Business Law Blog
Our Business Law blog will guide you through complex issues, bring to your attention important developments and remind you of important obligations. If we think it will be helpful, we'll blog about it.
Insider Reporting Requirements (Updated)
The Alberta Securities Commission (“ASC”) announced that effective May 13, 2013 it will charge a fee of $100 for each insider report that is not filed within the prescribed period of time under National Instrument 55-104. As such, the ASC joins the British Columbia Securities Commission (“BCSC”) and the Ontario Securities Commission (“OSC”) in charging fees for the filing of late insider reports. While at first blush this might seem like bad news (i.e. another potential fee for making an honest mistake), for some it actually offers relief from the very punitive penalties that would have otherwise been charged by the OSC (see the sections below entitled “Summary - Penalties” and the “The Law - Penalties” for further details on the interaction of the potential penalties that could be imposed by the ASC, BCSC and the OSC).
Ensuring the enforceability of non-competition/non-solicitation covenants is an important consideration for both employers and the purchasers of businesses. The Ontario Court of Appeal recently provided valuable guidance regarding the reasonableness and enforceability of non-competition/non-solicitation covenants in Martin v. ConCreate USL Ltd. Partnership.
The purpose of this Blog is to highlight the responsibilities and liabilities under Canadian securities laws of the directors and officers of a Canadian public company for that company’s secondary market disclosure.
The purpose of this Blog is to highlight the responsibilities and liabilities under Canadian securities laws of the directors and officers of a Canadian public company when the company is conducting an offering of securities of the company by way of a prospectus.
CSA Adopts “Notice-and-Access Rules” as an Alternative Method of Delivery
This blog is relevant to Canadian public companies (i.e. reporting issuers) as they prepare for the upcoming proxy season in the first part of 2013.
Last week, the Canadian Securities Administrators (“CSA”) adopted new rules that provide Canadian public companies (i.e. reporting issuers) with an alternative method (known as the “notice-and-access” system) for delivering to their shareholders (i) proxy-related materials and/or (ii) financial statements and related MD&A.
The purpose of this blog is to provide a brief checklist of the most common continuous disclosure obligations of reporting issuers pursuant to Canadian securities laws.
This blog provides a quick summary of certain of the most common insider reporting requirements applicable to “reporting insiders” of Canadian public companies (i.e. reporting issuers) under Canadian securities law including a summary of the applicable filing deadlines and the potential penalties for late filings or failures to file. Please note that it is a summary only and is not intended to be exhaustive.
The “early warning” reporting requirements under Canadian securities law are an often missed and misunderstood reporting requirement. The early warning reporting requirements are designed to inform the marketplace immediately of (i) any person who has reached a 10% ownership position in a Canadian public company and (ii) each subsequent 2% increase in that position. The early warning reporting requirements are satisfied by (i) the immediate issue and filing of a press release and (ii) the filing of a report within two business days, in each case containing prescribed information. With this information, the investment community can then make assessments about the investor’s intentions with respect to ownership and control of the company. This blog summarizes (i) the filing deadlines associated with the early warning reporting requirements, (ii) the length of time in which there are restrictions on further acquisitions by persons required to file early warning reports and (iii) the formula for calculating whether the ownership and control thresholds triggering the reporting requirements have been met.
Every now and then, it is prudent for directors and officers of Canadian public companies to review the timely disclosure obligations applicable to such companies to make sure they are following good practices and not getting into bad habits.
Significant Risk Allocation Addressed in These Often Ignored Clauses
A purchaser will usually conduct extensive due diligence on a target company prior to signing a definitive agreement to purchase that target company with the goal of both validating the value of the business to be acquired and uncovering any previously unknown risks associated with that business. The parties will then usually negotiate an M&A agreement including both (i) the amount and type of consideration payable and (ii) vendor representations, warranties, covenants and indemnities regarding the target company and its business. If the purchaser learns, prior to closing, that the vendor has breached one of these negotiated representations, warranties or covenants but goes ahead and closes the deal anyway with the intention of making a claim for indemnification (referred to as “sandbagging”), can it still make such a claim for indemnification? That will depend on what the M&A agreement says including the “sandbagging” clause (if one is included), the “knowledge qualification” clause (if one is included) and the “governing law” clause.
The Toronto Stock Exchange (the “TSX”) has recently amended its rules to require issuers listed on TSX to meet certain new requirements with respect to the election of directors.
The Short Story:
In a decision released on August 1, 2012, the Ontario Securities Commission (“OSC”) determined that Paul Donald (“Donald”), a former officer and employee of Research in Motion Ltd. (“RIM”), engaged in the trading of shares of Certicom Corp. (“Certicom”) that was “contrary to the public interest”, and therefore illegal, despite the fact that Donald was not in technical breach of the insider trading restrictions contained in the Ontario Securities Act.
Similar to the recent Ontario Superior Court of Justice decision in RIM v. Certicom, on May 4, 2012 the Delaware Court of Chancery issued an injunction against a hostile take-over bid by Martin Marietta Materials, Inc. for Vulcan Materials Company after finding that the making of the offer by Martin Marietta breached the terms of a confidentiality agreement between the two companies; this despite the absence of a “standstill” provision in the confidentiality agreement.
Increased volatility in the financial markets and overall economic uncertainty continue to affect corporate planning and go-forward strategies. The drive to increase shareholder value may cause management to seek out and assess a broader range of enhancement and maximization alternatives. Current market conditions have created opportunities for both the hunter and hunted.
While Canadian securities legislation only requires Canadian public companies to send their annual financial statements to those shareholders (both registered and beneficial) who have responded to an annual request form sent by the company indicating that they would like to receive such statements, applicable Canadian corporate law (i.e. the ABCA and the CBCA) requires those companies to send their annual financial statements to their registered shareholders (but not their beneficial shareholders) not less than 21 days prior to the company’s AGM.
Therefore, technically, Canadian public companies should include an “opt out” provision on the financial statement request form sent to registered shareholders (i.e. “I do not wish to receive such statements”) and an “opt in” provision on the financial statement request form sent to beneficial shareholders (i.e. “I wish to receive such statements”).
Canadian public companies need to be aware of the new executive compensation disclosure requirements that will impact the preparation of proxy material for the upcoming AGM season.
The CSA recently published for comment proposed National Instrument 51-103 Ongoing Governance and Disclosure Requirements for Venture Issuers.