Module 10

Question 1

What are 5 key advantages of being a public company?

Answer 1

1) Access to capital
2) Higher Visibility
3) Enhanced liquidity
4) Improved Valuation
5) Increase employee Motivation and Retention

Question 2

What are the 6 Disadvantages of being a public company?

Answer 2

1) Significant Increased Costs
2) Disclosure Requirements
3) Risk of Thin Trading / Downward moving stock price
4) Short-Termism
5) Loss of Control
6) Exposure to Civil Liability

Question 3

What are the 5 Factors in Going Private

Answer 3

1) Illiquidity in Public Markets
2) Increased Regulation of Public Companies
3) Scrutiny of Public Companies
4) Risks of Litigation
5) Disadvantages of Going Private - long and costly process

Question 4

What 3 ways can a company go private?

Answer 4

1) Take-Over Bid
2) Squeeze-Out Merger
3) Private Companies can be Large & Successful (choose to go private)

Question 5

What is Rule 61-101 (Multilateral instrument - protection of minority security holders in special transactions)

Answer 5

This Rule addresses a somewhat unique feature of the Canadian marketplace, being the large number of public companies controlled by a single shareholder or group it is intended to level the playing field for minority shareholders where a significant shareholder could have an advantage by virtue of voting power or board representation / information

Question 6

What 4 specified types of transactions are addressed by the 61-101?

Answer 6

1) Insider bids - takeover bid by shareholders who own more than 10% of voting rights
2) Issuer Bids - Repurchase of stock by issuer in order to cancel is
3) Business Combinations - Transaction whereby equity ownership interest of a shareholder may be terminated without consent regardless of whether security is replaced with another (only if transaction involved related party of issuer and the party is not treated identically to others)
4) Related Party Transactions