents, a company may still qualify as a Foreign Private Issuer so long as none of the following exist: • the business is principally administered in the U.S., • a majority of the issuer’s assets are in the U.S., or • a majority of the directors or executive officers are U.S. citizens or residents. Companies that do not qualify as Foreign Private Issuers are treated as U.S. Domestic Issuers by the SEC and must comply with all U.S. corporate governance requirements regardless of which exchange they are listed on. Determination of U.S. Domestic Issuer versus Foreign Private Issuer should be discussed with your legal counsel early in the planning process. U.S. TAX CONSIDERATIONS A company, whether a U.S. Domestic Issuer or a Foreign Private Issuer, can generally raise capital by issuing shares or other securities without adverse tax consequences. However, a U.S. Domestic Issuer that elects to proceed with a reverse takeover into a foreign jurisdiction to become a Foreign Private Issuer may subject itself and its shareholders to significant and adverse U.S. federal income tax consequences. Generally, the exchange of a U.S. corporation’s securities for securities of a foreign corporation will be a taxable transaction for U.S. taxpayers. Some of these adverse U.S. tax consequences may be avoided if the foreign corporation is treated as a U.S. corporation for U.S. federal income tax purposes. Such tax restructuring should be thoughtfully considered by the corporation and its tax advisors.