The BC government proposes sweeping changes to the Securities Act (British Columbia) (the “Act”), which will allow the British Columbia Securities Commission (“BCSC”) to better address white collar investment crime. Proposed through Bill 33 Securities Amendment Act, 2019, the amendments will provide the BCSC with some of the strongest powers in Canada to protect

On May 24, 2018, the Canadian Securities Administrators (CSA) released CSA Staff Notice 81-329 Reducing Regulatory Burden for Investment Fund Issuers, which outlines the CSA’s plan to implement four near-term initiatives to lessen the regulatory burden on investment fund issuers. Specifically, CSA staff will undertake to: (i) remove redundant information in disclosure

The Canadian Securities Administrators (CSA) have adopted amendments to National Instrument 45-102 Resale of Securities (NI 45-102) and changes to Companion Policy 45-102CP which provide for a new prospectus exemption for the resale by Canadian investors of securities of non-Canadian issuers. The amendments are expected to come into force as of June 12, 2018. The amendments will be applied to all Canadian jurisdictions other than Alberta and Ontario.

In Alberta and Ontario, the new exemption will be found in the following local instruments:


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Bill C-25 is a federal government bill that would, if adopted, introduce sweeping changes to the corporate governance regime for reporting issuers incorporated under the Canada Business Corporations Act (CBCA). Like the proverbial tortoise, the bill has moved unhurriedly through the legislative process, in part due to several changes made to the bill since our previous post that discussed Bill C-25. The bill’s enactment would be just one of many “finish lines”, and it may take several years for all provisions of the bill and accompanying regulations to be drafted and brought into force. This post will canvass the amendments made so far to Bill C-25, with a focus on the proposed gender diversity disclosure framework, and will show a path forward to its eventual coming into force.

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In May 2016, sweeping changes to the Canadian take-over bid regime came into effect.  The stated purpose of the new rules included the goal of rebalancing the dynamics between hostile bidders and target boards by extending the minimum bid period to 105 days, and mandating a 50% mandatory minimum tender condition and a ten-day extension once all bid conditions have been satisfied or waived.  We published our Canadian Hostile Take-Over Bid Study in the spring of 2015, just over a year before the new rules came into force.  In that study, we expressed concern that strengthening a target board’s hand could result in a decrease in hostile bid activity.  Over the past year, various commentators have suggested that the new rules have had no adverse impact on hostile bid activity.  We are not so sure.

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We noted in our post of January 18, 2018 that the Canadian Securities Administrators (CSA) were reconsidering whether the CSA’s disclosure-based approach for issuers with U.S. marijuana-related activities remained appropriate.  The CSA’s reconsideration was triggered by an announcement on January 4, 2018 by Jeff Sessions, Attorney General of the United States, which expressly rescinded previous nationwide guidance from the Obama-era specific to marijuana enforcement (or forbearance therefrom) in the United States, including a “Memorandum for All United States Attorneys” dated August 29, 2013 from James M. Cole, then-Deputy Attorney General of the United States.  As we noted, while medicinal marijuana is legal in numerous American states and recreational marijuana is legal in several states, marijuana remains illegal at the federal level in the United States, thus creating a dilemma for the CSA with respect to Canadian issuers with marijuana-related activities in the United States.

On February 8, 2018, the CSA published CSA Staff Notice 51-352 (Revised) Issuers with U.S. Marijuana-Related Activities (Revised 51-352), setting out the expectations of CSA staff with respect to disclosure for specific risks faced by issuers with marijuana-related activities in the United States.  In short, the CSA have maintained their disclosure-based approach for Canadian issuers with marijuana-related activities in the United States, as opposed to prohibiting such issuers from raising funds in Canada or listing on a Canadian stock exchange.  Issuers will continue to be able to raise funds and list in Canada, notwithstanding the fact that their operations may be illegal under United States federal law and that they may face prosecution at any time, as long as such risks are adequately disclosed.


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As noted in our post of October 18, 2017, the Canadian Securities Administrators (CSA) issued CSA Staff Notice 51-352 Issuers with U.S. Marijuana-Related Activities on October 16, 2017.  The CSA Staff Notice noted the discrepancy between United States federal and state law as it relates to the use and sale of marijuana.  In short, while medicinal marijuana is legal in numerous American states and recreational marijuana is legal in several states, marijuana remains illegal at the federal level in the United States.

The CSA Staff Notice stated that how a company with marijuana activities in the United States ensures compliance with U.S. state-level regulatory frameworks forms an important part of that company’s Canadian continuous disclosure record, and set out specific, detailed disclosure requirements for issuers with marijuana-related activities in the United States, applicable to continuous disclosure documents such as an annual information form (AIF) or management’s discussion and analysis (MD&A), and to a prospectus in the event of a public offering.

All of that may have changed on January 4, 2018, when Jeff Sessions, Attorney General of the United States, issued a one-page “Memorandum for All United States Attorneys” regarding “Marijuana Enforcement” (Sessions Memorandum).  The Sessions Memorandum expressly rescinded, effective immediately, previous nationwide guidance specific to marijuana enforcement in the United States, including a “Memorandum for All United States Attorneys” dated August 29, 2013 from James M. Cole, then-Deputy Attorney General of the United States, entitled “Guidance Regarding Marijuana Enforcement”.  A press release issued by the U.S  Department of Justice contemporaneous with the Sessions Memorandum announced that the Sessions Memorandum constitutes a “return to the rule of law” and that “Attorney General Jeff Sessions directs all U.S. Attorneys to enforce the laws enacted by Congress and to follow well-established principles when pursuing prosecutions related to marijuana activities”.


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On Thursday, July 27, 2017, staff of the Ontario Securities Commission and its counterparts in Québec, Alberta, Manitoba and New Brunswick (Staff) published important guidance on Staff’s expectations of market participants, including boards and their advisors, in material conflict of interest transactions.[1]  The guidance highlights the important role of public company directors in such transactions, including conducting a sufficiently rigorous and independent process while appropriately addressing the interests of minority security holders and ensuring detailed public disclosure of the board’s review and approval process.  In addition, the guidance confirms that Staff are actively reviewing such transactions “on a real-time basis” to assess compliance, to determine whether a transaction raises potential public interest concerns, and, if appropriate, to intervene on a timely basis prior to any security holder vote or closing of the transaction.

“material conflict of interest transactions” and “minority security holders”

Staff note that a “material conflict of interest transaction” is a transaction governed by Multilateral Instrument 61-101 Protection of Minority Security Holders in Special Transactions (MI 61-101) that gives rise to substantive concerns as to the protection of minority security holders, being equity security holders who are not “interested parties” in the transaction.  For example, a transaction pursuant to which an insider of the company acquires the company would be considered to be a material conflict of interest transaction.  Among other things, MI 61-101 prescribes detailed procedural safeguards when a company undertakes an insider bid, issuer bid, business combination, or related party transaction, including enhanced disclosure and, absent an exemption, a requirement to obtain “minority approval” (essentially an affirmative vote by a majority of the votes cast by minority security holders) and a formal valuation of the subject matter of the transaction.  In interpreting MI 61-101, Staff note that they apply a “broad and purposive interpretation” to these requirements that emphasizes the instrument’s underlying policy rationale.


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Downtown Hong Kong

CSA Proposed Amendments to Increase Canadian Investors’ Access to Exempt Market Offerings by Foreign Issuers

Background

On June 29, 2017, the Canadian Securities Administrators (CSA) released proposed amendments to National Instrument 45-102 Resale of Securities (NI 45-102) and corresponding amendments to  Companion Policy 45-102CP to National Instrument 45-102 Resale of Securities for a 90-day comment period.  The proposed amendments relate primarily to section 2.14 of NI 45-102 which sets out a prospectus exemption permitting the resale of securities by an investor where the issuer of those securities is not a reporting issuer in any Canadian jurisdiction.

Currently, section 2.14 permits the resale of securities on a prospectus exempt basis only if the issuer was a non-reporting issuer at the time of the distribution or at the time of the resale; residents of Canada, at the distribution date, did not own more than 10% of the outstanding securities of the class or series and did not represent more than 10% of the total number of security holders (10% Ownership Ceiling); and the resale is made on an exchange or market outside of Canada or to a person or company outside of Canada.

The purpose of the existing section 2.14 exemption is to permit the resale of securities over foreign markets or to persons outside of Canada if the issuer has minimal connection to Canada and it is unlikely that a market for these securities would be developed in Canada.  The 10% Ownership Ceiling was initially intended to define when an issuer has minimal connection to Canada.  The proposed amendments to section 2.14 remove the 10% Ownership Ceiling for Canadian residents.


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