How to Acquire a Canadian Target Company
A purchase by a Canadian target company implies that a private equity sponsor buys securities or other assets of that company. When many sellers are involved, an association or court approved agreement plan may be used. A similar example of such transactions can be a merger in the United States
It is possible to acquire a Canadian target company through securities, assets, consolidation and other methods. Which method to choose depends on tax and inherited obligations, as well as on the parties' ability to defend their interests in the negotiation process.
You can order consultations on the process of buying and selling securities in Canada from the specialists of YB Case.
Public Companies
The key criterion to distinguish private and public companies is the presence or absence of a public offer of securities. Public companies are under more surveillance and disclosure requirements to them are much stricter compared to private companies.
YB Case services include corporate securities advisory services in Canada.
Challenges for Public Companies Management
Company management are required to disclose their interest in a merger and acquisition transaction in Canada.
In order to protect the board of directors from potential conflicts of interest when considering a proposed takeover, an independent committee of directors will be appointed. This is needed and often used, because decisions of such a committee will be perceived by the courts with due respect.
When a private equity transaction is a related party transaction, an independent valuation of the target company securities is usually carried out, and this process under close supervision of the independent committee.
If you plan to begin the process of mergers and acquisitions of a company in Canada, YB Case specialists will provide competent legal support. Our experts will also provide legal advice on corporate governance in Canada, as well as advice on the disclosure of information in Canada.
Tax issues
Most often, companies with unlimited liability are taxed as registered corporations in Canada. US buyers who wish to register a Canadian subsidiary with unlimited liability will be treated as unaccounted for US tax purposes. A US resident organization wishing to establish a company with unlimited liability in Canada must be aware of the limitations of the U.S.
Treaty regarding access to contractual benefits and the strategies approved by Canadian tax authorities to access such benefits. The general established 25% tax rate on sources of income will be acceptable with respect to certain dividends, interest, royalties and other payments to the extent that tax on sources of income is applied.
Financial indebtedness
Buying private equity in Canada implies traditional priority debt received from a domestic Canadian bank. The high-yield bond market in Canada has been slow for quite a long time mostly due to the lack of liquidity.
Foe a Canadian corporation, paying dividends or returning capital usually reduces the corresponding capital for capitalization purposes. Therefore, effective steps should be taken to prevent evasion, which may result in capitalization rules being applied to intermediary lending agreements.
Acquisition of controlling interests
The acquisition of a Canadian public company may be structured as a corporate transaction or acquisition offer. The purchase of a Canadian public company includes aspects of corporate and administrative law.
Corporate operations usually take the form of a plan of agreement, a mandatory association or other corporate reorganization and require the approval of shareholders.
The takeover bid is the Canadian equivalent of a US tender offer. The bidder must follow the established process when filling out the application.
If your goal is to enter the Canadian Securities Exchange, request advice on preparing a company to enter the Canadian securities market from YB Case specialists. The list of our services also includes preparing a prospectus for entering the IPO market in Canada, as well as consultations on the public offering of shares in Canada.
Canada M&A Franchised Transactions
The interest of private companies in franchise systems in Canada continues to grow. Franchising systems have gone far beyond traditional fast-food restaurants and currently cover businesses in many sectors in international jurisdictions. Franchised companies are increasingly becoming objects of private equity.
By the way, YB Case specialists provide consultations on the preparation of a franchise agreement in Canada, as well as provide legal support for a transaction on the implementation of a franchise agreement in Canada.
Trends
Despite the continued uncertainty with Canada’s economic relations with the United States, Canada is likely to remain an attractive place for equity investment in the coming years, particularly in the consumer goods, chemical, oil and gas, and growth sectors.
YB Case specialists will help you register a company in Canada, provide legal support in mergers and acquisitions of Canadian companies, as well as provide recommendations on investing in securities, advice on entering the IPO in Canada.
