Getting the Deal Through â Private Equity 2012 â Fund ... - Gowlings

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Gowling Lafleur Henderson LLPIn practice, however, so long as the raising of any private equity fund’scapital and the investing of that money in portfolio companies areoccasional and uncompensated activities of a typical private equityfund (as described in question 12) or its manager, registration as adealer will not be required, provided that no other entity that is inthe business of trading in securities is involved in the marketing andsale of interests to Canadian investors.28 Money launderingDescribe any money laundering rules or other regulations applicable inyour jurisdiction requiring due diligence, record keeping or disclosure ofthe identities of (or other related information about) the investors in aprivate equity fund or the individual members of the sponsor.Canada imposes anti-money laundering requirements on marketparticipants with the purposes of identifying customers, keepingappropriate records, establishing internal procedures to train staffand guard against money laundering and reporting any indication ofmoney laundering to the applicable authorities. Transactions involvingmore than C$25 million may be effected only by wire transfer.These laws are of general application and are not specific to privateequity funds and members of the sponsor.Exchange listing29 ListingAre private equity funds able to list on a securities exchange in yourjurisdiction and, if so, is this customary? What are the principal initialand ongoing requirements for listing? What are the advantages anddisadvantages of a listing?In theory, private equity funds are able to list on the Toronto StockExchange (TSX) or its junior exchange, TSX Venture Exchange(TSX-V), though they would then cease to be known as a privateequity fund but rather as a listed limited partnership. Such listingsare rare for a variety of reasons, including the costs involved, specifictax rules, the ongoing continuous disclosure obligations and thecorporate governance requirements. TSX listing fees, including legal,accounting and other fees, may add up to more than C$800,000,Canadawhereas TSX-V listing fees may range from C$100,000 to morethan C$200,000. Benefits of listing may include access to capital andfuture financing opportunities, increased visibility and liquidity forlimited partners.30 Restriction on transfers of interestsTo what extent can a listed fund restrict transfers of its interests?The limited partnership agreement for a listed fund may include aprovision stating that if the fund becomes aware of any restrictedtransfers, the fund can effectively force the sale of the interests.Participation in private equity transactions31 Legal and regulatory restrictionsAre funds formed in your jurisdiction subject to any legal or regulatoryrestrictions that affect their participation in private equity transactionsor otherwise affect the structuring of private equity transactionscompleted inside or outside your jurisdiction?There are no legal or regulatory restrictions that would uniquelyaffect the ability of a private equity fund to participate in privateequity transactions. The funds should be aware of the laws of generalapplication such as the Competition Act (Canada’s antitrust law), theInvestment Canada Act and legislation limiting foreign ownership incertain sectors (for example, financial services, telecommunicationsand media).32 Compensation and profit-sharingDescribe any legal or regulatory issues that would affect thestructuring of the sponsor’s compensation and profit-sharingarrangements with respect to the fund and, specifically, anythingthat could affect the sponsor’s ability to take management fees,transaction fees and a carried interest (or other form of profit share)from the fund.This is not a regulatory matter, but rather a matter of negotiationbetween the fund’s sponsor and the principal investors; however,there are potential tax considerations concerning such structuring.FUND FORMATIONwww.gettingthedealthrough.com 33
®Annual volumes published on:Air TransportAnti-Corruption RegulationArbitrationBanking RegulationCartel RegulationClimate RegulationConstructionCopyrightCorporate GovernanceCorporate ImmigrationDispute ResolutionDominancee-CommerceElectricity RegulationEnforcement of ForeignJudgmentsEnvironmentForeign Investment ReviewFranchiseGas RegulationInsurance & ReinsuranceIntellectual Property & AntitrustLabour & EmploymentLicensingLife SciencesMerger ControlMergers & AcquisitionsMiningOil RegulationPatentsPharmaceutical AntitrustPrivate Antitrust LitigationPrivate EquityProduct LiabilityProduct RecallProject FinancePublic ProcurementReal EstateRestructuring & InsolvencyRight of PublicitySecurities FinanceShipbuildingShippingTax on Inbound InvestmentTelecoms and MediaTrademarksVertical AgreementsFor more information or topurchase books, please visit:www.gettingthedealthrough.comThe Official Research Partner ofthe International Bar AssociationStrategic research partners ofthe ABA International sectionprivate equity 2012 iSSN 1746-5524
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Getting the Deal Through â Private Equity 2012 â Fund ... - Gowlings