On March 30, 2012, the Court of Appeal for Ontario released its
decision in Abdula v. Canadian Solar Inc., 2012 ONCA 211.
The Court held that an issuer's shares need not be traded on a
Canadian exchange for that issuer to be subject to the liability
regime under Ontario's Securities Act for
misrepresentations made in the secondary market, provided that
issuer has a "real and substantial connection" to the
Canadian Solar is a putative class action commenced by
an Ontario resident seeking to hold Canadian Solar liable for
alleged misrepresentations made with respect to its financial
results in press releases, financial statements and an annual
report. The issue before the Court was whether Canadian Solar was a
"responsible issuer" as defined in Part XXIII.1 of the
Securities Act (which establishes the secondary market
misrepresentation liability regime). The phrase "responsible
issuer" is defined in section 138.1 as (a) a reporting issuer
or (b) any other issuer with a real and substantial connection to
Ontario, any securities of which are publicly traded. Canadian
Solar was not a "reporting issuer" in Ontario. Further,
the question of whether it had a "real and substantial
connection to Ontario" was not under appeal. It was therefore
the narrow issue of whether the second part of the definition of
responsible issuer in section 138.1 may be interpreted so as to
apply to issuers that do not trade on any Canadian exchange that
was before the Court of Appeal.
Canadian Solar argued that the definition of responsible issuer
should be implicitly read as requiring an issuer's shares to be
"publicly traded in Canada" such that an issuer
whose shares traded exclusively on foreign exchanges would not be
caught by the definition and therefore could not be subject to the
regime under Part XXIII.1, regardless of whether it had a
"real and substantial connection to Ontario".
Canadian Solar's appeal was dismissed. Writing for the
Court, Hoy J. held that the definition of responsible issuer did
not require that the issuer's securities be publicly traded in
Canada. The Court relied on the plain and ordinary meaning of the
provision read in the context of the Act as a whole, the object and
intention of the legislature in enacting Part XXIII.1, and the
legislative history of the secondary market misrepresentation
In addressing concerns about the extra-jurisdictional
application of provincial law to companies whose shares do not
trade over Canadian exchanges, Hoy J. cited the strong connections
between Canadian Solar and Ontario. She held that
"[t]erritorial limits of provincial authority are respected by
applying Ontario law to Canadian Solar in these circumstances.
Canadian Solar ... is a [Canada Business Corporations Act]
corporation with its registered office, its principal executive
office and business operations in Ontario". She further cited
the fact that "at least some of [the secondary market
disclosures alleged to contain misrepresentations] emanated from
The Court's decision makes it clear that non-reporting
issuers whose shares do not trade anywhere in Canada may
nevertheless find themselves subject to Ontario's liability
regime for misrepresentations made in the secondary market,
provided however that the issuer has a "real and substantial
connection" to Ontario. Although the Court of Appeal made it
clear that the factual determination as to whether Canadian Solar
had a real and substantial connection to Ontario was not before it,
it agreed with the motion judge's determination that such a
connection existed. The particular factors that connected Canadian
Solar to Ontario were clearly considered to be significant by the
motion judge. What remains to be determined in future cases is the
extent of the connections that other foreign issuers will be
required to have with the province before they will be considered
"responsible issuers" for the purposes of Part XXIII.1
and whether those connections must relate in some way to the
subject-matter of the claims advanced. It is possible that the
much-anticipated decision of the Supreme Court of Canada in Van
Breda v. Village Resorts, which could rearticulate the test
for jurisdiction in Canada, may influence such further
Andrea is a partner in the Osler Litigation
Department and a member of the firm's Class Action and
Corporate and Securities Litigation Specialty Groups.
Mary's commercial litigation practice focuses
on contract disputes in court or in arbitrations, franchise
disputes (including injunctions), and assisting financial
institutions in disputes or in the insolvency context.
Kevin's practice is focused on complex
commercial and corporate litigation matters.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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The Canadian Office of the Superintendent of Financial Institutions ("OSFI") recently ruled that a bank cannot promote comprehensive credit insurance ("CCI") within its Canadian branches under the Insurance Business (Banks and Bank Holdings Companies) Regulations (the "Regulations").
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