What Is Form 40-F and How Does It Work?

Companies that are publicly traded in Canada but want to access U.S. investors must comply with reporting requirements set by the Securities and Exchange Commission (SEC). Form 40-F allows eligible Canadian companies to register securities or fulfill annual reporting obligations under U.S. regulations.

Understanding this form helps businesses expand their investor base while staying compliant with both Canadian and U.S. financial disclosure standards.

Eligibility Criteria

Only certain Canadian companies can use Form 40-F. To qualify, a company must be a “foreign private issuer” under SEC Rule 3b-4. This means less than 50% of its voting securities are held by U.S. residents, and it does not have a majority of executive officers or directors based in the United States. Companies that do not meet these conditions must follow the more extensive reporting requirements for domestic U.S. issuers.

The company must be listed on a Canadian stock exchange, such as the Toronto Stock Exchange (TSX) or the TSX Venture Exchange, and comply with Canadian securities regulations set by the Canadian Securities Administrators (CSA). This ensures financial statements and disclosures submitted to the SEC align with Canadian requirements, reducing redundant reporting.

Additionally, the company must be a “reporting issuer” in at least one Canadian province or territory, meaning it is subject to ongoing disclosure obligations under Canadian securities laws. This includes submitting annual and interim financial statements. The SEC relies on Canadian regulatory oversight for transparency, making adherence to domestic reporting standards essential.

Filing Steps

Submitting Form 40-F requires coordination to comply with SEC regulations while aligning with Canadian disclosure practices. The process starts with gathering required documentation, primarily reports already filed with Canadian securities regulators. Since the SEC permits eligible companies to use these filings, much of the effort involves formatting them correctly for submission.

Documents must be submitted electronically through the SEC’s EDGAR system. Companies need an active EDGAR account, which requires obtaining login credentials through a Form ID application if they have not previously filed with the SEC. The submission must follow SEC formatting requirements, including the use of eXtensible Business Reporting Language (XBRL) for financial data when applicable. Errors in formatting or missing attachments can cause delays or rejections, making a thorough review essential before filing.

Timing is critical. For companies using Form 40-F to meet ongoing reporting obligations under the Exchange Act, the filing is due within 90 days of the fiscal year-end. If the form is for securities registration under the Securities Act, additional disclosures may be required, and timing depends on the registration process. Late filings can result in penalties, loss of eligibility for streamlined reporting, and increased regulatory scrutiny.

Required Disclosures

Form 40-F requires financial and managerial disclosures to ensure transparency for U.S. investors. These largely mirror Canadian regulatory requirements but must be formatted to meet SEC standards. Key components include financial statements, management commentary, and additional attachments providing further context on the company’s operations and risks.

Financial Statements

Financial statements must comply with either U.S. Generally Accepted Accounting Principles (GAAP) or International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB). Most Canadian public companies report under IFRS, which the SEC accepts without requiring reconciliation to U.S. GAAP. However, companies must ensure their IFRS financials meet SEC disclosure requirements, which may involve additional notes or explanations.

The filing must include audited annual financial statements covering the most recent fiscal year, along with comparative figures from the prior year. These statements typically consist of a balance sheet, income statement, statement of cash flows, and statement of shareholders’ equity. The audit must be conducted by an independent accounting firm registered with the Public Company Accounting Oversight Board (PCAOB) to ensure compliance with U.S. auditing standards. If the auditor’s report contains concerns about the company’s ability to continue as a going concern, this must be disclosed.

Management Commentary

Beyond financial data, Form 40-F requires a section similar to the Management’s Discussion and Analysis (MD&A) filed with Canadian regulators. This section provides context for financial statements by explaining performance, risks, and future outlook. The SEC expects a thorough discussion of factors influencing revenue, expenses, and profitability, including market conditions, regulatory changes, and operational challenges.

Companies must disclose known trends or uncertainties that could materially impact future results. For example, if a company operates in a commodity-driven industry, it should discuss how fluctuations in raw material prices affect margins. Pending legal or regulatory matters that could lead to significant costs must also be addressed. The SEC places particular emphasis on liquidity and capital resources, requiring companies to explain their ability to meet short-term and long-term financial obligations, including available credit facilities, debt maturities, and anticipated capital expenditures.

Additional Attachments

Form 40-F requires supplementary documents that provide further insight into governance and risk factors. One key attachment is the Annual Information Form (AIF), a document filed with Canadian regulators outlining business operations, competitive landscape, and legal proceedings. The SEC mandates its inclusion to ensure U.S. investors have access to the same level of detail as Canadian shareholders.

Companies must also submit CEO and CFO certifications under the Sarbanes-Oxley Act (SOX), specifically Sections 302 and 906. These confirm the accuracy of financial statements and the effectiveness of internal controls over financial reporting. If material weaknesses exist, they must be disclosed with a remediation plan. Additional exhibits may include material contracts, corporate governance policies, and agreements with significant shareholders or lenders. These attachments help investors assess financial health and operational risks.

Cross-Border Requirements

Canadian companies filing Form 40-F must navigate regulatory differences between Canada and the U.S. Unlike Canadian filings, which rely on principles-based disclosure, the SEC enforces more prescriptive requirements, including strict liability for material misstatements under Rule 10b-5 of the Securities Exchange Act. Inaccuracies or omissions could expose companies and executives to shareholder lawsuits or enforcement actions in the U.S., where securities litigation is more common and costly.

Corporate governance expectations also differ. The SEC’s rules, particularly under the Sarbanes-Oxley Act (SOX), require more rigorous internal control assessments, increasing compliance costs. For example, Section 404 of SOX mandates management assess and report on the effectiveness of internal controls over financial reporting, with larger issuers requiring independent auditor attestation. Canadian governance frameworks, such as National Instrument 52-109, have similar requirements but do not impose the same level of auditor involvement, meaning companies may need to adjust compliance processes when entering the U.S. market.

Tax implications also play a role. U.S. withholding tax rules under the Internal Revenue Code (IRC) affect dividend distributions to American shareholders, particularly under Sections 871 and 881, which impose a 30% tax on certain payments to foreign entities unless reduced by a tax treaty. The Canada-U.S. Tax Treaty generally lowers this rate to 15% for most corporate dividends, but companies must properly document shareholder residency to apply the reduced rate. Failure to do so can result in excess withholding, leading to administrative burdens for both the company and investors seeking refunds.

Consequences of Noncompliance

Failing to properly file Form 40-F or omitting required disclosures can lead to regulatory and financial repercussions. The SEC enforces strict compliance standards, and companies that do not meet these obligations risk penalties, trading restrictions, and potential legal action. Noncompliance can also erode investor confidence, making it harder to raise capital in U.S. markets.

One immediate consequence is the potential loss of eligibility to use Form 40-F for streamlined reporting. Late or incomplete filings may require companies to follow the more extensive reporting requirements for domestic U.S. issuers, such as filing Form 10-K instead. This increases compliance costs and administrative burdens, as Form 10-K requires more detailed disclosures. Additionally, companies that fail to file within required deadlines may face automatic deregistration under Rule 12h-3 of the Exchange Act, which can result in the loss of access to U.S. capital markets.