BUS 320 Lecture Notes - Lecture 10: Canada Business Corporations Act, Initial Public Offering, Toronto Stock Exchange

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Published on 29 Nov 2017
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© Dennis Chung 2016 Do not distribute
BUS320
Assignment #1
QUESTION ONE
(i) Some important questions or issues that can be clarified with the ABT management team during the
first interview:
- Under which business corporations act (e.g., the Business Corporations Act of British
Columbia or the Canada Business Corporations Act) was ABT incorporated? Knowing the
specific act under which the company was incorporated allows you to identify any special
and extra reporting requirements that the company has to follow in accordance with that
particular business corporations act.
- Does ABT have any debts or shares currently outstanding and held by members of the
general public? No need to ask about the shares if it is common knowledge that ABT is a
company with shares publicly traded on a major stock exchange (e.g., the Toronto Stock
Exchange). Asking such a question can project a poor image of you and your knowledge (or
the lack thereof) to the ABT management team. It also reflects poorly on the professional
image of your firm. However, it is still a good idea to ask management about any debts that
the company may have that are held by the general public or traded in a public market
because the trading of debts or bonds is usually not as visible as trading of shares on a major
stock exchange.
- If ABT is a company with shares that are publicly traded, find out where exactly the
company shares are traded. The shares may be traded on one stock exchange, on multiple
exchanges, or even on exchanges in different countries. If multiple exchanges are involved,
it would be a good idea to ask management for a complete list of all these exchanges.
Knowing where the shares are traded allows you to identify the jurisdictions and the
applicable securities acts that ABT has to observe as well as all the special and extra listing
and reporting requirements that ABT has to comply with.
- If ABT does not currently have any securities traded in a public market, does the company
have any plans to do so, or has the company already started the process of planning for an
initial public offering (IPO)? Find out from management whether ABT will be issuing
securities in the near future. If ABT has securities already trading in a public market or has
issued securities with filing documents (e.g., a prospectus), then ABT is a “reporting issuer”
as defined in the securities acts. If ABT does not have securities trading in a public market
and has no plan to issue securities for public trading, then ABT is likely a “non-reporting
issuer”. However, in the latter case, it is still a good idea to confirm with company
management that ABT is in fact a “non-reporting issuer”. It is possible that other parts of the
definition of a “reporting issuer” may still apply even though ABT does not currently have
any publicly traded securities and has no plan to issue securities for public trading in the near
future.
- Are the equity shares of ABT owned by a large number of shareholders or by a group of very
small number of shareholders? How likely could unanimous consent have been obtained
from all shareholders to waive some or all of the requirements related to the financial
statements? No need to ask these questions about the wavier if ABT is a “reporting issuer”.
If ABT is a “reporting issuer”, it is exempted from the financial reporting requirements of
the business corporations act and it would have to follow the more stringent requirements of
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© Dennis Chung 2016 Do not distribute
the applicable securities act(s) and no such wavier is available under any of the securities
acts. If ABT is a “non-reporting issuer”, then the financial reporting requirements of the
business corporations act apply. In this case, find out from company management whether
there is a waiver obtained through unanimous resolution and consent of all shareholders
removing the requirement of financial statements or allowing the company to prepare
financial statements on a basis other than GAAP as prescribed in the CPA Canada Handbook
(formerly known as the CICA Handbook). If there is such wavier, then the requirements of
the CPA Handbook do not apply.
- IF ABT is a “non-reporting issuer” and there is no waiver of financial statement
requirements, then the requirements of the CPA Canada Handbook apply. If ABT is a
“private enterprise” (i.e., not a “publicly accountable enterprise”) as defined in the CPA
Canada Handbook, then ABT has a choice in using either IFRS or ASPE under the CPA
Canada Handbook. In this case, find out from company management whether ABT has
already made that choice and decided some time ago to use IFRS even though it is not
required to do so under the CPA Canada Handbook.
- Are there contractual or other reasons requiring ABT’s financial statements to be prepared in
accordance with a specified basis of financial reporting? Find out from management
whether or not, for example, the bank or any creditor has as a condition of a contractual
lending agreement imposed the requirement that ABT prepares its financial statements in
accordance with IFRS.
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© Dennis Chung 2016 Do not distribute
(ii) Consider the form of business organization of ABT. Is ABT a sole proprietorship, partnership
or an incorporated business? From the name of the company, we can say with 100% confidence
that ABT is an incorporated business.
Because ABT is an incorporated business, it has to be under the authority of a business
corporations act (e.g., the Business Corporations Act of British Columbia or the Canada
Business Corporations Act). Factors to consider include any special and extra reporting
requirements that the company has to follow in accordance with that particular business
corporations act.
ABT has to meet the financial reporting requirements stated in the applicable business
corporations act unless the company is considered to be a “reporting issuer”. If ABT has
securities (i.e., shares or debts) already trading in a public market or has issued securities with
filing documents (e.g., a prospectus), then ABT is a “reporting issuer” as defined in the
securities acts. These are factors to consider in determining whether or not ABT is a “reporting
issuer”. It is also important to know the jurisdictions and the applicable securities acts that apply
to ABT because there can be special and extra listing and reporting requirements ABT has to
comply with.
If ABT does not currently have securities trading in a public market and has no plan to issue
securities for public trading in the near future, then ABT is likely a “non-reporting issuer”.
However, in this case, it is still possible that other parts of the definition of a “reporting issuer”
may apply. ABT may still be a “reporting issuer” even though ABT does not currently have any
publicly traded securities and has no plan to issue securities for public trading in the near future.
A factor to consider is whether some of these other parts of the definition of a “reporting issuer”
in fact apply to ABT. For example, the securities commission responsible for the administration
of a securities act has the power to order and designate a company as a “reporting issuer”.
If ABT is a “reporting issuer”, it is exempted from the financial reporting requirements of the
business corporations act. If this is the case, then ABT will have to meet the more stringent
requirements of the applicable securities act(s). It is therefore important to know whether or not
ABT is a “reporting issuer”. We will come back to this possibility later.
If ABT is a “non-reporting issuer”, the financial reporting requirements of the applicable
business corporations act will apply unless there is a waiver obtained through unanimous
resolution and consent of all shareholders of the company removing the requirement of financial
statements or allowing the company to prepare financial statements on a basis other than GAAP
as prescribed in the CPA Canada Handbook (formerly known as the CICA Handbook). Factors
to consider include whether the shares of ABT are owned by a large number of shareholders or
by a group of very small number of shareholders, and how likely unanimous consent can be
obtained from all shareholders to waive some or all of the requirements related to the financial
statements under the applicable business corporations act. If there is such a waiver, then ABT
does not have to meet the financial statement requirements of the applicable business
corporation act. If there is no waiver, then the requirements of the act apply and the company
has to have its financial statements prepared in accordance with GAAP as prescribed in the CPA
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Document Summary

Does abt have any debts or shares currently outstanding and held by members of the. Question one (i) some important questions or issues that can be clarified with the abt management team during the first interview: Under which business corporations act (e. g. , the business corporations act of british. Knowing the specific act under which the company was incorporated allows you to identify any special and extra reporting requirements that the company has to follow in accordance with that particular business corporations act. No need to ask about the shares if it is common knowledge that abt is a company with shares publicly traded on a major stock exchange (e. g. , the toronto stock. Asking such a question can project a poor image of you and your knowledge (or the lack thereof) to the abt management team. It also reflects poorly on the professional image of your firm.

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