Filing a prospectus as part of the process of going public is a big milestone and an especially important step. To better understand what a prospectus is and what must be included, be sure to read the step by step guide that follows.
A prospectus is a formal document that is required by and filed with the Securities Commission. For your company to sell securities in the Canadian public markets, it must first file a receipt for both a preliminary prospectus and a final prospectus. The filing must be with the local provincial and territorial securities authorities in each Canadian jurisdiction where the offering is being made.
Within the prospectus, it is essential to contain full disclosure of all material facts concerning the securities being offered for sale. The prospectus must contain all of the information required under the applicable prospectus form. The essential information includes audited annual financial statements for the 3 most recently completed financial years and unaudited interim financial statements for any subsequent interim period.
The prospectus must also contain the price and number of the securities being offered. Note that while they are required, the information resulting from these amounts may be omitted from the preliminary prospectus. In all other aspects, the requirements for the preliminary prospectus and the final prospectus are the same.
Once the preliminary prospectus is filed and a receipt has been issued by the securities regulators, the company and underwriters can begin marketing the offering to investors. Once the securities regulators come back with comments in regard to the preliminary prospectus, and those comments are addressed by the company, the final prospectus can then be filed. At this time, the underwriters of the offering can begin accepting subscriptions from the interested investors.
Contents of a Prospectus
The prospectus form requires detailed disclosure in regard to the company and its securities, which include the following:
Cover Page – includes required disclosure regarding the offering and underwriters.
Table of Contents.
Summary of Prospectus.
Business Description - 3-year history of the business, with specific disclosure required depending on the industry.
Use of Funds - accurate analysis of how the funds will be utilized.
Dividends or Distributions - the company’s policy and history regarding distributions.
Management’s Discussion and Analysis – discussion of financial results shown within provided financial statements.
Earnings Coverage Ratios - important for companies with outstanding debt securities.
Description of the Securities.
Consolidated Capitalization - description of changes in capitalization from the most recent financial statements included in the prospectus.
We have been involved in helping many companies refine their prospectus and would love to hear any questions on this matter. Our expert team is ready to assist you in any way we can.