What is a conditional listing application (CLA)?

Like in other exchanges around the world, companies that seek to be listed at Canada’s Toronto Stock Exchange (TSX) must fulfil a list of requirements. In the bourse, the requirements are known as CLA.

What does CLA mean? 

CLA stands for conditional listing application. It is an interim step that a company must fulfil in the process of becoming a publicly-traded business on the TSX.

TSX, which was founded in 1852, is one of the largest stock exchanges in North America.

How does a conditional listing application (CLA) work?

The conditional listing application is a combination of the TSX listing agreement and the company’s prospectus. It is the second-to-last step before a complete listing is approved.

Companies must submit the TSX listing application and supporting papers such as the personal information form to be considered for a listing. Additionally, according to the regulatory criteria, resource companies must also present geological reports prepared by an independent and qualified third party.

The bourse will accept a TSX listing application cross-referenced to a long-form prospectus if companies additionally submit the relevant supporting documents and can establish that public distribution criteria have been met.

The TSX Listings Committee is responsible for approving all listing applicants. For complex or unique proposals, the committee may consult the Listings Advisory Committee, which comprises members of the securities sector.

Once the company’s application is approved for TSX listing, its legal counsel will receive a conditional approval letter outlining any outstanding filing requirements and a listing fee.

When the conditional listing application is approved, applicants will receive a listing ceremony invitation to celebrate their status as a newly listed company.

There are several listing methods on the TSX, including the traditional initial public offering (IPO), direct listing and Special Purpose Acquisition Vehicle (SPAC). For IPO, companies must first file a prospectus with the securities commission and then follow it with an application for public listing. 

A company already listed on another bourse may directly list on TSX provided they can meet TSX’s listing standards. As well, if these companies are listed on a TSX-recognised exchange with similar listing criteria, they may be eligible for specific regulatory and reporting exemptions.

Alternatively, applicants can also list at TSX via a SPAC. In the SPAC, seasoned directors and officers form a corporation that contains only cash. It does not have operations or assets. The SPAC is listed on TSX via an IPO, raising a minimum of $30 million. As much as 90% of the funds raised are placed in escrow. The funds must be used to acquire an operating company or assets within 36 months of listing, defined as a qualifying acquisition.