Need directors insurance for an IPO in Canada? Get ALIGNED with us.
Canopy Growth Corporation. Kinder Morgan Canada. Shopify. The bold names of big Canadian IPOs in recent years might be inspiring your organization to think about going public with an initial public offering. According to Investment Executive, “54 new equities issues on four exchanges in 2018 generated $2.2 billion.”1
Moreover, “the fact that these IPOs were from three different sectors is a testament to the diversity of the Canadian market’.”2 While going public may be on your radar, there is a multitude of steps you’ll need to take to ensure a smooth and seamless transition. Getting director’s insurance for an IPO in Canada is an important starting point. This post shares some key insights into what you need to know about D&O for a Canadian IPO.
Risky business. Preparing your directors for an IPO in Canada.
Cassels Brock Lawyers set out some advantages and disadvantages of going public with an IPO. One advantage they note is the fact that an IPO limits liability. Specifically, “in an IPO, the operating company carries out the transaction itself. Accordingly, it would have no unknown prior history and would not acquire any new liabilities.”3
Meanwhile, a disadvantage of an IPO can be prospectus liability. “Under Canadian securities laws, there is a statutory liability for misrepresentations in a prospectus. That liability extends to the issuer, the underwriters or agents and each of the directors of the issuer personally.”4 Furthermore, “The fact that there is underwriter liability on the IPO prospectus means that the underwriters or agents tend to complete a more thorough due diligence review on the operating company and the relevant documents can take longer to prepare.”5
T’s crossed and I’s dotted. Why directors insurance for an IPO in Canada is important.
When your organization is going public, potential liabilities quickly add up. Directors & officers of publicly traded TSX & CSE companies may face liabilities related to securities laws and stock exchange rules. Canadian public company directors and officers are subject to 100+ provincial and federal statutes, securities laws, etc.
Each one of these regulations imposes personal liabilities upon directors and officers. These liabilities are noted in federal and/or provincial business corporation acts and other securities laws.
As a director or officer, breaching fiduciary duty (duty of company loyalty), duty of care and/or securities law can lead to corporate and/or personal liability. This is why D&O insurance for an IPO in Canada is designed to protect your directors and officers when your organization is going public.
How to get D&O insurance for an IPO
Whether you are listing on the TSX or CSE, it is important to know that your directors will have the best insurance in place during your IPO. Our brokers can help you assess the options in the marketplace and get ALIGNED with the best coverage and value for your D&O insurance.
Sources:1,2 Investment Executive: Canada’s IPO market topped $2B in 2018;3,4,5 Cassels Brock Lawyers “Going Public: Initial Public Offerings vs Reverse Takeovers 2019”