A qualifying transaction is a process in which a private company in Canada goes public with the intent to raise capital for commercial purposes.
The qualifying transaction involves the creation of a capital pool company (CPC) that acquires all outstanding shares of a private company, making it a subsidiary and a public company.
CPC is responsible for selling shares and raising capital while complying with the rules and regulations regarding the qualifying transaction.
The CPC must meet the qualification requirements for the deal within 24 months of its inception, which includes filing a prospectus and filing an application on the TSX Venture Exchange.
A qualifying transaction is the most common form of public offering on the TSX Venture Exchange, especially when compared to an initial public offering (IPO).