A “reverse merger” occurs when a private company acquires a majority of a publicly trading company’s shares, allowing the private company to bypass the prospectus or registration statement filing process of going public.

For United States OTC Bulletin Board companies, this allows the private company to commence trading as a public company upon completion of the merger transaction (ie. once the private company shareholders have exchanged their shares for shares in the public company). While additional filings are required in order for the merged company to meet securities law disclosure obligations, it is immediately able to raise additional financing for its business operations.

For Canadian TSX Venture Exchange companies, the merger process is more complicated and time consuming. The announcement of a reverse takeover transaction will result in a brief halt in trading of the public company’s shares, the requirement to obtain a sponsoring broker and various regulatory filing obligations. The private company is only able to obtain limited financing from the public company during this process.

Because this method is more expensive and complex than the United States reverse merger process, we recommend that companies pursue reverse mergers in the United States, unless they have a valid reason for preferring the Canadian marketplace.

“By taking advantage of the reverse merger procedure in the United States, you can be trading as a public company in a matter of days. While this process is more expensive, it is almost immediate.”

– Chairman of the Board