By: Jayson Schwarz LLM
Every company (not a charity or not for profit) has shareholders. Shareholders are the owners of the company. The most common type of shares are “Common Shares”. These are the shares that represent the equity or ownership of the company. A company needs to have officers and directors. Directors set the strategy of the company and officers provide the management.
In order to accomplish certain goals often more money is needed then the founders of a company can put into the company. Often in start ups banks won’t lend money. One method of raising this money is to sell shares to the public. Once a company offers it shares to the public it then gets listed on a stock exchange. In Canada there are really 3 main stock exchanges – the Canadian Securities Exchange (“CSE”), the Toronto Venture Exchange (“TSX-V”) and the Toronto Stock Exchange (“TSX”). Once a company is listed its shares can be bought and sold through the exchange where it is listed.
To buy shares on the exchange you need to hire a stock broker (like my friend Andrew Rudensky at Richardson GMP Limited, 1 416 941 6748) or sign up for an online trading account on the net or through your bank.
In Canada to get listed a company usually has a long form prospectus and goes through many steps with very stringent and expensive requirements and then the underwriters and brokers and promoters can sell shares to the public as can the company directly.
Another way to buy shares is through something called a private placement. Private Placements are used to raise money using a shorter Subscription Agreement in order to sell shares to the Public under certain exemptions. As an example Organic Potash Corporation (CSE:OPC)(www.organicpotash.com) a company that manufactures 99%+ pure organic potassium carbonate from cocoa husks in Ghana, raised its initial capital through a private placement. In order to buy shares in a private placement you have to be an “Accredited Investor”. This means you have to promise to the company that either alone or with your spouse, you beneficially own, directly or indirectly, financial assets having an aggregate realizable value that before taxes, but net of any related liabilities, exceeds $1,000,000.00 or you are an individual whose net income before taxes exceeded $200,000 in each of the two most recent calendar years or whose net income before taxes combined with that of a spouse exceeded $300,000 in each of the two most recent calendar years and who, in either case, reasonably expects to exceed that net income level in the current calendar year;