Qualifying Transaction

AAA

DEFINITION of 'Qualifying Transaction'

A type of transaction that occurs when a company issues public stock in Canada. A qualifying transaction occurs when a qualified Capital Pool Company (CPC) purchases all of the outstanding shares of a privately-owned company from the current shareholders. The private company then becomes a fully-owned subsidiary of the CPC.

INVESTOPEDIA EXPLAINS 'Qualifying Transaction'

Because the capital pool company will, by nature, have no business of its own, whatever line of trade that the private company engages in becomes the business of the CPC. Qualifying transactions usually formally begin when the shareholders and the CPC create a Letter of Intent (LOI) outlining the terms of the agreement. Usually, the CPC must include a plan for financing the transaction in every LOI.

RELATED TERMS
  1. Third-Party Transaction

    A third-party transaction is a business deal involving a buyer, ...
  2. Letter of Intent - LOI

    1. An agreement that describes in detail a corporation's intention ...
  3. Opening Transaction

    The act of initiating a trade. An opening transaction is the ...
  4. Cash Transaction

    A transaction that is settled with cash on the same day as the ...
  5. Junior Capital Pool - JCP

    A corporate structure whereby companies can issue shares to the ...
  6. Transaction

    1. An agreement between a buyer and a seller to exchange goods, ...
RELATED FAQS
  1. How do dividend distributions affect additional paid in capital?

    Whether a dividend distribution has any effect on additional paid-in capital depends solely on what type of dividend is issued: ... Read Full Answer >>
  2. Why can additional paid in capital never have a negative balance?

    The additional paid-in capital figure on a company's balance sheet can never be negative because companies do not pay investors ... Read Full Answer >>
  3. When does the fixed charge coverage ratio suggest that a company should stop borrowing ...

    Since the fixed charge coverage ratio indicates the number of times a company is capable of making its fixed charge payments ... Read Full Answer >>
  4. What is the difference between the return on total assets and an interest rate?

    Return on total assets (ROTA) represents one of the profitability metrics. It is calculated by taking a company's earnings ... Read Full Answer >>
  5. How does additional paid in capital affect retained earnings?

    Both additional paid-in capital and retained earnings are entries under the shareholders' equity section of a company's balance ... Read Full Answer >>
  6. How can EV/EBITDA be used in conjunction with the P/E ratio?

    Because they provide different perspectives of analysis, the EV/EBITDA multiple and the P/E ratio can be used together to ... Read Full Answer >>
Related Articles
  1. Options & Futures

    Combining Forex Spot And Futures Transactions

    The spot, futures and option currency markets can be traded together for maximum downside protection and profit.
  2. Taxes

    Avoiding "Prohibited Transactions" In Your IRA

    To avoid jeopardizing your IRA assets, find out what transactions are prohibited.
  3. Forex Education

    Mergers & Acquisitions: An Avenue For Profitable Trades

    When major corporate transactions have a big impact on the currency markets, you can benefit.
  4. Options & Futures

    Can IRA Transactions Trigger The Wash-Sale Rule?

    In 2008, the IRS said: Yes, they can. Find out what this means and how to avoid penalties.
  5. Taxes

    Recharacterizing Your IRA Contribution Or Roth Conversion

    Learn why you might make such a transaction and find out how to calculate how it will affect you.
  6. Fundamental Analysis

    Macau: Not Your Father's Gambling Destination

    Macau has given Las Vegas casinos a run for their money, but what's behind the scenes? Here's an overview of Macau's gambling industry.
  7. Investing

    Is There Still Opportunity in Japanese Stocks?

    Japanese stocks’ strong performance has prompted market watchers to question whether there’s still a case for adding exposure to the Land of the Rising Sun
  8. Fundamental Analysis

    American Express Returns Vs. DJ Industrial Average

    American Express has handily outperformed the Dow Jones Industrial Average since 2009, but unusual weakness in the last year is taking its toll.
  9. Fundamental Analysis

    Vice Can Be Nice: 4 Sin Stocks to Consider

    These four sin stocks are likely to be resilient during a bear market.
  10. Fundamental Analysis

    Apple’s Key Weaknesses

    While it seems that Apple is at the top of its game, several weaknesses have emerged that the company needs to address if it is going to stay on top.

You May Also Like

Hot Definitions
  1. Nuncupative Will

    A verbal will that must have two witnesses and can only deal with the distribution of personal property. A nuncupative will ...
  2. OsMA

    An abbreviation for Oscillator - Moving Average. OsMA is used in technical analysis to represent the variance between an ...
  3. Investopedia

    One of the best-known sources of financial information on the internet. Investopedia is a resource for investors, consumers ...
  4. Unfair Claims Practice

    The improper avoidance of a claim by an insurer or an attempt to reduce the size of the claim. By engaging in unfair claims ...
  5. Killer Bees

    An individual or firm that helps a company fend off a takeover attempt. A killer bee uses defensive strategies to keep an ...
  6. Sin Tax

    A state-sponsored tax that is added to products or services that are seen as vices, such as alcohol, tobacco and gambling. ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!