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On March 7, 2017, 1891868 Alberta Ltd., a wholly-owned indirect subsidiary of Sprott Inc. (Sprott, and together with its wholly-owned subsidiaries, Sprott Group), filed an originating application (Application) in the Court of Queen’s Bench of Alberta (Court) for an order approving a proposed plan of arrangement (Arrangement) with Central Fund of Canada Limited (Target), Sprott Physical Gold and Silver Trust (to be formed and managed by Sprott Asset Management LP (Trust)), the holders of class A non-voting shares (Class A Shares) of the Target and, as applicable, the holders of common shares (Common Shares) of the Target pursuant to Section 193(2) of the Business Corporations Act (Alberta) (Act).  The Application has been scheduled to be heard by the Court on September 7, 2017.

The Application

The Application seeks an interim order for the calling and holding of a meeting of shareholders (Target Shareholders) of the Target to approve the Arrangement proposed by the Sprott Group.  It should be noted that applications for court orders approving arrangements are typically made by target companies.  Accordingly, this application, which is not supported by the Target, could be characterized as a “hostile” plan of arrangement.  At an application held in April, the Court agreed to set a date in September for the interim application.

According to the Sprott Group, there are a number of qualitative and quantitative benefits to the Target Shareholders which are anticipated to result from the Arrangement and the transactions contemplated thereby, including eliminating the dual-class share structure, continued exposure to the future growth of the Target’s portfolio of assets, the availability of a physical redemption feature, and the potential for the Class A Shares to trade at, near or above their net asset value (instead of at a discount to net asset value, which is currently the case).

According to the Target, the Application is one of numerous steps already taken by the Sprott Group to seek control of the Target. Among other measures taken, the Sprott Group has previously attempted to requisition a meeting of the Target to, among other things, elect a slate of directors (Requisition), commenced a derivative action against the Target and appealed to the Court of Appeal the Court’s finding that the Requisition was invalid.  All of these attempts were unsuccessful.

In this context, a take-over bid made directly to the holders of Common Shares and Class A Shares would likely be ineffective since, according to Sprott, at least 75% of the Common Shares are held by directors and officer of the Target and such persons are not expected to tender to the bid.Continue Reading Hostile Plan of Arrangement Application to be Heard in Alberta 

Economic Environment

The volume of securities purchased by foreign investors in Canada has been steadily increasing in recent years.  While equity securities account for the majority of the increase, debt securities still comprise most of the foreign investment in Canada.[1]  Of these debt securities, corporate bonds attracted the largest increase in investment in 2016 compared to 2015.[2]  The continued significance for Canadian issuers (Issuers) of foreign markets for raising capital emphasizes the importance of understanding the nature of cross-border debt securities offerings (Offerings) and, in particular, uncertainties in their technicalities which, if not properly traversed, can lead to increased costs for Issuers.

Overview of Offerings

Bonds can be offered by Issuers pursuant to a public offering under a prospectus or can be placed privately by way of a private placement, in which case Issuers may choose to prepare and distribute an offering memorandum to potential investors.  The method employed will vary depending on the Issuer’s target market and the extent to which the Issuer is known to participants in the capital markets.  Bonds, regardless of the type of Offering, are typically issued under the terms and conditions of a trust indenture which is entered into between the Issuer and an indenture trustee (Trustee).  The Trustee protects the interests of the Bondholders by enforcing the terms and conditions provided in the trust indenture.Continue Reading Cross-Border Bond Offerings – Implications of a “distribution to the public” under the Canada Business Corporations Act

Background

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

On October 31, 2016, the Alberta Securities Commission (ASC) adopted Multilateral Instrument 45-108 Crowdfunding (MI 45-108) which will allow small or medium sized businesses (Target Businesses) to raise more capital through crowdfunding offerings across multiple jurisdictions in Canada than is possible under ASC Rule 45-517 Prospectus Exemption for Start-up Businesses (ASC Rule 45-517) which was adopted by the ASC on July 29, 2016.  Both MI 45-108 and ASC Rule 45-517 (collectively, the Growth Initiatives) provide Target Businesses with an exemption from prospectus requirements.  The Growth Initiatives are in place of proposed MI 45-109 Prospectus Exemption for Start-up Businesses published by the ASC and the Nunavut Securities Office.

The Growth Initiatives are aimed at addressing Target Businesses’ need for a cost effective and simple way to raise capital in a difficult economic environment by raising small amounts of money from a large number of people, commonly referred to as crowdfunding.  The Growth Initiatives offer different avenues that Target Businesses can use to overcome the hurdle of attracting investment without the high transactional costs of completing a prospectus offering.Continue Reading New Crowdfunding Prospectus Exemption in Alberta

Retail investors in British Columbia, Alberta, Saskatchewan, Manitoba and New Brunswick (Participating Jurisdictions) now have a new option by which they can participate in private placements. The securities regulators in the Participating Jurisdictions have adopted a prospectus exemption (Exemption) that allows issuers listed on a Canadian exchange to raise money by distributing securities to retail…

Most of the recent headlines concerning the unsolicited takeover bid by Suncor Energy Inc. (Suncor) for Canadian Oil Sands Ltd. (COS) surround the decision of the Alberta Securities Commission (ASC) to allow COS’s tactical shareholder rights plan to remain in place until January 4, 2016.  While that decision is…

On October 19 2015, the Alberta Securities Commission and the Nunavut Securities Office jointly published for comment Proposed Multilateral Instrument 45-109 Prospectus Exemption for Start-up Businesses (Proposed Exemption). The Proposed Exemption is directed principally at small and early-stage non-reporting issuers and is designed to allow them to raise a defined amount of money…

On December 4, 2014, the Canadian Securities Administrators (CSA) published amendments to National Instrument 51-101 Standards of Disclosure for Oil and Gas Activities (NI 51-101) and Companion Policy 51-101 Standards of Disclosure for Oil and Gas Activities and related forms. The amendments will:

  • permit disclosure from alternative resources evaluation standards and

…

On November 28, 2013, the Canadian Securities Administrators (CSA) in all jurisdictions except Ontario and British Columbia published for comment a proposed Multilateral Instrument 45-107 Listing Representation and Statutory Rights of Action Disclosure Exemptions (Proposed MI 45-107).

Proposed MI 45-107 is not being proposed in Ontario and British Columbia as existing or proposed local instruments address or are expected to address the issues discussed below.

Background

Proposed MI 45-107 provides exemptions from certain requirements of the securities legislation of the participating jurisdictions that apply in the context of prospectus exempt financings, conducted primarily in a foreign jurisdiction by foreign issuers and by investment dealers or international dealers acting as underwriters, and which are also offered to certain institutional and other sophisticated investors in Canada.

The purpose of Proposed MI 45-107 is as follows:

(1) to provide an exemption from the statutory prohibition against making a representation about the intention to list securities on an exchange or market in the context of international financings; and

(2) to provide an exemption from the requirement that applies in Saskatchewan, Nova Scotia and New Brunswick, that an offering document used in connection with a prospectus exempt distribution include a prescribed statement with respect to certain statutory rights of action.

Proposed MI 45-107 will codify discretionary exemptive relief that the CSA has been granting in the context of U.S. and international offerings of securities to Canadian institutional and other sophisticated investors and consequently will alleviate the need for these discretionary exemption applications.

The Proposed MI 45-107
Continue Reading Canadian Securities Regulators Propose Amendments to Disclosure Rules for Exempt Offerings by Foreign Issuers