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.


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Shareholder Control over Executive Compensation under Bill 101

Bill 101, An Act to Amend the Business Corporations Act (Bill 101), proposes a number of updates to the Ontario Business Corporations Act (OBCA). Introduced as a private member’s bill in early March, Bill 101 aims to shift power to shareholders through amendments in areas such as shareholder meetings, shareholder proxies, as well as the election and diversity requirements of directors. Among Bill 101’s most ambitious changes is to provide shareholders with power over executive compensation. These executive compensation amendments build on a trend in which many public companies are voluntarily providing shareholders with a “say-on-pay”. Bill 101’s proposal in this area, however, goes much further by providing shareholders with the unprecedented ability to both propose and approve executive remuneration policies. The implications of this power raises important questions regarding the respective responsibilities and duties of directors and shareholders.

Shareholders’ Current Say-On-Pay

Most Canadian business statutes, including the OBCA and the Canada Business Corporations Act, explicitly provide directors with the authority to fix compensation for directors, officers and employees, subject only to the company’s articles, by-laws and any unanimous shareholder agreement. Today in Canada there are no corporate or securities laws that provide shareholders with the ability to approve, much less propose, executive compensation.

While not legally required to do so, a trend in recent years has seen many publicly listed Canadian companies voluntarily provide shareholders with a vote on executive compensation. These say-on-pay motions are advisory only, with the results not binding the directors’ decisions. Although non-binding, the say-on-pay process is seen as providing shareholders with value by encouraging directors to consider and clearly explain compensation policies to shareholders.

While the voluntary adoption of non-binding advisory votes is steadily increasing, Canada lags behind certain other jurisdictions in both mandating say-on-pay votes and in providing teeth to the votes through binding outcomes (see a recent Timely Disclosure post). For example, the United Kingdom and Australia have mandated periodic shareholder votes on executive compensation policies.


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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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In June 2015, a 13-member panel created by the Minister of Government and Consumer Services (Ontario), known as the Business Law Agenda Stakeholder Panel, released “Business Law Agenda: Priority Findings & Recommendations Report”.

The panel reviewed corporate and commercial statutes in Ontario and made recommendations encompassing five key themes:

  • establishing a process to