Canada: Capital Markets Report - May 19-25, 2014

FROM THE REGULATORS

News and Notices

CSA Introduces Proposed Amendments for Disclosure Practices by Venture Issuers

By: Alexandra Iliopoulos and Sean Williamson

On May 22, 2014, the Canadian Securities Administrators (the "CSA") released proposed amendments to National Instruments 51-102 – Continuous Disclosure Obligations, 41-101 – General Prospectus Requirements and 52-110 – Audit Committees with the intention of streamlining disclosure requirements for venture issuers. The CSA had previously proposed a stand-alone consolidated disclosure instrument for venture issuers, but the feedback received was not supportive of its adoption. As such, the new proposals consist of targeted amendments to existing rules that will tailor disclosure requirements for venture issuers. The CSA believes that these proposed amendments will reduce venture issuers' burden of preparing required disclosure documents, while making it easier for investors to read and understand the disclosure documents without eliminating information that would detrimentally affect their ability to make informed investment decisions.

Click here for more details.

FROM THE COURTS

Ontario Superior Court of Justice Sentences First Individual Convicted Under the Corruption of Foreign Public Officials Act

By: Wendy Berman, Arthur Hamilton and Jonathan Wansbrough

On May 23, 2014, the first criminal sentencing of an individual under Canada's Corruption of Foreign Public Officials Act ("CFPOA") was rendered. Mr. Justice Hackland of the Ontario Superior Court of Justice sentenced Nazim Karigar to three years in prison.

In August 2013, following a lengthy trial, Karigar was convicted on a single count indictment of offering to bribe a foreign public official contrary to section 3 of the CFPOA. Karigar was found to have played a leading role in a conspiracy to bribe officials of Air India, a corporation owned and controlled by the Government of India, and the Indian Minister of Civil Aviation, for the purpose of securing a multi-million dollar Air India contract for a biometric security system on behalf of Ottawa-based Cryptometrics Canada Limited.

Click here for more details.

CBB KNOWLEDGE CENTRE

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

Drafting Tip of the Month

Time is of the Essence

By: Corporate Counsel Bulletin Board

A clause indicating that "time is of the essence" should be included only when a party wants the timeline of the agreement to be strictly adhered to, with clearly defined consequences resulting from a breach. The clause ensures that time-related obligations in contracts are conditions, the default or breach of which entitles the innocent party to rescind the contract.

The "time is of the essence" clause developed as an attempt to prevent courts from using their equitable jurisdiction to provide a defaulting party with extra time to complete an obligation, or worse, to give them "reasonable" time. These days, ever since Union Eagle Ltd v Golden Achievement Ltd was adopted the Ontario courts in 1473587 Ontario Inc v Jackson, courts rarely invoke their equitable jurisdiction to intervene on time-related issues. The courts in those cases held that the question of "how late is too late" is too difficult to decide, and applying different standards of lateness will lead to confusion, litigation, and uncertainty in the law.

If you decide to include a "time is of the essence" clause, consider the following:

  • Address the consequences that flow from a failure to comply with the timelines set in the agreement. Though a right of rescission is the traditional remedy, you should expressly include that as well as any other remedies or alternatives you might wish to seek, such as damages or specific performance.
  • Describe what behaviour (if any) will constitute a waiver of the clause.
  • Alternatively, instead of using a simple "time is of the essence" statement, consider using the following language:

    • If a party wishes to terminate this agreement in accordance with [insert section relating to a "drop dead date" provision], that party will not be required to give the other party any time beyond the ["drop dead date"] to allow that other party to satisfy any condition or perform any obligation under this contract.
  • Extensions of time may be given without necessarily waiving the time is of the essence clause. However, ensure that time is explicitly stated to be of the essence whenever an extension is given.

See this for further discussions of the issue.

PUBLIC COMPANY ACTIVITY

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

Public Offerings

Launched May 20 - May 23, 2014

Equity Offerings

Company Securities Offered/ Number Gross Proceeds Lead Agent/Underwriter
Americas Petrogas Inc. Units / TBD TBD Mackie Research Capital Corporation
Black Birch Capital Acquisition III Corp. (to be renamed Daymak Technology Inc.) Min. offering: 7,500,000 Units

Max. offering: 12,500,000 Units
Min. offering: $3,000,000

Max. offering: $5,000,000
Richardson GMP Limited
American Hotel Income Properties REIT LP 4,348,000 Units $45,001,800 Canaccord Genuity Corp. and National Bank Financial Inc.
Americas Petrogas Inc. Units / TBD TBD Mackie Research Capital Corporation
Artek Exploration Ltd. 8,050,000 Common Shares

1,987,000 Flow Through Shares
$43,019,480 Peters & Co. Limited
Regal Lifestyle Communities Inc. 3,530,000 Common Shares $27,004,500 CIBC World Markets Inc.
Summit Industrial Income REIT 4,320,000 Units $25,056,000 BMO Nesbitt Burns Inc.
Keyera Corp. 3,750,000 Common Shares $276,562,500 RBC Dominion Securities Inc.
Ballard Power Systems Inc. 2,210,063 Common Shares US$4,296,345 N/A
Crombie Real Estate Investment Trust 4,530,000 Units $60,022,500 CIBC World Markets Inc.

Debt Offerings

Company Securities Offered/ Number Gross Proceeds Lead Agent/Underwriter
Canexus Corporation 6.50% Convertible Unsecured Subordinated Series VI Debentures $75,000,000 CIBC World Markets Inc., National Bank Financial Inc. and Scotia Capital Inc.

Upcoming Shareholder Meetings

  • On June 12, 2014, the shareholders of Amarok Energy Inc. will be asked to vote to approve the issuance of Amarok shares in connection with a plan of arrangement among Amarok, 1815766 Alberta Inc., a wholly owned subsidiary of Amarok, and Passport Energy Ltd, pursuant to which, among other things, Amarok will acquire, indirectly through its wholly-owned subsidiary, all of the issued and outstanding common shares of Passport Energy.
  • On June 13, 2014, the shareholders of Sundance Energy Corporation will be asked to vote to approve the amalgamation of Sundance Energy and Ceno Energy Limited.
  • On June 13, 2014, the shareholders of European Uranium Resources Ltd. will be asked to vote to approve the share purchase agreement dated May 9, 2014, between the European Uranium and Forte Energy NL in connection with the proposed sale of European Uranium's wholly-owned Slovakian subsidiaries, Ludovika Energy and Ludovika Mining, to Forte Energy NL.
  • On June 16, 2014, the shareholders of Unite Capital Corp. will be asked to vote to approve the amalgamation of Unite Capital with a wholly-owned subsidiary of Lakeside Minerals Inc.
  • On June 20, 2014, the shareholders of American Bonanza Gold Corp. will be asked to vote to approve an arrangement pursuant to which Kerr Mines Inc. will acquire all of the issued and outstanding common shares of American Bonanza.
  • On June 23, 2014, the shareholders of Miocene Metals Limited will be asked to vote to approve a three-cornered amalgamation involving Miocene, Carube Resources Inc. and 2409440 Ontario Inc., a wholly-owned subsidiary of Miocene.

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.

Tweed Marijuana Inc.

By: Sean Williamson

Canada's first publicly traded medical marijuana company, Tweed Marijuana Inc., became listed on the TSX Venture Exchange earlier this year. The establishment and growth of the medical marijuana industry is an interesting development for many sectors including health and agriculture, but also introduces a new and unique industry risk factor such as the below item from Tweed's prospectus dated May 8, 2014.

Unfavourable Publicity or Consumer Perception

The Corporation believes the medical marijuana industry is highly dependent upon consumer perception regarding the safety, efficacy and quality of the medical marijuana produced. Consumer perception of the Corporation's products can be significantly influenced by scientific research or findings, regulatory investigations, litigation, media attention and other publicity regarding the consumption of medical marijuana products. There can be no assurance that future scientific research, findings, regulatory proceedings, litigation, media attention or other research findings or publicity will be favourable to the medical marijuana market or any particular product, or consistent with earlier publicity. Future research reports, findings, regulatory proceedings, litigation, media attention or other publicity that are perceived as less favourable than, or that question, earlier research reports, findings or publicity could have a material adverse effect on the demand for the Corporation's products and the business, results of operations, financial condition and cash flows of the Corporation. The Corporation's dependence upon consumer perceptions means that adverse scientific research reports, findings, regulatory proceedings, litigation, media attention or other publicity, whether or not accurate or with merit, could have a material adverse effect on the Corporation, the demand for Tweed's products, and the business, results of operations, financial condition and cash flows of the Corporation. Further, adverse publicity reports or other media attention regarding the safety, efficacy and quality of medical marijuana in general, or the Corporation's products specifically, or associating the consumption of medical marijuana with illness or other negative effects or events, could have such a material adverse effect. Such adverse publicity reports or other media attention could arise even if the adverse effects associated with such products resulted from consumers' failure to consume such products appropriately or as directed.

WHAT WE'RE READING

Capital Markets

Blog Post: Increased Scrutiny of High-Frequency Trading (Harvard Law School Forum on Corporate Governance and Financial Regulation)

By: Greg Hogan

This post from Noam Noked, co-editor, HLS Forum on Corporate Governance and Financial Regulation, summarizes the current landscape of regulator scrutiny of, and class actions against, high frequency trading ("HFT"), traders and institutions participating in HFT and markets that permit HFT. Among the regulators looking at HFT are the Securities and Exchange Commission, the Commodity Futures Trading Commission, the Federal Bureau of Investigation and attorneys general in New York and Massachusetts. The City of Providence, Rhode Island has also filed a class action complaint naming as defendants 16 different national securities exchanges, 12 major securities brokers and 11 HFT firms. The representative plaintiff is claiming on behalf of every class of investor who bought or sold stock on a U.S. exchange from April 2009 through the present.

Corporate Governance

Study: 2014 Study on How Investment Horizon and Expectations of Shareholder Base Impact Corporate Decision-Making (The Rock Center for Corporate Governance and the National Investor Relations Institute)

By: Greg Hogan

This survey of 138 investor relations professionals at North American companies found that nearly all describe their ideal shareholder as having a long-term investment horizon, but that approximately 50% of the typical company's shareholder base holds only a short- or medium-term investment horizon. As a result, the authors find, most companies see a significant upside to managing their shareholder base, and senior leaders spend considerable time meeting with current and prospective investors. As a result, the vast majority are seeking to manage their shareholder base, with the hope of increasing the price of their shares and decreasing volatility. The key belief is that a more long-term oriented shareholder base would permit management to more effectively implement strategy, reduce focus on short-term results and provide better feedback on management's decisions. Of note, long-term in the view of the survey participants is at least 2.8 years. Other interesting conclusions from the study are that companies want higher ownership from management, employees and pension funds and lower ownership from hedge funds and private equity.

WHAT WE'VE BEEN UP TO

Recent Transactions

We represented Dundee Securities Ltd., Scotiabank and a syndicate of underwriters in connection with a bought deal offering of common shares of RB Energy Inc. for gross proceeds of approximately $22 million. RB Energy intends to use the net proceeds of the offering on commissioning and development activities and ongoing financial obligations related to its Québec Lithium Project, and for general working capital purposes. Click here for more details.

We represented Dundee Securities Ltd. and a syndicate of underwriters in connection with a bought deal offering of units of Western Lithium USA Corporation for gross proceeds of approximately $9 million. Western Lithium intends to use the funds available to it for the completion of its organoclay manufacturing plant in Nevada, which is scheduled for commissioning in the fall of 2014, the procurement of the equipment and operation of its Lithium Demonstration Plant in Germany in the fourth quarter of 2014 and for working capital and general corporate purposes.

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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