Capital pool companies

Stock Exchange

Corporate Update


The Capital Pool Company (“CPC”) program is a unique listing vehicle offered exclusively by the ‎TSX Venture ‎Exchange (the “TSXV”). Providing an alternative to the traditional initial public ‎‎offering (“IPO”), the CPC program introduces investors with financial market ‎experience to ‎entrepreneurs whose growth and development-stage companies require capital and public ‎‎company management experience. Unlike the traditional IPO, the CPC program ‎enables ‎seasoned directors and officers to form a CPC with no assets other than cash ‎and no ‎commercial operations, list it on the TSXV, and raise a pool of capital. The CPC then uses the ‎‎funds to seek out an investment opportunity. Once the CPC has completed its Qualifying ‎Transaction ‎and acquired an operating company which meets TSXV listing requirements, its ‎shares continue trading ‎as regular listings on the TSXV. ‎

Two stages: Prospective offering and Qualifying Transaction

As noted above, the CPC program involves two distinct steps:‎ ‎

1.‎ The organization of the CPC and the clearance of the prospectus offering of the CPC ‎through the relevant ‎securities commissions; and ‎

2.‎ The completion of a Qualifying Transaction.‎

The first stage involves the incorporation of a company, funding the company with “seed ‎capital”, ‎completing a prospectus offering to the public and the subsequent listing of securities on ‎the TSXV. ‎The second stage involves the completion of a “Qualifying Transaction” which, ‎generally speaking, is a ‎transaction whereby the CPC acquires an asset or business which ‎allows the CPC to meet the Initial ‎Listing Requirements of the TSXV, thereby elevating it from a ‎CPC designation to a regular Tier 1 or Tier ‎‎2 listing on the TSXV. ‎

First stage: The CPC (organization, prospectus offering and listing)‎

A. Creating the CPC 

  • Three to six individuals with an appropriate combination of business and public company ‎experience put in a minimum of the greater of:

(i) $100,000 in seed capital; and

(ii) 5% of ‎the aggregate of all proceeds received by the CPC on the date of its final prospectus, to ‎a maximum of $500,000. ‎

  • These founders incorporate a shell company, the CPC, and issue shares in exchange for ‎seed capital at a minimum price of the greater of $0.05 and 50% of the price at which ‎subsequent shares will be sold by the prospectus offering. These seed shares will be ‎subject to the escrow requirements of the TSXV. ‎
  • The CPC and its advisors prepare a prospectus that outlines managements intention to ‎raise between $200,000 and $4,750,000 by selling CPC shares at a minimum price of ‎‎$0.10 per share, and to use the proceeds to identify and evaluate potential acquisitions.‎

B. Selling the shares 

  • The CPC files the prospectus with the appropriate securities commissions, and applies ‎for listing on the TSXV.‎
  • The agent sells the CPC shares, pursuant to the prospectus, to at least 200 arm’s length ‎shareholders, each of whom buys at least 1,000 shares. No one purchaser can purchase ‎more than 2% of the offering, and no one purchaser together with his, her or its ‎associates or affiliates can purchase more than 4% of the offering.‎
  • Once the distribution has been completed and closed, the CPC is listed for trading on the ‎TSXV. The symbol includes a “.P” to identify the company as a CPC.‎

Second stage: The Qualifying Transaction

A.‎ Announcing the acquisition

  • Within 24 months of listing, the CPC identifies an appropriate business as its “Qualifying ‎Transaction” and issues a comprehensive news release to announce that it has entered ‎into an agreement in principle to acquire the business.‎
  • The CPC prepares a draft filing statement or information circular providing prospectus-‎level disclosure on the business that is to be acquired, the CPC and the combined entity. ‎
  • The TSXV reviews the disclosure document and evaluates the business to ensure it ‎meets the Initial Listing Requirements.‎

B.‎ Closing the deal 

  • As shareholder approval is typically not required for arm’s length transactions, the filing ‎statement is posted on SEDAR for at least seven business days, after which the ‎Qualifying Transaction closes and the business is acquired. ‎
  • Additional components of the deal often include: name change and private placement ‎coinciding with the closing of the Qualifying Transaction. ‎
  • The “.P” from the ticker symbol is removed and the company now trades as a regular ‎TSXV listed company.‎


The timeline for the first stage, from organization to listing, can vary significantly and depends on ‎‎several factors. On average, a CPC is listed about 12 weeks from the time the process is ‎started (i.e. ‎filing of preliminary prospectus). Listing, however, can take anywhere from as little ‎as 8 weeks to several ‎months if significant problems are encountered. With respect to the ‎second stage, as noted above, once the CPC is listed, it has 24 months to complete a Qualifying ‎Transaction.‎ If a CPC fails to meet this 24 month deadline, the TSXV may suspend from trading ‎or delist the CPCs ‎shares. ‎


An issuer should always consider alternative methods of going public before determining to ‎proceed ‎with a CPC. In certain situations, an issuer may be better advised to raise funds ‎through a conventional ‎IPO. The determination by the issuer will always be made in conjunction ‎with an agent, as every CPC and ‎IPO will require an agent. An issuer may have an immediate ‎need for funds beyond the amounts ‎permitted to be raised by a CPC (which is limited to ‎‎$5,000,000 from seed capital and the IPO). A CPC ‎also has limits on the pricing of the offering ‎whereas an IPO offers more flexibility, as there are no upper ‎limits on pricing. It is a ‎misconception to believe that a CPC is a short cut to the market, in that ‎completion of the two ‎stages can often take longer than an IPO offering and a new listing.‎

As for CPC advantages, in general, a CPC limits the risk among public company investors, as ‎their ‎investment is generally small and offers substantial upside to initial public company ‎investors. ‎Particularly in times when the markets are slow, a CPC may be the only product that ‎an agent is ‎comfortable in selling. There is also a psychological factor, investors have become ‎very confident in ‎investing in capital pool companies because of the number of success stories ‎and the favorable ‎publicity the program has received. A CPC may allow a company to go public ‎at an earlier stage than it ‎otherwise would, and may permit it to go public when market conditions ‎are not generally favorable, ‎which leaves it in a position to raise private placement money when ‎market conditions improve. It is ‎often the case that a target issuer will be able to induce ‎investment into a private placement when ‎investors have comfort in knowing that a Qualifying ‎Transaction has been announced and is likely to ‎proceed, particularly if the CPC's shares are ‎trading at a premium to the price of the private placement. ‎It also permits development to ‎continue in a target company while the CPC is “going public”.‎

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