In the days of old before anyone heard of a structured investment vehicle or Citibank trading below $1, going public and getting listed was likened to printing money, which in common parlance meant getting rich. In reality, the success rate of public companies is not unlike the success rate of restaurants. A lot start out with great ideas but too often  they fall short of their goal. So if going public is like printing money, what it really means is that a public company can use its shares as a type of currency, to pay for goods, services and exchange for cash.

In order to use your stock as currency, the government has created a rule book four inches thick that sets the ground rules for playing in the public markets. In Law & Accounting Matters, we will provide you with some high level outlines of what legal matters arise in dealing with capital market participants , including investors, brokers, lawyers, accountants, securities commissions, and stock exchanges, to name a few.

In this first installment of Law Matters, some of what we write about may appear second nature to you, perhaps even obvious, but in the rapid-moving pace of business, it is remarkable how easily the obvious gets overlooked. The first step is to canvass your business’s legal status and the checklist of items you will be asked to provide to demonstrate that from a legal perspective your company as a going concern can be funded. This first overview is limited to your business activities.

In future articles we will cover the legalities of asking members of the public to invest and how that differs from asking your parent, grandparent or business associate to invest.

You already know what your business is, what are its assets and liabilities and who owns it. You may be able to define your business in a simple statement like  “WE MAKE WIDGETS” of “WE EXPLORE FOR MINERALS”. But a simple business proposition is affected by a broad spectrum of legal issues as illustrated by the list below. You can do your own preliminary diagnosis using this list before you consult with legal counsel.

  • Intellectual property law – did you invent the widget and is it covered/protected by patent, trademark and copyright laws?
  • Contract law – are you licensed to manufacture or distribute it?
  • Business Registration – are you required to be authorized or licensed by any governmental authority to manufacture, distribute or sell the product?
  • Taxation law – how do you calculate net revenue and tax payable? Been audited lately? Ever?
  • Financial Reporting – are your financial records in order and in shape to be audited for the past three financial years by an auditor certified by the Canadian Public Accountability Board?
  • Ownership – if the business is owned by a corporation, how was this business rolled into the corporation? Do you have partners and how is the relationship recorded? Any disputes as to ownership?
  • Corporate law – where, when and how did your company come into existence? Was it properly organized and is it up to date in its government filings? Does it have a properly constituted board? Is it up to date with its tax filings? Is it serviced regularly by an accountant and lawyer?
  • Securities law – who owns the Company? How many shareholders? How did you raise money?
  • Employment law – how many employees do you have? Are you properly deducting at source? Are you up to date in all of your required filings with taxation and safety authorities?
  • Environmental law – do you deal in toxic goods and are you in compliance with all environment regulations?
  • Insurance law – do you carry appropriate insurance for business risk and have you had an insurance audit done on your business?
  • Litigation – what are your liabilities – not just balance sheet liabilities, but any litigation risk or penalty associated with a deficiency in any of the above-mentioned items? Is any litigation pending or threatened?
  • Real property – do you own land in the conduct of your business? Is it owned outright or encumbered?
  • Security law – do you borrow or lend money and are your assets properly secured?
  • Mining law – do you have the right to drill, explore and extract minerals from the property where you are proposing to conduct your mining operations?
  • Contract law – how good are your relations with your business partners, be they joint venturers, co-investors or lenders?
  • Conflict of laws – do you have a supplier or customer from out of province/state that tells you his interpretation of the law differs from the interpretation of law your local lawyer brings to the table?
  • Any of the above items may preclude you from advancing to the public markets if any represent a material risk to the success of your business. Most items cannot be fixed at the last minute and the more problematic the more likely your business plans will be stopped dead in their tracks.

    No one likes a story about why you are almost ready.  Talk to a lawyer about all of these items. Get a legal checkup. Because if your legal house is not in order when you reach out to the capital markets, you may never get a second chance to make a first impression.

    Robert Spiegel is a partner of the firm Stikeman Keeley Spiegel Pasternack LLP (Toronto).  Mr. Spiegel specializes in securities financing, mergers and acquisitions and complex corporate reorganizations.  Mr. Spiegel also specializes in stock exchange listing, compliance and regulation, and provides advisory services in connection with issuer and broker compliance. He was formerly in house counsel at the TSX.  You can reach him at

    Since 2005 ITB Solutions has provided listings development services to stock Exchanges in Canada such as the Canadian Securities Exchange. ITB Solutions currently provides New Listing Services to the NEO Exchange. We assist companies with the listing application and managing the process to become publicly tradable in Canada, as well as offering advice on how to make the most of your public listing. You can reach Jeffrey Stanger at 647-500-0492 or by email at