Canada: Capital Markets Report - April 21-27, 2014

From the Regulators

News and Notices

CSA Soliciting Comments on Proposed Guidance for Proxy Advisory Firms

The Canadian Securities Administrators ("CSA") have published for comment proposed National Policy 25-201 – Guidance for Proxy Advisory Firms.

Proxy advisory firms play an important role in Canada's capital markets. They provide institutional investors with services such as proxy analysis, voting recommendations and guidelines, and help investors navigate increasingly complex disclosure and meeting matters. However, some observers have raised concerns about the independence of these firms and the potential for conflicts of interest in an industry dominated by just two firms.

The proposed policy seeks to address public concerns about the proxy advisory industry by providing proxy advisory firms with guidance on conflicts of interest, transparency and accuracy of vote recommendations, development of proxy voting guidelines, and communications with clients, market participants, the media and the public.

Transparency is a central theme of the CSA's guidance to proxy advisors. These firms are expected to disclose potential and actual conflicts of interest, the methodologies and analysis used to arrive at voting recommendations, the processes underlying the development of voting guidelines, and the policies that govern communications with clients and the public. The CSA's guidance also recommends that proxy advisors develop internal policies and controls to identify and manage conflicts of interest and ensure the accuracy of data used in support of voting recommendations.

The CSA's comment period closes on June 23, 2014. The proposed guidance can be viewed here.

IOSCO Publishes Report on Corporate Bond Markets

The International Organization of Securities Commissions recently published a Staff Working Paper which provides an in-depth overview and analysis of the global corporate bond markets. The objectives of the report are three-fold: (i) to provide an overview of the development of corporate bond markets since 2000, (ii) to identify the issues and market risks regarding market development for further research, and (iii) to highlight data gaps, particularly in emerging markets, in order to improve data collection efforts and provide a foundation for future research and policy work relating to investor production and the reduction of market risks.

In the process of preparing this report, information was gathered and assessed individually from 23 developed markets, including Canada, and 68 emerging markets. The main findings of the report can be summarized in the following key messages:

  1. Over the last decade, corporate bond markets have grown in terms of size and importance to the economy and they are important contributing elements to financial stability and economic growth. 
  2. Since the 2007/2008 crisis, corporate bond financings are beginning to substitute bank lending and are also increasingly used for financing long-term infrastructure projects. Corporate bond markets are also showing potential for servicing the needs of small and medium enterprises.
  3. The growth of corporate bond markets are in part fuelled by a search for yield and a changing interest rate environment will have an impact on bond risks, leading to new investor protection concerns.
  4. In response, secondary markets are adapting to a new economic and regulatory environment. An understanding of such changes is crucial in identifying potential systemic risks and development opportunities in these markets.

The full working paper can be viewed here.

CBB Knowledge Centre

Tips and guidelines to assist our clients in understanding the law and becoming better drafters.

Disclosure Matters

Voting Disclosure Obligations

Following each meeting at which there is a vote on the election of directors, each TSX-listed issuer must issue a news release disclosing the detailed results of the vote for the election of directors. In addition, all reporting issuers that are not venture issuers must promptly file a report of voting results for each matter voted upon, including a brief description of the matter and the outcome of the vote and, if the vote was conducted by way of ballot, including a vote on a matter in which votes are cast both in person and by proxy, the number or percentage of votes cast for, against or withheld from, the motion. The Canadian Coalition for Good Governance recommends that voting results should be disclosed immediately after a shareholder meeting and that disclosure should include a detailed breakdown of votes on each motion and each director election, including the number of votes for each matter listed on the proxy and a conversion to percentages (for all matters and not only matters that were voted by way of a ballot).

Drafting Tip of the Month

Effective Date and Agreements Dated "as of"

Identifying "the date of an agreement" with certainty can be very important. For example, if one party has the right to renew the agreement on notice given "not less than 30 days before the fifth anniversary of the date of this agreement", determining the actual "date of the agreement" may be critical.

But, where a document is executed in counterparts, each signed and dated differently, or where the dates above signatures are different or conflict with the date at the top of the agreement, the "date of the agreement" may be difficult to determine.

The better practice is to set out the date at the top of the agreement and ask the parties not to add a date when they sign. Since the parties may date their signatures regardless, you should consider including an Effective Date clause stipulating that the date of the agreement is the one identified at the top of the agreement, or else the date the agreement comes into effect.

Generally, the date of the agreement, or the effective date, should be either the date on which the parties sign or, where the agreement is not intended to come into effect immediately, a future date. If you are asked to date an agreement earlier than the date of signing (generally by dating it "as of" an earlier date), you must be careful that you are not "papering" something that did not actually already happen in order inappropriately to gain a benefit for either or both parties.

It may be appropriate to "back-date" the agreement where the parties had, in fact, earlier come to an understanding on the main points of the deal; however, the efficacy and legality of "back-dating" agreements must be carefully considered in each particular circumstance. Note that American auditors are becoming much less tolerant of documents dated "as of" an earlier date, and we expect this trend to manifest itself in Canada.

Public Company Activity

Information and intelligence about what public companies are doing in the market

Public Offerings
Launched April 21 - April 25, 2014

Equity Offerings


Securities Offered/ Number

Gross Proceeds

Lead Agent/Underwriter

Maghreb24 Television Inc.

Non-offering prospectus



Anchor Capital Corporation (capital pool company) - IPO

4,000,000 common shares


Richardson GMP Limited

DiaMedica Inc.

Common shares / TBD

Min: $2,000,000

Max: TBD

Paradigm Capital Inc.

Grenville Strategic Royalty Corp. (formerly,Troon Ventures Ltd.)

20,000,000 common shares issuable upon exercise or deemed exercise of 20,000,000 special warrants


National Bank Financial Inc.

HealthLease Properties Real Estate Investment Trust

7,000,000 Units


BMO Nesbitt Burns Inc. and National Bank Financial Inc.

Melcor Real EstateInvestment Trust

1,900,000 Units


RBC Dominion Securities Inc. and CIBC World Markets Inc.

theScore, Inc.

26,400,000 Class A Subordinate Voting Shares


Beacon Securities Limited

Western Lithium USA Corporation

13,800,000 Units


Dundee Securities Ltd.

Debt Offerings


Securities Offered/ Number

Gross Proceeds

Lead Agent/Underwriter

Bell Aliant Regional Communications, LimitedPartnership

Series 10 Medium Term Notes (unsecured) maturing April 22, 2016 (under a pricing supplement)


BMO Nesbitt Burns Inc., Beacon Securities Limited, CIBC World Markets Inc., Casgrain & Company Limited, Desjardins Securities Inc., National Bank Financial Inc., RBC Dominion Securities Inc., Scotia Capital Inc. and TD Securities Inc.

Genesis Trust II

$1,000,000,000 2.433% Real Estate Secured Line of Credit-Backed Class A Notes, Series 2014-1;

$20,811,655 2.603% Real Estate Secured Line of Credit-Backed Class B Notes, Series 2014-1;

and $19,771,072 2.783% Real Estate Secured Line of Credit-Backed Class C Notes, Series 2014-1. (under a pricing supplement)


TD Securities Inc.

Upcoming Shareholder Meetings

  • On May 14, 2014, the shareholders of Kingsway Arms Retirement Residences Inc. will be asked to vote to approve the disposition and sale of the assets of Clarington Retirement Centre in Bowmanville, Ontario.
  • On May 14, 2014, the shareholders of Madison Capital Corporation will be asked to vote to approve the plan of arrangement between Madison and Radient Technologies Inc.
  • On May 16, 2014, the shareholders of GreenPower Motor Company Inc. will be asked to vote to approve the amalgamation of GreenPower and 0999314 B.C. Ltd., a wholly-owned subsidiary of Oakmont Minerals Corp.
  • On May 22, 2014, the shareholders of Baikal Forest Corp. will be asked to vote to approve a proposed going private transaction by way of an amalgamation of Baikal Forest Corp. with 0998803 B.C. Ltd., a corporation incorporated by Far East Forest Industry Inc. that will, at the effective time of the amalgamation, be wholly-owned by Far East and certain shareholders of Baikal.

Risk Factor of the Month
Our focus on risk factors is intended to highlight the ways in which issuers are disclosing specific, material risks to their business rather than relying on market standards or boilerplate.

Davis + Henderson Corporation, Annual Information Form (March 3, 2014)

Unauthorized disclosure of data, security breaches or computer viruses could harm the Business by disrupting delivery of services, pose a risk of protracted and costly litigation, cause loss of customers and reputational damage. Davis + Henderson collects and stores confidential and personal information in its data centres. 

Unauthorized access to Davis + Henderson's computer systems could result in the theft or publication of confidential information or the deletion or modification of records or could otherwise cause interruptions in Davis + Henderson's operations. In addition, despite the Corporation's implementation of security measures, its systems are vulnerable to damages from computer viruses, natural disasters, unauthorized access, cyber-attack and other similar disruptions. Any such system failure, accident or security breach could disrupt Davis + Henderson's delivery of services and make Davis + Henderson's applications unavailable or cause similar disruptions to the Corporation's operations. If a person penetrates Davis + Henderson's network security or otherwise misappropriates sensitive data, Davis + Henderson could be subject to liability or Davis + Henderson's business could be interrupted, and any of these developments could have a material adverse effect on Davis + Henderson's business, results of operations and financial condition. In addition Davis + Henderson's software may contain undetected errors, defects or "bugs", and there can be no assurance that errors would not be found in Davis + Henderson's existing or future products or third party products upon which products are dependent, with the possible result of delays in or loss of market acceptance of products, diversion of resources, injury to Davis + Henderson's reputation and increased service and warranty expenses and/or payment of damages.

What We're Reading


Commentary: Poison Pill's Relevance in the Age of Shareholder Activism

The New York Times Deal Professor, Steven Davidoff writes about whether the poison pill is reaching its tipping point with Sotheby's low-threshold pill. The pill sets two limits for ownership — a 20 percent limit for passive investors, but a 10 percent threshold for activist shareholders. An activist is suing, claiming that it is acquiring shares in order to run an effective proxy contest and that pill is not a reasonable response. The shareholder stated in the lawsuit that "the board has no genuine concern with a takeover attempt" and instead is trying to thwart, "Sotheby's largest stockholder, from effectively running a slate of director candidates." Davidoff is looking at whether the courts look to create new law that would permit corporations to deal with shareholder activists. The complaint can be read here.

Corporate Governance

Academic Article:  Shareholder Voting in an Age of Intermediary Capitalism

This paper from the European Centre for Corporate Governance ("ECGI") is timely given the recent proposals from the Canadian Securities Administrators on proxy advisory firms (see above). Paul H. Edelman of Vanderbilt University, Randall S. Thomas of Vanderbilt University and ECGI, and Robert B. Thompson of Georgetown University attempt to develop a theory of shareholder voting under which shareholders (and only shareholders) have been given the right to vote because they are the only corporate stakeholder whose return on their investment is tied directly to the company's stock price. The need for this new theory is driven to a great extent by the rise of intermediated shareholdings, as through pension funds and mutual funds. Developments such as mandated voting and the rise of proxy advisory firms have nonetheless driven shareholder voting, even by intermediaries, to a more central role in the life of the corporation. Shareholder voting under their theory is justified by its value as a supplemental monitoring tool where the shareholder vote is likely to be better, or complementary, to monitoring through directors or the discipline of the market (e.g., in a conflict situation). They also believe that voting can provide (i) "a superior information aggregation device for private information held by shareholders when there is uncertainty about the correct decision; and (ii) an efficient mechanism for aggregating heterogeneous preferences when the decision differentially affects shareholders."

What We've Been Up To

Recent Transactions

We acted for Braeval Mining Corporation in connection with its previously announced business combination pursuant to a business combination agreement between Braeval, Oban Exploration Limited and a wholly-owned subsidiary of Braeval. The business combination was effected by way of a three-cornered amalgamation, whereby Oban amalgamated with a wholly-owned subsidiary of Braeval, resulting in Braeval acquiring all of Oban's assets.

We are acting for Sandstorm Gold Ltd. in connection with a definitive arrangement agreement with Sandstorm Metals & Energy Ltd. pursuant to which Sandstorm Gold will acquire all of the issued and outstanding shares of Sandstorm Metals. The terms of the arrangement agreement value Sandstorm Metals at approximately $49 million.

We acted for Canaccord Genuity Corp. and a syndicate of underwriters in connection with Callidus Capital Corporation's initial public offering of an aggregate of 18,000,000 common shares for gross proceeds of $252,000,000.

We acted for Tempest Capital Corp. in connection with a $2.5 million private placement of units of Anthem United Inc. (formerly Turnberry Resources Ltd.). The proceeds of the offering will be used by Anthem to fund a joint venture for the construction and commissioning of gold milling operations in Peru and for general working capital.

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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Gregory Hogan
Sean Williamson
Joyce Lim
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