New “Go Public” Platform for Mid-Market Growth Companies: NEO Exchange Unveils G-Corp™ Pilot Program

The NEO Exchange Inc. (“NEO”) has introduced a new pilot program (the “Program”) for a publicly-traded vehicle known as a Growth Acquisition Corporation™ (the “G-Corp”), designed by NEO to enable private mid-market growth companies with an enterprise value between C$50 million and C$500 million to access capital and go public with substantially reduced risks, including the elimination of the well-known “redemption risk” associated with special purpose acquisition companies (“SPACs”). The Program is NEO’s answer to the well-established capital pool company program created by the TSX Venture Exchange.

NEO’s existing SPAC program designed for senior issuers has informed the structure of the Program, which leverages the existing SPAC rules and framework, subject to certain waivers and additional requirements specifically tailored to the G-Corp. Requirements are determined by NEO staff on a case-by-case basis, depending on the particular features of the G-Corp.

Key Features of the Program

NEO imposes certain threshold requirements for G-Corp vehicles, namely:

  • Minimum IPO of at least C$2 million and up to C$30 million, with all IPO Proceeds held in Escrow

    The G-Corp must file a prospectus to complete its initial public offering of shares or units (the “IPO”) to raise minimum aggregate proceeds of C$2 million up to a maximum of C$30 million, the entirety of which must be held in escrow for the purpose of identifying one or more target businesses and funding the G-Corp’s qualifying transaction (the “QT”).

  • 20% Limitation on Founders Equity following IPO, other than Securities Purchased at the IPO Price

    The founders’ equity ownership in the G-Corp cannot exceed 20% following the closing of the IPO, excluding any securities purchased at or prior to the closing of the IPO at not less than the IPO price.

  • Founders to Fund C$300,000 of Working Capital on Closing of IPO

    Founders must purchase securities in an amount sufficient to ensure the G-Corp has at least C$300,000 of free working capital upon the closing of its IPO.

  • 24 Month Limit to Identify Target Business(es), 27 Month Limited to Complete Acquisition(s)

    After completing its IPO, the G-Corp must identify a QT within 24 months of the IPO and complete the QT within 27 months of the IPO. If the G-Corp fails to complete the QT within the mandated timeframe, the escrowed proceeds will be returned to investors on a pro rata basis.

  • QT Requires Filing of Prospectus and Shareholder Approval – No Redemption Feature

    In order to complete its QT, the G-Corp must file an additional prospectus and information circular for the purpose of obtaining shareholder approval. While there is no redemption feature at the time of the QT, the QT is subject to the receipt of shareholder approval, excluding any holders of non-IPO securities.

  • Post-QT C$30 million Minimum Market Capitalization

Following completion of the QT, the resulting issuer must have a market capitalization of at least C$30 million and meet the NEO’s initial listing standards that are applicable to senior (Tier 1) issuers listed on NEO.

How to become a G-Corp Founder?

In order to take advantage of the Program and act as a founder of a G-Corp, applicants must schedule a pre-filing meeting with NEO staff in order to assess the prospective issuer’s eligibility for the Program. As a management team, founders of a G-Corp must have previous experience with pooled capital vehicles and/or private equity.

If a management team is considered by NEO staff to be eligible for the Program, NEO staff will request a waiver submission from the management team outlining the proposed structure of the G-Corp. A waiver will be required in connection with, among other matters, the minimum public float requirement, and removal of the redemption features and associated escrow requirements under the NEO rules. After resolving any comments provided by NEO staff, the NEO co-ordinates concurrence with the Ontario Securities Commission (the “OSC”) on the suitability of the waiver. The OSC may request the applicant to pre-file a prospectus prior to NEO receiving OSC concurrence regarding the requested waivers. Upon receipt of OSC concurrence, NEO staff will request the applicant to file a prospectus with the OSC, to the extent it has not been done already, disclosing the waivers granted in connection with the listing of the G-Corp, and provide NEO staff with initial listing materials.

SPAC vs. G-Corp

Below is a comparison between NEO listing standards applicable to SPAC and G-Corp vehicles:

Listing Standard



Minimum Price

Both a G-Corp and SPAC are subject to a minimum price of C$2 per security.

Minimum Distribution

Both a G-Corp and SPAC must have a public float of 1 million securities together with a minimum of 150 public security holders each holding a board lot.

Value of Public Float

The expected public float market value must be at least C$30 million at the time of listing in the case of a SPAC.

A G-Corp must apply for a waiver to allow for a total initial raise of minimum of C$2.5 million, comprising a minimum of C$500,000 from the founders and a minimum of C$2 million from the public IPO.

Working Capital

While a SPAC and G-Corp both must have sufficient working capital to fund operations, the founders of a G-Corp must also purchase securities in an amount sufficient to ensure at least C$300,000 of free working capital upon closing of the IPO. The founders may do so concurrently with the completion of the IPO. To the extent the G-Corp requires additional funding for ongoing expenses, the G-Corp may obtain an unsecured loan from its founders or complete a rights offering of shares.

Redemption Feature

Shares or units of SPACs proposed to be listed on the NEO must contain a redemption feature, pursuant to which shareholders (other than founding security holders) may, in the event a QT is completed within the permitted timeframe, elect that each share or unit held be redeemed.

There is no redemption feature in the case of a G-Corp; instead, the completion of the QT is subject to the affirmative vote of shareholders, excluding votes held by founders.

Escrowed Funds

A SPAC must place into escrow at least 90% of the gross proceeds raised in its IPO or subsequent rights offering, including 50% of the underwriters’ commission relating to the IPO.

A G-Corp must place into escrow 100% of the gross proceeds raised in its IPO or subsequent rights offering, including 50% of the underwriters’ commission relating to the IPO.

Shareholder Approval

In the case of a SPAC, the QT must generally be approved by a majority of directors unrelated to the QT and a majority of shareholders at a duly called meeting. However, if 100% of the gross proceeds raised in a SPAC’s IPO, including any subsequent financings, are placed into escrow, the shareholder approval requirement can be avoided.

For a G-Corp, the QT will be subject to shareholder approval in all cases. In addition, founding security holders of the G-Corp cannot vote on the QT.

Qualifying Transaction Disclosure

A prospectus may be required in connection with the QT even if shareholder approval is not required. If shareholder approval is required (if 100% of the gross proceeds of the IPO are not in escrow), or if elements related to the QT require shareholder approval (such as the adoption of a new stock option plan, or amendments to constating documents), an information circular will be required in connection with the QT.

A prospectus and an information circular will be required in connection with the QT.

Permitted Time for Completing Qualifying Transaction

A SPAC is required to complete the QT within 36 months following the closing of the IPO (or shorter if specified in its IPO prospectus).



G-Corp will have up to 24 months to identify and complete a QT. A G-Corp may extend the timeline by up to three months in order to complete a QT that is already in progress. Failure to complete the QT within the permitted timeframe will result in a liquidation distribution to shareholders.

Value of Qualifying Transaction

A SPAC must complete a QT with an aggregate fair market value of at least 80% of the value of the escrowed funds (excluding any deferred underwriters’ commissions and any taxes payable on interest or other proceeds earned on the escrow account at the time of entering into a definitive agreement).

A G-Corp is expected to complete a QT resulting in an issuer with a market capitalization of at least C$30 million.

Permitted Founder Compensation

For both a SPAC and a G-Corp, NEO will consider compensation measures proposed by founders provided that they: (i) are non-recourse to the escrowed proceeds; (ii) only become payable in connection with the closing of a QT; and (iii) are disclosed in the IPO prospectus.

NEO is willing to consider a percentage success fee based on the market capitalization of the resulting issuer or the size of the QT, although this may be considered novel from the perspective of securities regulators. Currently, NEO will permit payment of: (i) a monthly cash fee to a G-Corp sponsor as compensation for the provision of administrative and related services to help facilitate a QT; (ii) a retainer to directors of a G-Corp; and (iii) advisory fees by a target to affiliates of the G-Corp sponsor in connection with a QT. NEO will also permit reimbursement of founders for any out-of-pocket expenses.

Debt Financing

A SPAC is prohibited from obtaining any form of debt financing other than through unsecured loans on reasonable commercial terms, up to a maximum aggregate principal amount equal to 10% of the escrowed proceeds, repayable in cash no earlier than the closing of the QT or which may be convertible into shares and/or warrants in connection with the closing of the QT, provided that such limit is disclosed in the IPO prospectus.

In the case of a G-Corp, NEO will consider on a case-by-case basis a waiver from this requirement given the smaller sum of escrowed proceeds, provided that in all cases any loan is non-recourse to the escrow proceeds.