Capital Markets

Dorsey releases Updated Guide for Canadian issuers to trade on the OTCQX and OTCQB

In conjunction with the OTC Markets, Dorsey has updated its Guide to Joining the OTCQX or the OTCQB Markets for Canadian and other Foreign issuers. Canadian issuers who trade on a qualified foreign stock exchange (which include the Toronto Stock Exchange, TSX Venture Exchange, Canadian Securities Exchange and the NEO Exchange) and who meet certain financial criteria can trade in the United States on the OTCQX or the OTCQB by relying on their Canadian disclosure and without needing to register with the United States Securities and Exchange Commission. The OTCQX is for more established companies that meet higher financial standards while the OTCQB is for early-stage and developing companies. The OTCQX and OTCQB...

Tax

Plan Ahead to Reduce (or Eliminate) U.S. Withholding Tax when Selling or Transferring U.S. Subsidiaries holding U.S. Real Property

Many Canadian companies and individuals own U.S. real property interests through a U.S. corporation. The Foreign Investment in Real Property Tax Act (“FIRPTA”) regime imposes a withholding tax (currently at a rate as high as 15%) on the gross proceeds realized by Canadians upon the sale or transfer of a U.S. real property interest. This withholding is imposed without regard to whether the disposition results in a taxable gain.  However, with advance planning, this withholding may be reduced or eliminated. A U.S. real property interest (“USRPI”) generally includes land, buildings, growing crops and timber, and mines, wells and other natural deposits (including oil and gas properties and mineral deposits) located in the United...

Tax

Share Buyback Transactions: U.S. Tax Consequences may differ for each U.S. Shareholder

On Thursday, November 4, 2021, the Office of the Superintendent of Financial Institutions announced that, subject to approval by the superintendent, Canadian banks and other financial institutions may begin repurchasing their own shares. Share buyback transactions by Canadian companies are not novel. However, the U.S. federal income tax treatment of U.S. shareholders participating in a share buyback transaction with a Canadian corporation can often be surprising. Depending on the U.S. shareholder’s particular circumstances, the tendering of shares of a Canadian corporation for cash pursuant to a share buyback transaction will generally either be treated as a “sale or exchange” of such U.S. shareholder’s shares or as a “distribution” by the Canadian corporation in...

M&A / Tax

Canadian Corporations Acquiring U.S. Target Companies in Tax-Deferred Transactions: When Business Activities Outside the U.S. Matter

In transactions in which a Canadian corporation seeks to acquire a U.S. target entity for shares of the Canadian acquiror in a transaction intended to be tax-deferred for U.S. federal income tax purposes, the ability of U.S. shareholders of the U.S. target to qualify for tax-deferral may depend on the activities the Canadian acquiror conducts in Canada (or other non-US jurisdictions). Under the general rule in Code Section 367(a), if a U.S. person transfers stock in a U.S. corporation to a Canadian corporation (as characterized for U.S. federal income tax purposes), such transfer will not be characterized as a tax-deferred exchange for U.S. federal income tax purposes (even if the transaction would otherwise...

Capital Markets

OTCQX International Rule Changes Will Push Certain Canadian Companies to the OTCQB Tier

The OTC Markets has published proposed rule changes that would, effective September 23, 2021, require that in order to be quoted on the OTCQX International, a company must either be an SEC reporting company, file reports with the SEC under the Regulation A+ reporting system, or be exempt from SEC reporting requirements by virtue of Rule 12g3-2(b).  Companies relying on the Rule 12g3-2(b) exemption must annually certify to the OTC Markets that they continue to comply with that exemption.  Another alternative, which had allowed companies to be quoted on the OTCQX International if they are exempt from SEC reporting requirements for other reasons, is being eliminated.  Companies previously relying on that exemption may...

Employment

OSHA Releases Updated Guidance on Mitigating and Preventing the Spread of COVID-19 in the Workplace

On August 13, 2021, the United States Occupational Safety and Health Administration (“OSHA”) released updated guidance on mitigating and preventing the spread of COVID-19 in the workplace to reflect changes in the Centers for Disease Control and Prevention (“CDC”) guidance for fully vaccinated individuals in response to the spread of the Delta variant.  The guidance serves to update OSHA’s June 10, 2021 COVID-19 workplace safety rule, but is advisory in nature and does not create any legal obligations for employers.  OSHA emphasized that vaccination is “the most effective way” to protect workers from the transmission of COVID-19 in the workplace, but now also recommends that all workers wear masks in public indoor settings...

Capital Markets / SEC Rulemaking / Securities

New NASDAQ Board Diversity Disclosure Rules

As discussed in more detail here, on August 6, 2021, the United States Securities and Exchange Commission (the “SEC”) approved NASDAQ Rules 5605(f) and 5606, which require each NASDAQ listed company (subject to certain narrow exceptions) to (i) publicly disclose, to the extent permitted by applicable law, information on the voluntary self disclosed gender, racial characteristics and LGBTQ+ status of the issuer’s board members, and (ii) have at least two “diverse” board members or explain why it does not have two diverse members meeting the applicable requirements. Issuers with five or fewer board members are required only to have one “diverse” board member. Canadian issuers that are NASDAQ listed are subject to the...

Capital Markets / Securities

The Lights Could Go Out on Over-the-Counter Companies on September 28, 2021

On September 28, 2021, companies trading in the United States over-the-counter securities markets (“OTC Markets”) that do not comply with amended Rule 15c-211 will no longer be eligible for quotation on the OTC Markets, effectively eliminating their public quotation in the United States. Amended Rule 15c-211 requires that broker-dealers obtain and review basic information about an issuer and its security before initiating or resuming quotation of a security in the OTC Markets. The amendments should have no effect on companies that are traded on a national securities exchange (i.e., NASDAQ, New York Stock Exchange, NYSE American, etc.), the OTCQX or OTCQB. Companies trading on the OTC Pink or OTC Grey Market will need...

Employment

New EEOC Guidance on COVID-19 Vaccinations in the Workplace

On May 28, 2021, the United States Equal Employment Opportunity Commission (“EEOC”) released new guidance regarding COVID-19 vaccinations in the workplace.  The new guidance clarifies some significant issues, including whether employers may require U.S. employees to be vaccinated (at least as a matter of U.S. federal law) and the types of incentives they may provide to vaccinated employees.  Employers must also comply with the significant number of new state laws that address these same issues, and in many cases, contradict the EEOC’s positions. I.                   Mandatory Vaccinations The EEOC confirmed that employers may require all employees physically entering the workplace to be vaccinated for COVID-19, but with important caveats.  The guidance reiterates the requirement...

M&A / Tax

President Biden’s Made in America Tax Plan Would Treat More Cross-border Transactions as Inversion Transactions

Generally, an “inversion” is a transaction in which a non-U.S. corporation directly or indirectly acquires substantially all of the properties held by a U.S. corporation or partnership, after which the former owners of that U.S. corporation or partnership are in control of the acquiring non-U.S. corporation. Inversion transactions can take many different forms.  Over the years, inversion transactions have continually drawn scrutiny, perceived to be transactions pursuant to which a U.S. company effectively changed its domicile to a non-U.S. jurisdiction and, accordingly, reduced its U.S. income tax liability. In response, Congress enacted the anti-inversion rules under Code Section 7874 as a means of discouraging inversion transactions and preserving the U.S. tax base. Under...