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The Cost of Being Public

Costs, Going Public, Listing, RTO, IPO
By Jeffrey Stanger, ITB Solutions and Jeremy Budd, BA (Hons), JD/MBA

It’s a new year and a new article for GoPublicInCanada.com. We usually write about how to become public and raise capital but we thought we’d start off with the realistic costs of being a public company.

Every public company will face different costs depending on the size of the company, the rate of growth and the industry that it’s in. You need to reflect on the value you are getting for every dollar you have to spend in order to keep your company trading.

We’ll ballpark the costs based on a newly-listed small cap company. We’ll also break down costs into mandatory and optional, as follows:

Mandatory
1. Exchange Fees
2. SEDAR
3. Press Release Dissemination
4. Audit
5. Legal
6. Securities Commission
7. Transfer Agent

Optional (but important)
1. Investor Relations
2. Market Making

Mandatory Fees

Exchange Fees
Once you are listed, and have paid a stock exchange a fee for listing, there are ongoing fees that have to be paid.

Exchange Fees differ between the three stock exchanges in Canada with primary listings. The Toronto Stock Exchange has two basic types of fees, Annual Sustaining Fees and Additional Listing Fees.

The Annual Sustaining Fee is paid yearly and is calculated based on your market capitalization which entails a base fee plus a variable fee rate for market capitalization in excess of the base listing capitalization. The chart below outlines the fees:

Listing Capitalization Base Fee + Variable Fee Rate for Market Capitalization in Excess of Base Listing Capitalization
Base Listing Capitalization
$0 Up to $100M $12,000 0.0120%
$100M Up to $300M $24,000 0.0100%
$300M Up to $700M $44,000 0.0080%
$700M And above $76,000 0.0069%

The maximum fee is $110,000

The minimum annual sustaining fee is $12,500 up to a maximum of $110,000.

There are additional listing fees for the listing of additional securities by the company. This would include securities from private placements, convertible securities, securities issued for acquisitions, new classes of shares, etc.

Listing Capitalization Base Fee + Variable Fee Rate for Listing Capitalization in Excess of Base Listing Capitalization
Base Listing Capitalization
$0 Up to $5M $5,000 0.169%
$5M Up to $10M $13,450 0.164%
$10M Up to $50M $21,650 0.158%
$50M Up to $100M $84,850 0.153%
$100 And above $161,350 0.147%

The maximum fee is $170,000

On the TSX Venture there is a three-tiered fee system, including Annual Sustaining Fees, Financing Fees and Filing fees.

Annual Sustaining Fees are as follows:

Application Type Minimum* Maximum Fee Calculation
Issuers with a market capitalization of $5 million or less $5,200 $5,200 Flat fee
Issuers with a market capitalization of greater than

$5 million and less than $100,000,000

$5,300 $14,800 $5,300 + $100 for each $1,000,000 in market capitalization or part thereof above $5 million
Issuers with a market capitalization greater than

$100,000,000 and less than $440,000,000

$440,000,000

$16,750 $50,750 $16,750 + $100 for each

$1,000,000 in market capitalization or part thereof above $100 million

Issuers with market capitalization of $440,000,000 or above $51,000 $90,000 $51,000 + $100 for each

$1,000,000 in market capitalization or part thereof above $440 million

Financing Fees include private placements, public offerings and Share Bonus’ and Loans.

Min

Max

Fee Calculation

Private Placement/Public Offering of less than $6 million

Private Placement/Public Offering greater than or equal to $6 million

$750

$30,000

$30,000

$55,000

$750 + 0.5% of proceeds raised

$30,000 + 0.1% of the proceeds exceeding $6 million

Bonus Shares/Loans

$500

$30,000

$500 + 0.5% deemed value of shares issued

Filing Fees include transactions such as stock option plans, shares for debt, consolidations, etc.

Min

Max

Fee Calculation

Stock Option plan review/administration

$500

$30,000

$0.001 per share reserved for issuance
Shares for Debt

$500

$30,000

$500 + 0.5% of debt
Expedited Acquisition

$500

$30,000

$500 + 0.5% deemed value of shares issued
Reviewable Transaction

$1,000

$30,000

$1,000 + 0.5% deemed value of shares issued
Additional Listing (Amalgamation, Merger)

$1,000

$30,000

$1,000 + 0.5% deemed value of shares issued
Share Split

$1,000

$30,000

$1,000 + 0.5% deemed value of shares issued
Tier Movement-upward movement

$2,500

$2,500

Flat Fee
Consolidation

$2,500

$2,500

Flat Fee
Supplemental listing (2)

$2,500

$2,500

Flat Fee
Normal Course Issuer bid, Stock Exchange Take-over bid or Issuer bid

$2,500

$2,500

Flat Fee
Shareholder rights plan

$2,500

$2,500

Flat Fee
Alteration in Capital

$2,500

$2,500

Flat Fee
Escrow amendments, transfers & releases

$750

$750

Flat Fee
Warrant & Convertible Debt extensions/price amendments

$750

$750

Flat Fee
Stock Option amendment

$500

$500

Flat Fee
Investor Relations Agreements

$500

$500

Flat Fee
Name change (no consolidation)

$500

$500

Flat Fee
Management agreements, employment & Admin contracts

$500

$500

Flat Fee
Reinstatement for Suspended

Issuers

$500

$500

Flat Fee
Processing

$500

PIF (recovery cost)

$200

On the CSE – Canadian Securities Exchange there are no annual sustaining fees or transactional fees. The CSE has an initial listing fee of $12,500 and thereafter a monthly flat rate fee of $500 per month or $6,000 per year.

SEDAR
All public companies in Canada must file on SEDAR. We will outline the fees here, however many dissemination services offer packages where they include payment of your SEDAR fees. The SEDAR fees are based on the jurisdiction that the company is reporting in. Many companies have multiple jurisdictions that they are reporting in. We will go over the fees for a company reporting in one jurisdiction.

First Additional Maximum
Short Form Prospectus (NI 44-101) Shelf Prospectus (NI 44-102) Prospectus MJDS (NI 71-101)

Long Form Prospectus Rights Offering Material CPC Prospectus (TSX-V)

Prospectus Distribution Outside Quebec ( QC Sec. 12 Act)

$ 390

$ 390

$ 390

$ 715

$ 325

$ 715

$ 130

$ 115

$ 115

$ 115

$ 212.50

$ 115

$ 212.50

$ 1,770

$ 1,770

$ 1,770

$ 3,265

$ 1,705

$ 3,265

$ 130

Annual Information Forms

> Short Form Prospectus Issuer

Annual Information Form (NI 81-106)

> Short Form Prospectus Issuer

Annual Financial Statements

$ 455

$ 2,655

$ 455

$ 2,655

$ 705

$ 74

$ 455

$ 2,655

$ 455

$ 2,655

$ 1,593

Press Release Dissemination
All companies must put out a press release for every material change that occurs in the company. There are a wide variety of packages from different approved disseminators in Canada. Some charge per press release or per word and others give you a flat fee for the year for as many press releases as you require. These usually start at around $2,500 per year.

Auditing
Companies must file annual audited financial statements as well as unaudited interim financial statements for the first three quarters. The cost for your audited financial statements will vary depending on the agreement you come to on the cost with your auditor, how well organized the information you provide to your auditor is, as well as how much the company has grown.

Your interim financial statements (“quarterlies”) do not have to be audited but they must be filed. The costs can also fluctuate; the completion of the interims by your auditors might be included in the price for the audited financial statements. In some cases management of the public company will prepare and complete the interim financial statements.

Legal
Public companies enlist securities lawyers to assist them in navigating the regulatory hurdles and hoops that are inherent in being a public company. They help ensure that your company is complying with applicable securities laws and stock exchange rules. A securities lawyer acts as advisor to management and is consulted when considering corporate actions, ranging from acquisitions and financings to policy changes and disclosure issues.

In addition to transactional work that may arise, a securities lawyer will typically assist with the preparation of proxy material for shareholder meetings, review financial statements and MD&A, draft press releases, review technical reports, review and update annual information forms, attend meetings of the board, draft resolutions of the board and prepare stock exchange filings. They will also be your company’s contact person with the stock exchange, transfer agent and securities regulatory authority.

The billable hour model practiced by most traditional law firms to obtain more affordable legal advice together with cost certainty.

BUDD | Law
specializes in providing corporate and securities law advice to reporting issuers with securities listed on a Canadian stock exchange. Our objective is to build the lawyer-client relationship into a partnership through regular communication.
Clients will never feel like “the clock is ticking” when they call with a question or concern which encourages dialogue between the client and the lawyer.

We are focused on providing quality legal advice and services at exceptional value to our clients based on a fair and cost effective fixed fee structure.

The fees are categorized as either: (1) A monthly fee of $3,000 for day-to-day, monthly, quarterly and annual activities of a reporting issuer undertaken in the normal course of business or (2) transactional, for activities taken outside of the normal course of business.

Our annual contracts based upon the monthly fee of $3,000 covers all the “normal course of business” issues that a publicly listed company is required to deal with including:

  • Preparing for the annual meeting, including drafting the management information circular and form of proxy
  • Updating Annual Information Form
  • Drafting and reviewing Press Releases and other disclosures
  • Filings with Canadian stock exchanges (other than as set out below under Transactional Fees)
  • Reviewing financial statements and MD&As related to quarterly and annual filings
  • Monthly, quarterly and annual filings required by the CSE (if applicable)
  • Drafting resolutions of the board of directors and its committees
  • Attending meetings of the board and its committees
  • Preparing minutes of meetings of the board and its committees
  • General discussions, legal advice and preparation of legal documents

We are also your company’s contact person with the stock exchange, transfer agent and securities regulatory authority.

Public companies listed on Canadian Stock Exchanges must comply with the monthly and annual regulatory requirements for which legal services are needed and at Budd | Law we are pleased to offer a more cost effective solution to meeting those needs.

Securities Commission(s)
All public companies must pay an annual regulatory fee for each province or territory in which they are reporting at the time the annual audited financial statements are filed on SEDAR. The annual fee varies for each jurisdiction.

The chart below outlines the fees:

Jurisdiction

Annual Regulatory Fee

AIF Filing Fee

Alberta $300 N/A
British Columbia $600 $1,000
Manitoba $100 $1,000
New Brunswick $250 if Canadian-listed issuer, otherwise $150 $1,200 if short-form eligible, otherwise $100
Newfoundland and Labrador $250 $1,000
Nova Scotia $283.45 if Canadian-listed issuer, otherwise $170.05 $1,359.40
Northwest Territories N/A $400
Nunavut N/A $400
Ontario See Ontario Participation Fee below N/A
Prince Edward Island N/A $600
Quebec $1,087 if Canadian-listed issuer, otherwise $543 N/A
Saskatchewan $250 $1,000
Yukon N/A $400

Ontario Participation Fee
In Ontario, the annual participation fee is determined based on the market capitalization of a company in the reference fiscal year which is currently the company’s last fiscal year ending before May 1, 2012 if it was a public company at the end of that fiscal year. If the company became public in that year as a consequence of a prospectus receipt, it’s securities were listed or quoted on a marketplace at the end of that fiscal year. In any other case, it is the public company’s last completed fiscal year. The annual participation fee is currently determined as follows:


Capitalization

Participation Fee
under $10 million

$890

$10 million to under $25 million

$1,070

$25 million to under $50 million

$2,590

$50 million to under $100 million

$6,390

$100 million to under $250 million

$13,340

$250 million to under $500 million

$29,365

$500 million to under $1 billion

$40,950

$1 billion to under $5 billion

$59,350

$5 billion to under $10 billion

$76,425

$10 billion to under $25 billion

$89,270

$25 billion and over

$100,500

AIF Eligible Companies
Alberta and Quebec require higher annual regulatory fees for companies that file an annual information form (“AIF”) to become eligible to file a short form prospectus. An AIF is required to be filed by TSX issuers and is optional for TSX Venture and CSE issuers. The annual regulatory fee is $2,400 in Alberta and $2,175 in Quebec. The filing of an AIF must be at the same time as filing the annual audited financial statements for TSX issuers but can vary for TSX Venture and CSE issuers that are not required to file an AIF. Additional fees are also required when filing an AIF as follows: (1) $1,359.40 in Nova Scotia; (2) $1,200 (if eligible to file a short form prospectus) or $100 in New Brunswick; (3) $1,000 in British Columbia, Manitoba, Newfoundland and Labrador and Saskatchewan; (4) $600 in Prince Edward Island; and (5) $400 in Northwest Territories, Nunavut and Yukon.

Transfer Agent
It is mandatory for public companies to use a transfer agent. There are more than a dozen acceptable transfer agents in Canada. The role of a transfer agent is to maintain the share registers of a company, affect corporate changes to capital structure, issue share certificates and coordinate mailings to shareholders for shareholder meetings, changes to capital structure and dividends. Transfer agents will also act as the escrow further to your company’s going public transaction and stock exchange listing. Basic annual fees for transfer agents typically range between $3,000 and $6,000, but can vary significantly depending on variety of factors, such as number of holders, the exchange(s) your company is traded on, whether there are co-agents, whether your company pays dividends and the services required.

Optional Fees

Investor Relations
There are many different Investor Relations firms in the market with different programs, some are person to person based communications strategies, some are web/social media based, and others are a mixture of the two.

IR firms are usually paid in a combination of stock options and a monthly fee. Stock options are usually up to 2% of the issued and outstanding shares of the company and the monthly fees range from $4,000 to $12,000 per month. This is something that you will have to negotiate. Even though IR is under “optional” it really is mandatory for your company to attract investment capital. Please see our publication – IR Insight at GoPublicInCanada.com.

Market Making
A market maker provides a service to the company to enhance liquidity on the company’s stock. The role of the market maker is to provide a continuous two-sided passive market in the company’s stock. They are compensated only in cash – they cannot be compensated in shares due to conflict of interest reasons.
The fees for market makers are negotiable but are usually about $5,000 per month.

In conclusion, there is a cost to getting access to capital in the public markets.
Part of it is the cost of the listing charged by the stock exchanges. There are many factors that go into determining the costs that a company will face in order to maintain its public listing. Much of it may depend on the size of the company (market capitalization), its trading activity, and the number of transactions it executes. But much of that can be alleviated by choosing the right stock exchange listing for your company. On the Canadian Securities Exchange, you can budget exactly what your costs will be – as a flat $6000 per year covers everything.

Jeremy S. Budd, the principal of BUDD Law, was called to the Ontario Bar in 2007 after completing his articling term and the JD/MBA program at Osgoode Hall Law School and the Schulich School of Business. Before founding BUDD Law, Jeremy was a partner at one of Bay Street`s top boutique securities law firms. Mr. Budd has extensive experience as a corporate securities lawyer and regularly assists reporting issuers with ongoing disclosure, corporate governance matters and a variety of financing, corporate and M&A transactions. Jeremy is also an experienced corporate secretary and has served as a public company director. Further information about BUDD Law can be found at www.budd-law.ca or by contacting Mr. Budd by phone at 416-840-6632 or by email at jeremy@budd-law.ca

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 jeffrey@itbsolutions.ca

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