Searching for D&O insurance for a reverse takeover in Canada? We can help.
In the news. Investors are always looking for the next big thing. In Canada, cannabis is it. A recent Mondaq news release notes that, “Canadian capital markets have proven to be fertile ground for the financing of issuers in the cannabis industry, both foreign and domestic. Several cannabis issuers have gone public by way of reverse takeovers…including Aurora Cannabis, Curaleaf, Zenabis, MJardin, IGC Resources, Pure Global Cannabis and MedMen. Since 2017, a total of 66 cannabis issuers have announced or completed reverse takeovers.”1
Cannabis reverse takeovers in Canada are trending right now because CSE “rules allow for the listing of cannabis companies with U.S. domestic operations, whereas the TSX and the TSXV restrict listed issuers from engaging in or investing in U.S. cannabis cultivation and distribution operations, and certain ancillary activities.”2
Whether your company is considering an IPO or an RTO, it is important to have the right insurance in place to protect your people and assets. That’s why D&O insurance for an RTO so important. Read on to learn about what you need to know about directors insurance for a reverse takeover in Canada.
Timing is everything. What to know about directors insurance for an RTO in Canada…
When you are preparing for an RTO, you are also weighing the pros and cons of a reverse takeover. Cassels Brock Lawyers outline some of the key advantages and disadvantages of going the RTO route. For example, an RTO can limit the financing distribution, because it “enables the transaction to be completed without the requirement to market to retail investors.”3
As well, “In certain circumstances, if the ideal shell can be secured, the shell company can provide the acquiring company with commercial advantages such as cash, qualified resident Canadian directors, a strategic shareholder base or a compatible asset.”4
While an RTO in Canada can be faster than an IPO, with speed also comes unique risks.
Details matter. How directors and officers insurance for an RTO manages risk…
Potential liabilities add up quickly. An RTO in Canada means that the shell company will have some prior operating history. Cassels Brock Lawyers notes that this history “means that there is greater potential for actual or contingent liabilities that would be inherited by the operating company.”5
Furthermore, the directors & officers of any publicly traded TSX or CSE company can face liabilities specifically related to securities laws and stock exchange rules.
In fact, there are more than 100 provincial and federal statues and securities laws that apply to directors and officers of Canadian public companies. And they apply personally to directors & officers.
Outlined in federal and/or provincial business corporation acts and other securities laws, each regulation imposes a personal liability upon directors and officers. A director or officer who breaches their duty of care, fiduciary duty (duty of company loyalty) and/or securities law may be held personally or corporately liable.
D&O insurance for an RTO in Canada is specifically designed to protect a company’s directors and officers when the organization is executing a reverse takeover of another.
Get ALIGNED with D&O insurance for an RTO now!
During a reverse takeover, risk can and will trip you up when you least expect it. That’s why managing risks for your directors is vitally important during your RTO.
Stop searching and talk to an ALIGNED broker now about D&O insurance options for a Canadian RTO. We can help you get ALIGNED with options and value.
Sources: 1,2 Mondaq.com – Canada: The return of the reverse takeover;3,4,5 Cassels Brock Lawyers “Going Public: Initial Public Offerings vs Reverse Takeovers 2019”
