What is ‘Qualifying Transaction’
A type of transaction that occurs when a company issues public stock in Canada. A qualifying transaction occurs when a qualified Capital Pool Company (CPC) purchases all of the outstanding shares of a privately-owned company from the current shareholders. The private company then becomes a fully-owned subsidiary of the CPC.
Explaining ‘Qualifying Transaction’
Because the capital pool company will, by nature, have no business of its own, whatever line of trade that the private company engages in becomes the business of the CPC. Qualifying transactions usually formally begin when the shareholders and the CPC create a Letter of Intent (LOI) outlining the terms of the agreement. Usually, the CPC must include a plan for financing the transaction in every LOI.
Further Reading
- The economics of Islamic finance and securitization – jsf.pm-research.com [PDF]
- Reduction of financial instrument volatility – patents.google.com [PDF]
- Reporting on financial derivatives–A Law and Economics perspective – link.springer.com [PDF]
- Bypassing the financial growth cycle: Evidence from capital pool companies – www.sciencedirect.com [PDF]
- Finance in the Courtroom: Appraising Its Growing Pains – papers.ssrn.com [PDF]
- Money in the bank: Transaction costs and the economic organization of marriage – www.jstor.org [PDF]
- Entrepreneurial Finance and Economic Growth: A Canadian Overview – papers.ssrn.com [PDF]
- Reduction of financial instrument volatility – patents.google.com [PDF]
- Financial derivatives in corporate tax avoidance: A conceptual perspective – meridian.allenpress.com [PDF]
