Canada: Ontario Court Of Appeal Clarifies Definition Of "Promoter"

In Goldsmith v. National Bank of Canada,[1] the Ontario Court of Appeal clarified the definition of "promoter" in the context of a proposed secondary market class action under Part XXIII.1 of the Ontario Securities Act.[2] The decision provides comfort to financial institutions and others in the capital markets that deliver traditional commercial lending and investment advisory services to public companies. Further, it provides useful guidance for prospectus filing requirements for issuers and others involved in the creation or reorganization of an issuer's business.


Goldsmith was one of 13 class actions commenced in Alberta, Ontario and Quebec following the collapse of Poseidon Concepts Corp. ("Poseidon"), an Alberta-based energy company. Poseidon was created in 2011 through a reorganization of Open Range Energy Corp. ("Open Range"). Before the reorganization, Open Range had two separate business segments: a tank rental business and an oil and natural gas exploration and production business. In Q2 2011, Open Range's board of directors concluded that the trading price of the company's shares did not reflect the aggregate value of the two business lines and that separating the two business segments would enhance shareholder value. Open Range, with the assistance of advisors, developed a plan of arrangement (the "Arrangement") to spin off the oil and natural gas business into a new company with Poseidon carrying on the tank rental business. After the spin-out, in January 2012, Poseidon raised $82.5 through a public offering (the "Offering") in a bought deal.[3]

In a series of corrective disclosures made between November 2012 and February 2013, Poseidon revealed that it had materially overstated revenues and accounts receivable for the tank rental business in its audited financial statements. Shortly thereafter, Poseidon filed for protection under the CCAA. Poseidon was delisted by the Alberta Stock Exchange in May 2013. A multitude of class actions ensued.[4]

In the Goldsmith action, the plaintiff alleged that National Bank of Canada ("NBC") – either directly, or through its capital markets subsidiary, National Bank Financial ("NBF") – was liable under s. 138.3(1) of the OSA. Section 138.3(1) provides a cause of action against each "influential person" who "knowingly influenced" an issuer to release a document containing a misrepresentation. An "influential person" includes a "promoter". The plaintiff alleged that NBC was a "promoter" and that it "knowingly influenced" the release of the Circular (issued in connection with the Arrangement) and the Prospectus (issued in connection with the Offering). Both documents incorporated Poseidon's audited financial statements by reference, which were alleged to be false or misleading.

A "promoter" is defined in s. 1 of the OSA as a person who "acting alone or in conjunction with one or more other persons, companies, or a combination thereof, directly or indirectly, takes the initiative in founding, organizing or substantially reorganizing the business of an issuer." The facts said to have made NBC a "promoter" were wide-ranging but centered around the following:

  • NBC's credit relationship with Open Range and Poseidon, both alone and as part of a lending syndicate, including its consent to the Arrangement;
  • NBF's role as lead underwriter in the Offering and in prior equity issuances by Open Range;
  • NBF's role as an exclusive investment advisor to Open Range in connection with the Arrangement; and
  • NBF's provision of a fairness opinion (which was annexed to the Circular) to Open Range's board in connection with the Arrangement.

The plaintiff also relied on a number of emails in support of a generalized allegation that individuals at NBC and NBF had "significant and longstanding relationships" with individuals at Open Range.

The motion judge dismissed the plaintiff's motion for leave to proceed under s. 138.8(1) of the OSA, finding that the plaintiff's claim had no reasonable possibility of success at trial. The Court of Appeal agreed that the plaintiff's claim that NBC and/or NBF was a "promoter" that "knowingly influenced" the Circular or Prospectus had no reasonable possibility of success and should be dismissed.

Guidance on the Definition of Promoter

The Court of Appeal in Goldsmith held that to be a "promoter", one must do more than simply "influence[] the decision maker's actions", "indirectly participate[] in the initiative" or "influence or participate with the decision makers" in the founding, organization or reorganization of an issuer's business.[5] The phrase "[taking] the initiative" connotes "a form of active and autonomous involvement in the organization or reorganization of a company."[6] A "promoter", like a "control person", "insider" or "investment fund manager" – all of whom are "influential persons" under the OSA – is one who "exercise[s] meaningful control over a reporting issuer's business".[7]

A "promoter" thus "play[s] a driving role in founding the issuer and consequently wields influence comparable to that of an officer and director".[8] Mere involvement in an organization or reorganization is not sufficient, "even if that involvement involves important services and support". To qualify as a "promoter", the individual or entity must be an "active participant" or a "driving force" behind the reorganization; i.e. at the "very heart of the issuer and the organization".[9]

Goldsmith makes clear that a bank is not a "promoter" by merely providing financing to an issuer[10] or its consent to a reorganization involving the reallocation of assets and debt.[11] Similarly, financial institutions do not qualify as promoters by providing financial advice to a board of directors[12] or delivering a fairness opinion to the board regarding a plan of arrangement.[13]

The meaning given to the word "promoter" in the Court's decision has important implications not only for secondary market liability claims, but also for prospectus offerings. Section 58(1) of the OSA requires a "promoter" to sign a prospectus, which exposes a promoter to substantial risk with respect to any misrepresentations in the prospectus. Goldsmith makes clear that a person will be considered a promoter only if it has had active and autonomous involvement in the organization or reorganization of a public company.


1. 2016 ONCA 22 [Goldsmith].

2. R.S.O. 1990, c. S-5 [OSA].

3. Goldsmith, supra note 1 at ¶ 2-5.

4. Ibid. at ¶ 6.

5. Goldsmith, at ¶ 35 and 40.

6. Ibid. at ¶ 39.

7. Ibid. at ¶ 42-43.

8. Ibid. at para. 45.

9. Ibid. at ¶ 53, vide Re Gordian Financial Group Inc., 1995 LNABASC 250.

10. Ibid. at ¶ 71. See also: Ingenito v. Bermec Corp., 441 F. Supp. 525 (S.D.N.Y. 1977), referred to with approval in Goldsmith, ibid., at ¶ 51.

11. Ibid. at ¶ 72.

12. Ibid. at ¶ 73

13. Ibid. at ¶ 75.

To view original article, please click here.

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.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

In association with
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.