On January 11, 2023, Fasken, along with TMX Group Ltd. (“TMX Group”, which includes the Toronto Stock Exchange (“TSX”) and TSX Venture Exchange (“TSX-V”)) and Laurel Hill Advisory Group (“Laurel Hill”), hosted a conversation on disclosure and regulatory considerations for issuers leading into the 2023 proxy season.
Several months ago we asked whether a COVID-19-related impact on a business might constitute a “Material Adverse Change” (referred to as a “MAC,” or a material adverse effect, “MAE”) under merger agreements, and we noted the near complete absence of case law on the issue in Canada (see: “COVID-19 and Material Adverse Change Provisions…
The Ontario Securities Commission, like several other regulatory investigators, has extensive power to compel testimony and require the disclosure of documents and information. A recent decision of the OSC, B (Re) (2020 ONSEC 21), has highlighted a gap in the Commission’s power to compel testimony from a witness where such testimony may constitute a breach of the witness’s contractual obligations to a third party.
Staff of the Commission is conducting an investigation pursuant to an investigation order issued by the OSC under section 11 of the Securities Act. Investigation orders empower Staff to issue a summons pursuant to section 13 of the Act, to compel an individual to provide oral testimony under oath and to provide documentary evidence. Section 16 of the Act prohibits the recipient of a summons from disclosing information relating to the summons or the investigation, subject to narrow exceptions.
Staff served upon an individual, identified only as “B”, a summons under section 13 of the Act. Although B was prepared to cooperate with Staff, B was concerned that doing so would violate B’s employment contract, which imposes confidentiality over all matters relating to B’s employment without an exception that is relevant to a regulatory investigation.
Continue Reading Recent OSC Decision Raises Uncertainty for Witnesses Responding to a Summons
The COVID-19 pandemic has raised a fundamental question for M&A participants: does the outbreak of COVID-19 and the impact on a business constitute a “Material Adverse Change” (referred to as a “MAC”) under merger agreements? The answer is important because if the pandemic is a MAC, then buyers can typically walk away from a deal without penalty or legal exposure. On the other hand, if it is not a MAC and buyers try to walk the seller can seek damages and/or seek specific performance of the agreement to force the buyer to close.
The law on MACs
In Canada there is virtually no case law on what constitutes a MAC, so most M&A practitioners look to the jurisprudence from Delaware for assistance (where there are several thoughtful and well-articulated decisions). Not wanting to empower buyer’s remorse at the expense of public shareholders, Delaware courts have been extremely reluctant to find a MAC to have occurred. In fact, there is only one case in which a Delaware court has found a MAC and allowed a buyer to walk from a merger agreement. See our previous blog post for reference.
Although difficult to establish, the case law has focused on two key elements: that the adverse change is “material” and “durationally significant.” Put differently, a MAC needs to be much more than a short-term drop and essentially reflect a fundamental change in the business to be acquired.
Continue Reading COVID-19 and Material Adverse Change Provisions in M&A Agreements
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 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.…
The enforcement efforts of the Ontario Securities Commission (OSC), the regulator that administers and enforces compliance with the provisions of the Securities Act (Ontario) and the Commodity Futures Act (Ontario), have had mixed success— at best. With a mandate to protect investors and ensure fair and efficient capital markets through monitoring compliance and enforcement measures…
When the Ontario Court of Appeal speaks, it sets important policy for the securities industry. On February 3, 2014, the industry was told that class actions claiming damages for secondary market misrepresentations are rendered easier to commence and continue.
In Greene v. Canadian Imperial Bank of Commerce, a rarely assembled five‑member Court Bench overturned…