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23 March 2004
Effective March 30 2004, Canadian securities laws that determine how soon after an initial public offering (IPO) or a private placement shareholders may resell their securities will be relaxed.
Previously, shareholders who bought securities in a private company had to wait at least one year after the company's IPO before selling their securities. This one-year 'seasoning period' will be eliminated in some circumstances: pre-IPO shareholders will be permitted to sell their securities as soon as the company clears a final IPO prospectus if:
Contractual commitments with underwriters and/or escrow rules may change the effect of this rule.
The old distinction between a four-month hold period for 'qualifying issuers' and a 12-month hold period for other public companies will be eliminated. Private placees who do not control a reporting issuer will generally be permitted to resell their shares after they have held them for four months.
The new relaxed rules will also apply after March 30 2004 to IPOs and to private placements that have been or are completed before March 30 2004. For example, if an individual purchased a non-controlling block of securities of a private company on January 1 2002 and the company clears a final IPO prospectus on March 1 2004, the individual will be able to resell his or her securities on March 30 2004 (ie, as soon as the new rules take effect). The old rule would have required the individual to hold the securities until March 1 2005.
A precondition to the resale of securities privately placed on or after March
30 2004 is that the share certificates contain a prescribed legend. For uncertificated
securities, the legend can appear on an ownership statement instead of a certificate.
Certificates issued before March 3 2004 that contain old legends need not be
reissued to take advantage of the new shorter hold period.
For further information on this topic please contact Robert H Karp or Jennifer L Friesen at Torys LLP by telephone (+1 416 865 0040) or by fax (+1 416 865 7380) or by email (email@example.com or firstname.lastname@example.org). The Torys website can be accessed at www.torys.com.
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