Junior Capital Pool - Explained
What is a Junior Capital Pool?
Written by J. Mance Gordon
Updated at April 23rd, 2024
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What is a Junior Capital Pool?
A junior capital pool (JCP) is a corporate structure that allows a company to issue its shares or stock options to the public before going into an actual business. JCP also refers to a company that engages in such an act. When a company goes public (issues stock options) before having an operational business structure, a junior capital pool exists. JCP as a corporate practice is peculiar to Canada, it was first invented in Alberta, Canada and it only exists on Toronto's TSX Venture Exchange. The goal of a JCP is to provide a capital structure through which start-ups or emerging companies can easily raise funds for business operations.
How Does a Junior Capital Pool Work?
A junior capital pool (JCP) is a form of corporate financing that started in Canada, it was first invented in the oil and gas industry. It serves as a alternative way startups can raise money to go public. Undergoing a JCP requires that an emerging firm or a startup gets a minimum of $100,000 as investment from founders and then issues its shares to the public in order to gain additional funds to start its business operation. A junior capital pool has a structure that allows the founders of a company to fund it with a minimum of $100,000 before such a company is listed on the stock exchange (Canadain exchange). This corporate structure allows young startups that are yet to have a line of business operation to go public. JCPs have a lot of risks given that the companies have to means of income yet. The first JCP was invented in Alberta and was listed on the Alberta Stock Exchange.