Timely Disclosure

Timely Disclosure

Updates and Commentary on Current issues in M&A, Corporate Finance and Capital Markets

Total Energy’s Take-over Bid for Savanna Energy: Developments and Defensive Tactics



On November 23, 2016, Total Energy Services Inc. (Offeror) disclosed its intention to make an offer (Offer) to purchase all of the issued and outstanding common shares (Target Shares) of Savanna Energy Services Corp. (Target) for consideration consisting of common shares of the Offeror (Offeror Shares).

The Target responded in two press releases, dated November 24, 2016 and November 28, 2016, in which the Target indicated that any change of control on or before June 13, 2017 would result in all amounts (approximately $105 million) outstanding under a recently implemented term loan (Term Loan) becoming immediately due and payable plus a change of control fee in the amount of 3% of the $200 million commitment amount (approximately $6 million) (Loan Fee).

The Offeror filed its take-over bid circular (Bid Circular) outlining the Offer on December 9, 2016 and filed support agreements from significant shareholders of the Target representing approximately 43% of total number of issued and outstanding Target Shares.

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The TSX Venture Exchange Relaxes Shareholder Approval Policies for Reverse Takeovers and Changes of Business

Amendments to TSXV Corporate Finance Policy 5.2 – Changes of Business and Reverse Takeovers

On December 15, 2016, the TSX Venture Exchange (Exchange) published amended Policy 5.2 of the TSX Venture Exchange Corporate Finance Manual (Policy 5.2), which formalized its March 2015 guidance (March 2015 Guidance) on the specific circumstances where the Exchange may waive the requirement for shareholders’ approval for changes of business (COB) or reverse takeover (RTO) transactions. The March 2015 Guidance advised issuers that the Exchange may exercise its broad discretion to waive shareholders’ approval for COB or RTO transactions when such transactions are not related party transactions, the issuer is without active operations, and the issuer is in good standing with the Exchange. The stated purpose of the policy is to enable companies listed on the Exchange or NEX to efficiently complete a COB or RTO, while protecting the interests of the affected shareholders and preserving the integrity of the market.

The substantive amendments to Policy 5.2 include the following:

  1. The formalization of the practice whereby as soon as a COB or RTO agreement has been reached, the issuer is obligated to notify the Exchange, and the securities of the issuer are immediately subject to a trading halt until certain disclosure and suitability conditions, as set out by the Exchange, are met;
  2. The formalization of exceptions for the requirement for majority shareholders’ consent, including where:
    1. the COB or RTO transaction is not a related party transaction;
    2. the Exchange has confirmed its view that the issuer is without active operations (including NEX issuers, Tier 1 and Tier 2 issuers that have failed to meet activity requirements but have not yet been transferred to NEX, and Tier 1 and Tier 2 issuers that otherwise satisfy the Exchange that they are without active operations);
    3. the issuer is not subject to a cease trade order;
    4. shareholders’ approval of the COB or RTO is not required under corporate law or securities law; and
    5. the issuer has disclosed in a press release that it will not obtain, and the reasons for not obtaining, shareholder approval;
  3. The formalization of policies related to financing that an issuer may obtain after it has entered into a COB or RTO agreement but prior to such closing, for funds needed to pay for expenses related to completing the transaction (Bridge Financing), and the formalization of policies related to financing that an issuer may obtain after it has entered into a COB or RTO agreement and concurrently with the closing of such transaction, for funds needed to satisfy listing requirements related to Working Capital and Financial Resources (as defined in the Corporate Finance Manual) (Concurrent Financing).

Bridge Financing is only permitted where, among other factors, (i) the issuer lacks sufficient resources to complete the COB or RTO transaction, (ii) the financing is completed independently of the completion of the transaction, (iii) the money raised is used for specific purposes related to the completion of the transaction, (iv) it is offered at a discount to the Concurrent Financing that is no greater than what is permitted under the definition of Discounted Market Price, and (v) in certain cases, at least 75% of the Bridge Financing offering must be subscribed by parties who are arm’s-length persons to the COB or RTO transaction.

Notwithstanding the pricing rules related to Bridge Financing, if the terms of the Concurrent Financing are not known at the time of the Bridge Financing, the terms of the Bridge Financing can be made independently of the Concurrent Financing;

  1. Advances to a target company in the form of non-refundable deposits and unsecured loans made by the issuer to the target in an aggregate maximum amount of $25,000, are now permitted without approval from the Exchange. Advances of amounts greater than $25,000, including Bridge Financing, may be made with prior approval from the Exchange, if such advances are secured and meet certain criteria as set out in Policy 5.2; and
  2. Changes to the document filing requirements for a COB and RTO transactions, to minimize inconsistencies in relation to document filing requirements with respect to initial listings and capital pool companies.

While the Exchange is expected to abolish the requirement for sponsorship of COB and RTO transactions, that policy has not yet been implemented. The Exchange has provided guidance that it will be receptive to applications to waive the sponsorship requirement, in situations where it is appropriate to do so.

Women on boards: Alberta adopts new disclosure requirements


Disclosure requirements regarding the representation of women on boards and in senior management adopted in Alberta

The Adoption

On December 15, 2016 the Alberta Securities Commission (ASC) adopted amendments to National Instrument 58-101 Disclosure of Corporate Governance Practices (NI 58-101) and Form 58-101F1 Corporate Governance Disclosure (together with NI 58-101, Amendments).  The Amendments will come into effect in Alberta as of December 31, 2016.

The Amendments were previously implemented in every jurisdiction in Canada other than Alberta, British Columbia and Prince Edward Island effective as of December 31, 2014.  Although the ASC previously took the position that adopting the Amendments was not properly within the ASC’s mandate as the Amendments related to gender diversity rather than investor protection, the Canadian Securities Administrators published CSA Multilateral Staff Notice 58-307 Staff Review of Women on Boards and in Executive Officer Positions – Compliance with NI 58-101 Disclosure of Corporate Governance Practices which indicated that the purpose of the Amendments was to assist investors when making investment and voting decisions.  The ASC subsequently published the Amendments for a 30-day comment period.

Summary of the Amendments

The amendments require non-venture reporting issuers in Alberta to provide annual disclosure of the following items in their proxy circular or annual information form:

  • any policies regarding the representation of women on the board;
  • whether the board or its nominating committee considers the representation of women in the director identification and selection process;
  • whether the issuer considers the representation of women in executive officer positions when making executive officer appointments;
  • targets regarding the representation of women on the board and in executive officer positions, if any have been set by the issuer;
  • the number of women on the board and in executive officer positions; and
  • director term limits or other mechanisms of board renewal.

The adoption of the Amendments by the ASC will likely not change the disclosure requirements for most issuers as most non-venture issuers are reporting issuers in Ontario and therefore are already subject to the rules which previously came into force in other Canadian jurisdictions on December 31, 2014.

New Land Ownership Register Requirement For Ontario Corporations

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On December 10, 2016, Bill 144, the Budget Measures Act, 2015 will come into force with potentially onerous administrative consequences for Ontario corporations. Bill 144 will enact the Forfeited Corporate Property Act, 2015 (FCPA) which will amend the Business Corporations Act (Ontario) (OBCA) in several important ways.

The Ministry of Finance discussed the intent behind the FCPA in a press release on November 18, 2015. First, the FCPA aims to mitigate risks to Ontario taxpayers in cases where corporate property is forfeited and becomes Crown property upon the dissolution of a corporation. Second, the FCPA seeks to reduce the number of corporate properties forfeited to the Crown. Third, the amendments seek to increase corporate accountability for the costs associated with forfeited corporate property. Fourth, the amendments will increase transparency and certainty in the management and disposition of forfeited corporate property. Lastly, the goal of the FCPA is to return forfeited property to productive use more quickly and efficiently.

As a result of the FCPA, OBCA corporations will have increased book and record-keeping requirements. Section 140(1)(e) of the OBCA states that corporations must prepare and maintain at their registered office a register of “ownership interests” in land in compliance with the newly enacted requirements set out in section 140.1.

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Fasken Martineau Publishes Directors’ Handbook for Shareholder Activism


Canada has proven to provide fertile ground for shareholders activism, in part due to a regulatory landscape that could be viewed as more shareholder friendly than some other jurisdictions. As a result, it is perhaps not surprising that activists have achieved significant success in Canada in recent years. It is apparent that shareholder activism is now firmly part of Canada’s corporate landscape and that sound governance practices and proactive boards who engage directly with stakeholders have become the baseline expectations.

Fasken Martineau has published a Directors’ Handbook (Handbook) for shareholder activism. The Handbook provides guidance and recommendations of sound practices that should be adopted by any public company to bolster its defence against activists.

The Handbook is divided into four parts:

  • Part 1 – an overview of duties of the board in the context of shareholder activism;
  • Part 2 – a proactive program designed to decrease the odds of being targeted by an activist;
  • Part 3 – a framework for responding to and engaging with an activist; and
  • Part 4 – description of common activist scenarios and tactics.

The Handbook is intended to provide a general overview and to provide guidance that may be of assistance to public companies. It is important to bear in mind that every activist situation is unique and that it is impossible to plan for every possible contingency in advance. Fasken Martineau would be pleased to answer any questions or provide any additional assistance regarding shareholder activism.

The Directors’ Handbook: Shareholder Activism can be accessed on our website.

“Sorry, nothing personal” – the personal grievance exemption in Koh v Ellipsiz Communications Ltd.


Where does one draw the line between personal and business? It’s a timeless question, and was also the subject at issue in Koh v Ellipsiz Communications Ltd., 2016 ONSC 7345 (Koh), decided by the Ontario Superior Court of Justice on November 28, 2016.

The facts of the case are these: Ellipsiz Communications Ltd. (ECL) is a TSX Venture Exchange-listed issuer. ECL’s six-person board includes its two largest shareholders, Tat Lee (Michael) Koh and Chong Gin (Sam) Tan, who control about 42% and 27% of outstanding shares, respectively. Following a dispute between Mr Koh and a majority of the ECL directors (including Mr Tan), Mr Koh submitted to the board a requisition seeking a shareholder meeting at which the shareholders would consider resolutions to remove three directors and elect replacements. The Board declined the requisition, citing its discretion under section 105(3)(c) of the Ontario Business Corporations Act[1]. Mr Koh attempted to call a meeting of his own accord and applied to the court for a declaration that his meeting was validly called, which the trial judge denied.

In his reasons, Superior Court Justice Wilton-Seigel considered how to interpret section 99(5)(b)[2] of the OBCA, which sets out that a board can decline a requisition made for the primary purpose of redressing a personal grievance. However, the OBCA does not specify what evidence may be considered in determining the primary purpose of a requisition. To this end, Justice Wilton-Seigel referenced Michaud c Banque Nationale du Canada[3], wherein the Superior Court of Quebec ruled that only the contents of the resolutions at issue could be considered. The court in Koh ultimately distinguished Michaud, stating that whether or not such an approach is suitable for a shareholder proposal addressing matters of corporate policy, it is not appropriate in the context of a requisition to reconstitute the board of a public company between annual meetings. Justice Wilton-Seigel wrote that while the requisitioning party should not be cross-examined as to motives, reference can be made to prior conduct, behaviour or written communications. He considered also minutes of board meetings and other documentary evidence in determining Mr Koh’s primary purpose.

Koh emphasizes that shareholders considering submitting a requisition should be mindful that their actions and correspondence could be the subject of judicial scrutiny. Two otherwise identical requisitions could be treated differently by the courts depending on the facts that led to their submission.

Mr Koh has announced that he will appeal the Superior Court’s decision. We will continue to monitor this matter and report on any updates.

[1] RSO 1990, c B16 [OBCA].

[2] Section 99(5)(b) allows the board to exercise its discretion to decline a requisition if “it clearly appears that the primary purpose of the proposal is to enforce a personal claim or redress a personal grievance against the corporation or its directors, officers or security holders”.

[3] [1997] RJQ 547 [Michaud]. Michaud was a case about the federal Bank Act, which has a comparable provision to s 99(5)(b) of the OBCA. At the time Michaud was decided, the English and French versions of that provision of the Bank Act (and the Canada Business Corporations Act [CBCA]) were slightly different, with the English focussing on the shareholder’s purpose in bringing the resolution, and the French looking to the purpose of the proposal itself. The court chose to follow the French version, and Parliament subsequently amended the English versions of the Bank Act and the CBCA to match the French version. The Ontario legislature later revised the corresponding provision of the OBCA to match the CBCA.

The SEC’s Proposed Amendments regarding the Use of Universal Proxies


In today’s marketplace, most shareholder voting is done by way of proxy. Few shareholders choose to attend shareholder meetings in person. Under the current rules of the U.S. Securities and Exchange Commission (SEC), shareholders who attend meetings in person typically receive a universal ballot, which allows shareholders to choose from a complete list of all nominees running for the board of directors. In contrast, shareholders who choose to vote by proxy in a contested election receive one set of meeting materials from the company and one set of meeting materials from the dissident, and are therefore limited to choosing from either a slate of the company’s nominees or a slate of the dissident’s nominees.

On October 26, 2016, the SEC voted to propose amendments to the proxy rules that would require parties to a contested election to use universal proxy cards. Universal proxy cards would include the names of the board of director nominees from both the company and the dissident, thus allowing the shareholder to vote by proxy for their preferred combination of board candidates. The proposed amendments may increase the ability for dissidents to achieve representation on boards of directors.

Under the proposed amendments:

  • a dissident would be required to provide 60 days’ notice of its intention to solicit proxies and provide the names of its nominees;
  • the company would be required to provide the names of its nominees to the dissident by giving 50 days’ notice;
  • a dissident would be required to solicit shareholders representing at least a majority of the voting power of shares entitled to vote on the election of directors;
  • proxy contestants would be required to refer shareholders to the other party’s proxy statement for information about the party’s nominees;
  • a dissident would be required to file its definitive proxy statement with the SEC by the later of 25 days prior to the meeting date or five days after the company files its definitive proxy statement; and
  • universal proxy cards would be subject to presentation and formatting requirements.

The proposed amendments do not apply to companies that fall into the following categories:

  • foreign private issuers;
  • investment companies; and
  • business development companies.

Most Canadian companies fall into the SEC’s “foreign private issuer” category, and are therefore not subject to the SEC’s proxy rules.

Universal proxies, although not common, are permitted under Canadian law. In September 2015, the Canadian Coalition for Good Governance (CCGG) released a policy statement encouraging the use of universal proxies whenever there is a contested director election at a Canadian public company. CCGG has further advocated for amending corporate and securities laws to prescribe for the mandatory use of universal proxies. In light of the SEC’s proposed amendments, conversations about the use of universal proxies in Canada will likely increase further.

The SEC is seeking public comment on the proposed amendments until January 9, 2017.

Update on TSX Pricing Guidance – Prospectus Offerings, Private Placements & Concurrent Acquisitions


On October 11, 2016, the Toronto Stock Exchange (TSX) provided guidance with respect to pricing a prospectus offering or private placement where there is undisclosed material information. The TSX provided the following guidance:

  • While reviewing the price at which securities are issued from treasury for financings, the TSX will factor in trading activity, liquidity and any material events, changes or announcements, as described under the definition of “market price” (Market Price) seen in Part I of the TSX Company Manual.
  • When listed issuers are proposing a prospectus offering or a private placement, the TSX expects the price of such offerings to reflect the Market Price. The Market Price in this regard should factor in all material events, changes or announcements of a listed issuer (Material Information).
  • Listed issuers should consult with the TSX or Investment Industry Regulatory Organization of Canada (IIROC) if there is any doubt or concern about whether an event is material.
  • If there is undisclosed Material Information, a listed issuer should not price a financing preceding the public disclosure of the Material Information. Doing so may prevent the Market Price of the securities from accurately reflecting the business and affairs of the listed issuer. That said, historically the TSX has permitted an exception to pricing a financing where there is undisclosed Material Information when the event would not otherwise occur without a financing agreement (Pricing Exception).
  • Pricing Exceptions are most common when listed issuers offer securities (i.e., subscription receipts, common shares, etc.) and the proceeds of such offering are used to fund an acquisition. Normally, the principal terms of the financing (including the price) and the acquisition are announced at the same time. In such a case, the financing is priced before the acquisition is disclosed to the public. The TSX has shown that it will generally accept pricing of such financings in this manner, provided that the TSX is satisfied that the acquisition would not otherwise have been approved by the board of directors of the listed issuer, but for a financing agreement. To support the Pricing Exception, the TSX generally requires an officer’s certificate confirming that the listed issuer’s board of directors would not have entered into the acquisition agreement without also having entered into the financing agreement.
  • If a listed issuer is unable to deliver an officer’s certificate outlining the above, it should consider announcing the Material Information and pricing its financing after dissemination and disclosure of the Material Information, based on the post-announcement Market Price. The TSX may, in extraordinary circumstances, accept alternative documentation in support of the Pricing Exception. Listed issuers and their advisors should contemplate these requirements of the TSX well before any financing.
  • Regardless of providing an officer’s certificate or alternative documentation, the TSX may not allow the Pricing Exception for financings in the following circumstances:
    • the net proceeds of the financing significantly exceed the cash consideration of the acquisition (plus reasonable capital expenditures or similar expenses related to the acquisition); or
    • the financing provides for significant insider participation.

The Rise of Advance Notice Provisions in Canadian Corporate Bylaws


New Paper Discusses the Rise of Advance Notice Provisions in Canadian Corporate Bylaws

In recent years many Canadian firms have amended their corporate bylaws to include advance notice provisions (ANPs). ANPs provide for advance disclosure from shareholders who propose to nominate directors at a shareholders’ meeting. As recently as 2011, no Toronto Stock Exchange (TSX)-listed firm had adopted an ANP. Fast forward to today, and nearly half of all firms on the TSX have added an ANP in their bylaws.

What are ANPs and what accounts for their rapid adoption by Canadian public firms? A recent study and paper, An Empirical Analysis of Advance Notice Provisions in Corporate Bylaws: Evidence from Canada, by Anita Anand and Michele Dathan of the University of Toronto’s Faculty of Law and its School of Management, respectively, provides insight into the recent ANP trend. The authors analyze a sample of 1,156 TSX-listed firms to identify the shared characteristics and rationale among firms that have adopted ANPs.

What are ANPs?

ANPs are corporate bylaw provisions that stipulate advance disclosure requirements from shareholders who propose to nominate directors at a shareholders’ meeting. The disclosure must be circulated to all shareholders (typically at least 30 days in advance of the meeting), and pertain to information about the nominating shareholder and the proposed director or directors. The information required may include the nominating shareholder and proposed director’s name, occupation, residency, shareholdings in the company, descriptions of key agreements or arrangements between the nominating shareholder and proposed director, their relationship with competitors, as well as information that would be required in a dissident proxy circular.

What characterizes a firm likely to propose an ANP?

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2017 ISS and Glass Lewis Updates


Institutional Shareholder Services (ISS) and Glass, Lewis & Co. (Glass Lewis) have both released updates to their Canadian proxy voting recommendation guidelines for the 2017 proxy season.

The following summary outlines the significant changes made by ISS (ISS Policy Updates) and Glass Lewis (Glass Lewis Guideline Updates) to their respective Canadian proxy advisory guidelines.


Audit Related. The voting guidelines regarding auditors, which currently recommend voting against ratifying auditors and withholding for individual directors on the audit committee if the non-audit related fees are greater than audit-related fees, have been updated slightly such that an against recommendation for a vote ratifying an auditor and a withhold recommendation for each director on the audit comment will be given if non-audit fees are greater than the aggregate of the audit fees, the audit related fees and tax compliance/preparation fees. This change recognizes that tax compliance and preparation services are more efficiently provided if completed by the auditor and brings the Canadian guidelines in line with ISS’ guidelines in other jurisdictions. However, unless issuers provide a breakdown of tax related services, all tax fess will be considered by ISS to be non-audit fees.

Board of Directors – Voting in Uncontested Elections. The ISS definition of independence for directors has been clarified to expressly indicate that the terms “currently”, “is” and “has” as they relate to transactional, professional, financial and charitable relationships are defined as having been provided at any time during the most recently completed fiscal year and/or having been identified at any time prior to or at the annual shareholders’ meeting.

Shareholder Rights and Defenses. ISS has revised its guidance relating to shareholder rights plans to take into account the recent amendments to the Canadian take-over bid regime.  Whereas the previous ISS policy called for votes against rights plans with a minimum permitted bid period of greater than 60 days, the updated policy calls for votes against rights plans with a minimum permitted bid period of greater than 105 days to correspond with the timelines provided for in the amendments to the Canadian take-over bid regime.

Director Compensation – TSX only. ISS will generally recommend withholding votes from the committee responsible for director compensation (or if no such committee exists, the board chair or whole board) where directors compensation practices pose a risk of compromising directors’ independence.  ISS has identified the following particular areas of concern: (a) excessive inducement grants for new directors absent a satisfactory rationale for such grants; and (b) performance based grants to non-employee directors which could pose a risk of aligning directors’ interests away from those of shareholders and towards those of management.


Director Overboarding Policy – TSX Issuers.  As indicated in its 2016 guidance, beginning in 2017 Glass Lewis will generally recommend voting against a director who serves as an executive officer of any public company while serving on a total of more than two public company boards and voting against any other director who serves on a total of more than five public company boards.

Glass Lewis has indicated that it would generally not recommend that shareholders vote against an overcommitted director at the company where they also serve as an executive.

However, Glass Lewis notes that it will not apply a bright-line test in arriving at these recommendations but will also take into account contextual factors.  Such contextual factors may include the size and location of the companies on which a director serves, the director’s board roles on the other companies, whether the director serves on the board of any large privately-held companies, the director’s tenure on the boards in question and the director’s attendance record at all companies.

Glass Lewis may also refrain from recommending against certain directors that otherwise qualify for “overboarding” if the company provides a rationale for the director’s continued service which allows shareholders to evaluate the scope of the director’s commitment and contributions to the board including their specialized knowledge of the company’s industry, strategy and key markets.

A more lenient threshold of up to nine boards continues to apply for directors of companies listed on the TSX Venture Exchange.

Shareholder Rights Plans.  Glass Lewis has revised its guidance relating to shareholder rights plans to take into account recent amendments to the Canadian take-over bid regime.  In its previous guidance, Glass Lewis advised that it would not support rights plans that require offers to remain open for more than 90 days.  Under its new guidance, Glass Lewis has confirmed that it will not support rights plans that require offers to remain open for more than 105 days to correspond with the timelines provided for in the amendments to the Canadian take-over bid regime.

Board Responsiveness to Failed Advisory Vote.  While acknowledging that advisory votes on executive compensation in Canada remain voluntary, where such a vote has been provided, Glass Lewis may recommend voting against members of a company’s compensation committee if the committee fails to address shareholder concerns following a company’s failure to secure majority approval in a say-on-pay proposal.

Equity Compensation Plans.  Glass Lewis has advised that it will generally not support full value award plans (such as RSUs or Performance Units) which would exceed a rolling maximum of 5% of the company’s issued and outstanding shares.