In preparing and filing the preliminary prospectus, we have
recently noticed that regulators are commonly responding with
requests for further disclosure from issuers with mining properties
in emerging markets. Often, the information requested is of the
nature that you would expect should be included an annual
information form (AIF) except that the nature of the information
sought is not actually covered by the scope of required AIF
As we've discussed in previous posts, regulators have in
recent years increased the scrutiny over emerging market issuers.
Specifically, the OSC undertook a targeted review of issuers with significant business
operations in emerging markets in 2011 and released a notice outlining areas of concern in March
2012. Meanwhile, in November 2012, the OSC released a guide to assist boards and
management of emerging market issuers in addressing the risks of
doing business in emerging markets and satisfying their governance
and disclosure obligations. The TSX and TSX-V also issued a consultation paper in December 2012 intended
to identify the potential risks with listing emerging market
issuers and to provide guidance to issuers with respect to
applicable listing considerations.
In our experience, the disclosures recently requested by
regulators in the context of their prospectus reviews have included
information such as (i) the issuer's ownership of property
interests and assets; (ii) the impact of foreign laws on the
issuer; (iii) the control of the board of directors over
subsidiaries; (iv) how the board of directors of the issuer will be
able to cause the emerging market subsidiary to transfer funds to
the issuer to fund the issuer's expenses, including the salary
of the chief financial officer and other officers located in
Canada, director fees, legal fees, audit fees or the costs of any
investigation that the board or audit committee may need to
undertake; (v) how the board will cause the removal of the officers
and directors of the subsidiary; (vi) risks to the corporate
structure and controls put in place to mitigate risks; (vii)
whether the location of assets in emerging market jurisdictions has
any implications to an investor's ability to exercise statutory
rights and remedies under Canadian securities law; (viii)
information on which directors and executive officers have
experience conducting business in the emerging market jurisdiction;
and (ix) how any language barriers will be overcome. While arguably
not topics that may be typically canvassed by Canadian reporting
issuers in disclosure documents, these are also not unfamiliar, as
many are drawn from the OSC guide.
As such, issuers, especially mining companies, outside of
Canada, the U.S., Australia and Western Europe, that intend or are
considering filing a prospectus in Canada, would be well advised to
consider the OSC guide and other staff guidance and policies and
review their disclosure accordingly in advance of undertaking a
public offering of securities. This includes enhancing disclosure
contained in their AIFs before filing a prospectus to include
disclosure that is responsive to these types of questions. Such
enhancements to the AIF should also help avoid delays in obtaining
prospectus receipts and potential added costs and delays in
assembling the required emerging markets disclosure, and
coordinating with local counsel in the emerging markets
jurisdictions under the tight time frame of a bought deal or other
In addition, if an issuer does not have its emerging markets
disclosure in place prior to undertaking a bought deal, it should
ensure there is adequate time included in the timetable contained
in the bought deal letter to prepare the disclosure and clear its
preliminary prospectus with the regulators.
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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Under the Income Tax Act, the Employment Insurance Act, and the Excise Tax Act, a director of a corporation is jointly and severally liable for a corporation's failure to deduct and remit source deductions or GST.
Under the Income Tax Act, the Employment Insurance Act, the Canada Pension Plan Act and the Excise Tax Act, a director of a corporation is jointly and severally liable for a corporation's failure to deduct and remit source deductions.
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