It’s that time of year again — and no, not tax season or cottage season. For Canadian public companies with U.S. reporting obligations, the end of Q2 means it’s time to test your Foreign Private Issuer (FPI) status under U.S. securities laws.
This isn’t a “nice-to-have” compliance check. For Canadian companies listed in the U.S., June 30, 2025, is the mandatory annual checkpoint. For Canadian companies without a US listing, knowing your FPI status is still important for purposes of ensuring your “offshore transactions” are properly structured.
Why It Matters
Foreign private issuers benefit from a much lighter regulatory burden under U.S. federal securities laws:
* No Form 10-Qs or Form 8-Ks
* Exemption from U.S. proxy rules
* Can report under IFRS (without reconciliation to U.S. GAAP)
* Relaxed filing requirements (e.g., 6-K instead of 8-K)
Lose that status, and you’re suddenly subject to the same disclosure rules as a U.S. domestic issuer.
The Tests: A Quick Refresher
You qualify as an FPI if:
- Incorporated Outside the U.S., and
- You either:
- Have 50% or less of your voting securities held of record by U.S. residents, or
- If more than 50% of your voting securities are held by U.S. residents, you have none of the following contacts with the United States:
- Majority of executive officers/directors are U.S. citizens or residents;
- More than 50% of assets are in the U.S.; or
- Business is administered principally in the U.S.
Canadian issuers often find themselves in a grey zone — especially those with U.S. board members, U.S. operations, or a shareholder base split across borders. In these cases, it’s critical to document your methodology and apply your tests consistently year-over-year.
Canadian-Specific Pitfalls
- Cross-Border Float: The look-through requirement to determine U.S. record ownership is limited to three jurisdictions — Canada, the U.S., and your primary trading market (e.g., TSX or NYSE).
- Dual Citizens: Directors or officers with dual U.S.-Canadian citizenship count as U.S. for FPI purposes.
- Officer Location Drift: Even if incorporated in Alberta, if your executive team is Zooming in from Houston, you may fail the administration test.
- Asset Rebalancing: IP held in Delaware or sales hubs in the U.S. could tip the balance — even if your headquarters remain in Toronto.
What You Should Be Doing Now
- Run the Numbers: Start with your cap table and DTC participant analysis. If more than 50% of voting securities are held of record by U.S. residents, move on to the second test.
- Check Residency: Scrutinize your board and C-suite. Don’t forget Green Card holders count as U.S. residents.
- Map Your Assets: Use segment reporting under IFRS, but don’t stop there. Consider where your key intangibles (e.g., IP, customer contracts) are located.
- Evaluate “Principal Administration”: It’s not just about HQ signage — it’s about where decisions are made.
If You’re on the Line
If you’re close to tripping one of the tests, now is the time to act. Consider:
- Refreshing board composition or executive offices
- Moving IP or operations back to Canada
- Documenting a robust, reasonable, and consistently applied FPI assessment policy
Looking Ahead
Failing the FPI test as of June 30, 2025, means U.S. domestic issuer compliance kicks in on January 1, 2026 — with no grace period. That includes Form 10-Qs, Form 8-Ks, proxy statements, and accelerated filing deadlines. Preparation needs to start now if you suspect your status may change.
We’re advising Canadian clients to treat FPI testing not as a passive checkpoint, but as an active governance item in Q2 board agendas — particularly in anticipation of future SEC scrutiny or a U.S. transaction.
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Need help assessing your FPI status or documenting your methodology? Book a consultation with our cross-border securities team.