Category: M&A

Capital Markets / M&A / Securities

What Cross-listed Canadian Companies Need to Know About the Impact of the U.S. Government Shutdown on SEC Operations

As a result of the partial U.S. government shutdown that began on December 22, 2018, the U.S. Securities and Exchange Commission (SEC), one of nine federal agencies affected, recently published its Operations Plan Under a Lapse in Appropriations and Government Shutdown (sec.gov/files/sec-plan-of-operations-during-lapse-in-appropriations-2018.pdf), which went into effect on December 27, 2018. The Operations Plan offers important guidance regarding the significant impacts of the shutdown on the agency’s activities. Additional guidance is also available from the SEC’s Divisions of Corporation Finance (here: sec.gov/page/corpfin-section-landing) and Investment Management (here: sec.gov/investment-management). Issuers and practitioners should make contingency plans to address the effects upon ongoing or planned securities offerings, filings, and requests for interpretive guidance, among other things. A few important highlights:...

Corporate / M&A / Securities

U.S. Subsidiaries of Canadian Companies Face Imminent Reporting Deadline For Federal Survey

Canadian companies with U.S. subsidiaries and investments should note upcoming deadlines for filing reports required by U.S. Department of Commerce rules. These mandatory reports are required to be filed with the Bureau of Economic Analysis (“BEA”) within the U.S. Department of Commerce by May 31, 2018, if made by hardcopy, or by June 30, 2018, if made electronically. The affected U.S. subsidiary companies are those in which a non-U.S. person owns or controls, directly or indirectly, 10 percent or more of the company’s voting securities if the U.S. subsidiary company is incorporated, or in which a non-U.S. person holds that same degree of ownership or control through other means if the U.S. subsidiary company is...

Employment / Litigation / M&A

Termination for Cause in the United States: It’s Whatever You Want it to Be

The default rule in most U.S. states is at-will employment. This means that either the employee or the employer may terminate the employment relationship at any time, without notice, for any reason—other than a discriminatory or retaliatory reason. A reason is discriminatory if it is based upon an individual’s status as a member of a protected class, such as race, gender, national origin, or religion. A reason is retaliatory if it relates to an individual’s protected activity, such as whistleblowing or raising concerns regarding the terms and conditions of employment. Parties can opt out of the default at-will rule by entering into an employment agreement that provides the employee with severance unless the...

Employment / Litigation / M&A

Exempt or Non-Exempt Employee Under U.S. Law? Even U.S. Employers Frequently Get it Wrong

In the United States, employers are required to pay employees overtime (1.5 times the employee’s hourly rate) for hours worked over 40 per week. In some states, such as California, employers are required to pay overtime if employees work more than 8 hours in a day. Like Canada, U.S. employees may be exempt from overtime requirements if they meet certain criteria. However, such exemptions under U.S. law are frequently more complicated than their Canadian counterparts, and even sophisticated U.S. employers frequently get them wrong. In 2016, U.S. employers spent nearly $700 million on class-action settlements of wage and hour claims. This does not include amounts U.S. employers spent paying judgments and attorneys’ fees....

Benefits / M&A / Securities

New Approach for the Assumption of Options in M&A

A Canadian SEC reporting company that looks to acquire a company with outstanding equity grants in the United States will frequently need to address the question: What alternatives are available for the assumption of the target’s outstanding options or other equity-based compensatory awards? Under U.S. law, both the grant of the equity award and the exercise or conversion of the equity award must be registered under the 1933 Act or satisfy an available exemption. For Canadian issuers that are SEC reporting companies, the alternative approaches available to satisfy the 1933 Act requirements for the exercise or conversion of the assumed awards were formerly restricted to (i) an S-8 registration statement (either existing or...

Employment / M&A

Reductions in Force and the Older Workers Benefit Protection Act

It is generally a good idea for companies not to disclose biographical information about their employees, such as marital status, religion, or age. Good HR professionals counsel managers not to ask for such information during interviews, for example, in order to avoid claims of discrimination in hiring. Under U.S. law, however, there is an important exception to this well-advised general rule. Under the Older Workers Benefit Protection Act (“OWBPA”), employers terminating two or more employees as part of a layoff and offering severance in exchange for a release must disclose the following information to each employee over 40 who is being terminated and offered severance: 1) a description of the class of employees...

Corporate / M&A / Tax

Reminder of Required IRS Cost Basis Reporting for Canadian Companies

Canadian companies should be aware that if they engage in certain “organizational actions” that affect the tax basis of shares held by U.S. persons (including many types of acquisitions and business combinations where shares are issued to U.S. persons), they are required by the U.S. tax laws to evaluate the effect of the action on the U.S. holder’s tax basis and disclose this information in a completed Form 8937 promptly following the action. Internal Revenue Code Section 6045B and IRS From 8937 require corporations to report an “organizational action” that affects the tax basis of its shares held by U.S. individuals and certain other tax entities. Canadian residents who are U.S. citizens or...

Corporate / M&A / Securities / Tax

Canadian Plan of Arrangement – Do I Need U.S. Counsel?

You’re a Canadian public company with no U.S. operations.  You don’t file reports with the SEC.  You plan to merge with another Canadian public company in a share-for-share exchange, structured as a Canadian plan of arrangement.  Do you need to hire U.S. counsel to assist on this Canadian deal? Yes. Canadian public companies invariably have shareholders resident in the United States.  If the acquirer will issue shares to the target shareholders, or if there will be an amalgamation in which shareholders of both companies receive shares of amalco, the transaction will be deemed to involve the offer and sale of securities to the U.S. shareholders.  This requires either registration with the SEC and...