Capital Markets / SEC Rulemaking

Rule 506(c) Update: SEC Issues No-Action Letter Allowing Self-Certification of Accredited Investor Status in Certain Circumstances

On March 12, 2025, the staff at the Securities and Exchange Commission (SEC) Division of Corporate Finance issued a no-action letter in response to a request for Rule 506(c) interpretative guidance, agreeing that an issuer could reasonably conclude that it has taken reasonable steps to verify a purchaser’s accredited investor status in an offering of securities conducted under Rule 506(c) of Regulation D if the issuer requires purchasers to invest certain minimum investment amounts, when coupled with the purchaser’s written representations and certain related conditions as outlined in the incoming letter. Rule 506(c) of Regulation D permits issuers to broadly solicit and generally advertise an offering of securities, provided that: all purchasers in the...

Capital Markets / General

NYSE American Amends Shareholder Approval Requirements

The NYSE American stock exchange requires a listed company to obtain shareholder approval prior to issuing shares pursuant to (i) stock-based compensation plans, (ii) certain acquisitions and change of control transactions, and (iii) certain other transactions that may result in the issuance of more than 20% of the previously outstanding shares (the “20% Rule”).  Effective March 6, 2025, the NYSE American amended the 20% Rule.  Previously, the 20% Rule contained an exemption for (x) a transaction that the NYSE American deems to be a “public offering” under a multi-factor test (the “Public Offering Exception”), and (y) any other transaction at a price not less than the greater of book or market value per...

Corporate / Securities

CTA Will Now Apply Only to Foreign Reporting Companies

On February 27, 2025, FinCEN confirmed that it would halt enforcement actions in relation to the Corporate Transparency Act (“CTA”) while it developed revised regulations that would prioritize reporting for “those entities that pose the most significant law enforcement and national security risks.” On March 2, 2025, the U.S. Treasury Department confirmed that the scope of those new regulations would be limited to “foreign reporting companies” only, and that Treasury would not “enforce any penalties or fines against U.S. citizens or domestic reporting companies or their beneficial owners after the forthcoming rule changes take effect”. Essentially, the U.S. government has now abandoned the CTA for the vast majority of reporting companies that were covered under the prior...

International Trade

Dorsey Hosting Webinar on International Trade

On February 25th, Dorsey & Whitney LLP will be hosting a webinar on changes to U.S. trade policy as part of its International Business Roundtable Series. The webinar, International Trade: A First Look at the Second Trump Administration, U.S. Trade Policy, and Potential Impacts on U.S. Businesses, will feature discussions with representatives of Canada and Mexico and business leaders. Please use the link above to register for this event.

General

Trump Cites National Emergency to Launch Trade War Against Canada, China, and Mexico

ON FEBRUARY 6, 2025, AN UPDATE WAS ADDED TO THE END OF THIS POST. According to a White House Fact Sheet published on February 1, 2025, the Trump Administration followed through with its threat to impose high U.S. import tariffs on Canadian, Chinese, and Mexican origin products. These tariffs will subject many Canadian and Mexican origin products to a 25% import duty, while Chinese origin products will be subject to a 10% import duty. U.S. President Donald Trump invoked his authority under the International Emergency Economic Powers Act (“IEEPA”) to impose the sweeping tariffs, citing a national emergency relating to fentanyl trafficking and illegal border crossings. The Executive Order that targets Canada prescribes...

Tax

Certain Canadian Corporations May Unknowingly be Subject to U.S. Federal Backup Withholding and Reporting Requirements With Respect to Dividend Payments

Canadian corporations making dividend payments should ensure that they are compliant with U.S. federal backup withholding and reporting requirements to avoid potential U.S. federal income tax issues. Generally, a Canadian corporation making a payment of dividends aggregating USD$10 or more to another person during the calendar year is subject to the U.S. federal backup withholding and reporting regime. However, a dividend payment by a Canadian corporation is excluded from these rules if it is: from sources outside the United States; by a non-U.S. payor or a non-U.S. middleman; and paid and received outside the United States. For purposes of this discussion, a reference to a “Canadian corporation” does not otherwise include a Canadian...

Benefits / Tax

Considerations for Awarding Incentive Stock Options

Canadian companies that award stock options to their employees, non‑employee directors and/or other service providers often inquire as to whether they should offer Incentive Stock Options (“ISOs”) to any such individuals who are U.S. taxpayers.  Below is a discussion of some of the tax considerations in awarding ISOs and the main requirements that must be met for an option to qualify as an ISO. Please note, this blog post provides only a high‑level summary of the tax treatment of options as well as some of the notable requirements for an option to qualify as an ISO.  This article does not purport to cover every nuance or situation.  As such, you should consult with...

Capital Markets / SEC Rulemaking / Securities

EDGAR Next – Changes to Filer Access and Account Management

On September 27, 2024, the Securities and Exchange Commission (SEC) approved substantial updates to the EDGAR system’s login, password, and access protocols that will affect Canadian SEC reporting companies and other individuals and entities with EDGAR filing codes including Section 16 filers. (referred to as “EDGAR Next”). Compliance with the new EDGAR Next protocols will be mandatory for new filers starting March 24, 2025, while existing filers must comply from September 15, 2025. Filers have until December 19, 2025, to enroll in the EDGAR Next system. More information is available here.  

General

Corporate Transparency Act: Enforcement Halted Pending Further Court Developments

Canadian companies with U.S. subsidiaries have been gearing up all year to file beneficial ownership reports with FinCEN pursuant to the Corporate Transparency Act, in advance of a January 1, 2025 deadline for entities that were formed prior to 2024. Many have already completed their analysis and either determined that they qualify for an exemption or filed their initial beneficial ownership reports. On December 3, 2024, the U.S. District Court for the Eastern District of Texas issued a nationwide preliminary injunction against enforcement of the January 1, 2025 deadline. More information is available here. Companies that have not yet filed their initial beneficial ownership reports, and that are not exempt, now have a...

Capital Markets / Securities

Comparison of Canadian and U.S. Securities Laws

Last month, I was invited to speak to the Canadian Securities Administrators, focusing on how U.S. securities exemptions, prospectus forms, and continuous disclosure requirements differ from their Canadian counterparts. One of the handouts was a side-by-side comparison of the different exemptions and forms, that we thought our readers might also appreciate. Here is an updated version you can download and print.