SPAC Talk: Important Considerations for Private Companies Evaluating a SPAC Going-Public Transaction

One of the hottest going-public trends in 2020 and 2021 has been the rise of SPACs – Special Purpose Acquisition Companies – as a vehicle for private companies to go public. SPACs are shell companies that are formed, funded and taken public for the purpose of later acquiring an operating company. By merging with a SPAC, the private company effects a reverse takeover, inheriting the SPAC’s existing cash and taking over its management. SPAC mergers have quickly increased from being occasional to outpacing the number of traditional IPOs. A SPAC merger involves different players that can have different motivations than a traditional IPO. In a traditional IPO, a private company may slowly prepare...

UK to Adopt New Powers Over M&A Activity to Protect National Security

Draft legislation currently being debated in the UK Parliament will introduce a new regime similar to that of the Committee on Foreign Investment in the United States (“CFIUS”) while maintaining the UK’s position as an attractive forum for business and an openness to foreign investment. While the National Security and Investment Act (“NSIA”) will not come into effect until later this year, it will have retroactive effect from November 12, 2020. It is therefore important that entities contemplating any transaction which has a UK element and is likely to come within the ambit of the new law obtain advice now to assess whether that transaction may be at risk of challenge once NSIA...

Critical Reporting Obligation: Canadian-Owned U.S. Corporations and Disregarded Entities

Canadian persons and entities owning a significant interest in a U.S. corporation or U.S. entity classified as a “disregarded entity” for U.S. federal income tax purposes should ensure they are compliant with IRS Form 5472 filing requirements to avoid substantial U.S. federal income tax penalties. IRS Form 5472, “Information Return of a 25% Foreign-Owned U.S. Corporation or a Foreign Corporation Engaged in a U.S. Trade or Business” must be filed by: (i) any U.S. corporation which has a Canadian shareholder that owns, directly or indirectly, 25% or more of the voting power or value of that corporation; (ii) any U.S. entity classified as a “disregarded entity” for U.S. federal income tax purposes that...

Managing Workplace Safety in the COVID-19 Era

The workplace safety framework in the United States is difficult to navigate at its best.  Since the beginning of the COVID-19 global health emergency, employers have faced increasingly complex challenges involving inconsistent and conflicting guidance regarding workplace safety regulations and best practices.  Since taking office in January 2021, the Biden administration has initiated the process of clarifying rules and advice to employers regarding COVID-19 safety measures. Employers with operations in the U.S. should monitor these developments, with particular attention to the Occupational Safety and Health Administration (“OSHA”) and the feasibility of COVID-19 liability waivers. I.  Occupational Health & Safety On January 21, 2021, President Biden signed his Executive Order on Protecting Worker Health...

FINRA Provides Informal Guidance for Canadian Issuers

The Financial Industry Regulatory, Inc. (“FINRA”) has recently provided our firm with informal guidance that, in accordance with the principles of the multijurisdictional disclosure system (“MJDS”), a Canadian issuer that is undertaking a U.S. registered public offering may count its reporting history in Canada (along with any reporting history in the United States) toward the 36 month requirement in FINRA Rule 5110.  This has the effect of providing an exemption from filing with FINRA for Canadian issuers with a combined Canadian and U.S. reporting history of at least 36 months, even if they have a shorter reporting history in the United States.  This guidance will save qualifying Canadian issuers the time and financial...

Recent Hart-Scott Rodino Developments

Canadian companies engaged in M&A transactions with connections to the United States should be aware of recent changes to the rules under the Hart-Scott Rodino (HSR) Act. On February 2, 2021, the US Federal Trade Commission (FTC) announced the annual adjustment of the thresholds that trigger premerger reporting obligations (and the mandatory waiting period) under the HSR Act. The new thresholds will apply to transactions closing on or after March 4, 2021 (that is, 30 days after publication of the announcement in the Federal Register). This year, for the first time in a decade, the thresholds decreased. You can find a detailed discussion of the recent developments here. In addition, the FTC and Department of...

Often Overlooked Exception to Withholding and Reporting Requirements under FATCA

An often overlooked exception to U.S. withholding taxes may result in a lower overall U.S. tax burden. The Foreign Account Tax Compliance Act (“FATCA”) was enacted in an effort to ensure that U.S. taxpayers could not avoid U.S. federal income tax on investment income through the use of non-U.S. accounts or entities. FATCA requires that certain foreign financial institutions (“FFIs”) and nonfinancial foreign entities (“NFFEs”) comply with information reporting requirements intended to identify U.S. account holders or U.S. owners. FFIs generally include banks, investment companies or similar financial institutions, and certain non-U.S. trusts while NFFEs generally include any entity that is not a financial institution. Under FATCA, a withholding agent that does not...

The COVID-19 Vaccine – Next Steps for Canadian Employers with U.S. Operations

The United States is currently experiencing the largest surge in COVID-19 cases since the global health emergency began.  In the past several weeks, the United States Food and Drug Administration (“FDA”) granted emergency-use authorization to the Pfizer and Moderna COVID-19 vaccines, prompting employers to ask whether they may require employees to be vaccinated. It is imperative that Canadian employers understand their rights and responsibilities with regard to the vaccination of U.S.-based employees. A.  Can Employers Require Employees to Receive the Vaccination? Generally speaking, employers may disallow employees from entering the workplace if they have not been vaccinated, though employers must accommodate employees with disabilities or religious objections.  On December 16, 2020, the Equal...

U.S. Department of Labor Rule Broadens the Classification of Independent Contractors

The United States Department of Labor (DOL) has issued a proposed rule addressing the definition of “independent contractor” in the context of the Fair Labor Standards Act (FLSA). Canadian companies with a presence in the United States should monitor the proposed rule and its impacts on their American operations.  If adopted, the proposed rule would loosen restrictions on classifying workers as independent contractors for purposes of the FLSA and provide more flexibility for Canadian organizations. While some states have adopted the DOL’s approach to independent contractor classification, others, such as Washington and California, have adopted more restrictive rules.  Employers should be sure to confirm the laws regarding independent contractor classification in the states...

“ECI” and its Trap for Unwary Canadian Investors in Partnerships and LLCs

A Canadian which holds a partnership interest in a U.S. or non-U.S. partnership that has “effectively connected income” (“ECI”) is subject to U.S. tax withholding with respect to the Canadian partner’s allocable share of the partnership’s ECI.  That withholding tax must be remitted by the partnership to the IRS irrespective of whether any distributions are made by the partnership in that tax year and irrespective of the Canadian partner’s ultimate U.S. federal income tax liability for that tax year.  For this purpose, a “partnership” includes any entity classified as a partnership for U.S. tax purposes, including a limited liability company or “LLC” classified as a partnership. ECI generally includes all income from U.S....